Bluelight.com Fueled by Cash Infusion

As capital continues to evaporate for many an Internet retailer, BlueLight.com announced Monday that it will receive $80 million (US$) in second round financing from initial investors Kmart Corp. (NYSE: KM) and Softbank, Inc.

BlueLight said it will use the capital to fund day-to-day operations, but company spokesperson Dave Karraker told the E-Commerce Times that the discount e-tailer could venture to acquire other companies as well.

“The extra money also affords us the opportunity to take a look around at the marketplace and see if there are other opportunities for us,” Karraker said.

Electric Growth

Kmart formed BlueLight.com late last year as a stand-alone e-commerce operation, with Softbank taking part in a $62.5 million first round in December 1999. Martha Stewart Living Omnimedia (NYSE: MSO), one of Kmart’s retail partners, is also invested in the San Francisco-based company.

BlueLight.com recently launched its preview shopping site, where it sells clothing, home electronics, housewares, toys, sporting goods and Martha Stewart’s line of home and garden products. Throughout the summer, BlueLight.com will be rolling out additional product categories.

The site will launch in earnest this fall with “hundreds of thousands of products” available, the company said.

Keeping it Light

In addition to selling merchandise, BlueLight.com offers free Internet access. Last month, the company said it had signed up three million registered users for the free access service in just seven months.

BlueLight.com has also teamed up with Yahoo! to offer online services, such as special offers based on individual preferences, Yahoo! mail and personalized news, sports and weather on a Yahoo! startup page.

‘Sticky Bricks’

BlueLight.com calls its marketing strategy “sticky bricks,” which means the company aims to capture new business both online and off.

Because of the Kmart connection, BlueLight.com has a wire on all of the brick-and-mortar shoppers who frequent the second largest retailer in the United States. The online store is being heavily promoted in Kmart’s weekly circulars and in Kmart’s more than two thousand stores across the country.

Building Loyalty

More than one industry analyst has said e-commerce sites without real-world presences are more likely to fail than their click-and-mortar peers. At the time of BlueLight’s formation, IDC senior vice president Frank Gens said that 2000 would see many dot-coms adding brick-and-mortar alliances and offering free services as primary ways to gain market share.

Since that time, online brokerages Ameritrade and Quick & Reilly announced that they would offer free Internet access. In July, Internet portal Excite@Home started offering free storefronts for e-commerce start-ups.

For its part, Kmart sees BlueLight as a beacon that is both drawing in new buyers and confirming the loyalty of Kmart’s existing customer base.

According to Kmart chairman and chief executive officer Chuck Conaway, “Our additional investment reinforces our desire to maintain Kmart’s majority interest in BlueLight.com.”