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Venture firms plan major retail service

A secretive firm flush with venture capital is quietly preparing a service to help brick-and-mortar retailers catch up online. Sources say Paul Allen and George Soros are involved.

    A secretive company flush with venture capital is quietly preparing to launch a major service that will provide the technology, expertise, and funding to help brick-and-mortar retailers catch up online, sources say.

    The New York-based company, which has the working name of Online Retail Partners, has secured $100 million to $300 million from venture firms, including Comcast Interactive Capital, according to the sources. Financiers Paul Allen and George Soros are also involved, people close to the new venture said.

    Venture capitalists, who have been closely associated with Internet start-ups, are increasingly funding the panicked migration of many land-based retailers to the Web.

    Earlier this year, blue-chip firm Benchmark Capital took steps to help bring Toys "R" Us online with planned investments in Toysrus.com. While those plans fell through without explanation from either company in August, Benchmark said it would invest $15 million to create an Internet subsidiary of Seattle-based retailer Nordstrom.

    Following the Benchmark model, Online Retail Partners is hoping to provide a permanent staff that specializes in bringing companies to the Internet, sources said. Henry Nasella, a former president and chief operating officer at office supplies giant Staples, is serving as chairman of Online Retail Partners. John Kristie, the former chief technology officer of Barnesandnoble.com, has also signed on.

    The company declined to comment on any aspect of the venture. But sources said it is working with at least some nationally branded retailers that are dominant players in their fields.

    "Each retailer involved has at least 75 to 100 retail outlets in their specific categories," a venture capital source said. Partnerships are expected to be announced in coming months.

    Some e-commerce analysts said the venture may provide retailers with much-needed help in competing against their Internet counterparts.

    "[Land-based retailers] have the assets, the brand, the distribution, purchasing power, and fulfillment capabilities that are becoming more valuable and appreciated online," said Andrea Williams, an analyst at E*Offerings. "Unfortunately, they still don't know what they are doing online and need a lot of help with execution speed."

    Analysts also noted that the deep pockets of venture capital firms may also help ease the worries about the cost of going online without immediate returns.

    "The investors are providing the capital," one of the venture capital partners said. "The retailers are providing the brand name, as well as the experience of doing the buying and the cross-promotion in the stores."

    Traditional public companies are held to different standards from those of Internet firms. Funding that can help sustain their online efforts without cutting into their earnings is a big plus, analysts said.

    "[Retailers] may find the capital infusion attractive because that way they aren't playing with their own money," Jupiter Communications analyst Michael May said.