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Net computer store tries new tack

The Internet Shopping Network is selling the Web's oldest computer store to a competitor so it can concentrate on items more likely to appeal to women.

Out with the PCs and modems--in with the jewelry and lingerie.

That's the move Internet Shopping Network is making as it sells the Internet's oldest computer store to a competitor so it can concentrate on items more likely to appeal to female Net users.

ISN will retain its FirstAuction service as it begins to offer similar merchandise to that sold on TV's Home Shopping Network, which, like ISN, is owned by Barry Diller's USA Networks.

Cyberian Outpost, which went public in July, is buying ISN's customer list, and visitors to ISN now are redirected to Cyberian Outpost. No details of the cash deal were released, but customers that link to existing URLs will be redirected to Cyberian Outpost for a 12-month period.

USA Networks stock rose 1.9 to close at 24.4 today. Cyberian Outpost's stock closed today at 15.1, up 2.1 or 16 percent but still below the online-only computer store's IPO price of 18.

"We are evolving into a more broad-based retailer," said Alan Citron, acting CEO of Internet Shopping Network and president of USA Networks Interactive. "There's been a tendency on the Web to focus on the young male consumer, but now something like 38 percent of users are female. There's an appetite for things like jewelry--it is a profitable business, one that's not served real well on the Web."

Citron outlined some of the ways ISN is hoping to begin serving that appetite.

"In a couple of weeks, we will introduce lingerie sales on First Auction--it worked for Victoria's Secret," he said, pointing out that gourmet foods is another area of strong interest. "We've told our merchandisers, just go out and, if it's interesting, bring it in."

Nicole Vanderbilt, e-commerce analyst at Jupiter Communications, said Citron's strategy makes sense.

"It's a pretty wise move given how crowded the online PC and software space is. It's proving to be a difficult business to climb to the top in. Jewelry is not very crowded yet," Vanderbilt said. "It's a lot easier to get your money's worth out of a customer [in the jewelry business] than in the PC business. It's not as price-sensitive, and items are hard to compare."

Indeed, profit and competition were two factors that likely figured heavily in the decision to sell off ISN's Computer Superstore. Analysts have pointed out repeatedly that selling computer hardware and software online is a notoriously cutthroat business with low margins.

But Cyberian Outpost CEO Darryl Peck in counting on being able to move ISN's 160,000 customers to his store and doubling his customer base in the process.

"When we started this company, the only real Internet-only competitor was ISN. They started a year before anybody else, and they were No. 1 in the market by far," Peck said. "To buy the guys we looked up to when we started is cool, too."

Buying ISN isn't Cyberian Outpost's only trick this fall--the company also will launch a national advertising campaign on cable channels CNN, MSNBC, Comedy Central, and others. It also plans a print campaign.

Nor is First Auction likely to remain ISN's only retail Web site for much longer. By spring, Citron intends to bring two more sites online, a Web version of Home Shopping Network and an online outlet mall--a $11-billion-a-year category in the physical world.

"The idea is to use the infrastructure that's been built at ISN to create more sites and thematically move to more general retailing," Citron said, noting that the company retails ISN's storefront infrastructure.

Diller's ownership of cable networks HSN, USA Network, and the SciFi Channel provide a way to promote online retail sites on TV. USA Networks also owns a majority interest in Ticketmaster and City Search, which merged earlier this year. The combined company already has plans to go public.

Former Bloomingdales and QVC executive Bill Lane is putting together a merchandising strategy for Diller's Web properties.

(Paul Allen, a significant shareholder in USA Networks, is also an investor in CNET: The Computer Network, publisher of News.com.)