In its second-largest acquisition, Amazon buys the company for $970 million.
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As Bluelight begins to use more of its parent company’s resources, observers wonder whether the strategy of providing Internet access through an ISP sponsored by BlueLight as a way to attract customers will continue. The ISP service launched in December 1999 as a free service but switched to tiered payment options after the initial ISP supplier went bust. The basic service offers 12 free hours to meet the needs of typical users who spend six to seven hours online per month. A second tier charges $9.95 for 100 hours, geared towards heavy Internet users. The third tier, aimed at rewarding Bluelight.com shoppers, gives free Internet service to those who make a purchase at BlueLight.com: for purchases from $1 to $100, users get one month free service; users who spend $100 to $150 get two months free; users who spend $150 to $200 get three months free, and so on up to six months of free service. So far the company has 6.6 million ISP users.
But how long BlueLight will pursue this avenue is in question. “BlueLight has a business model that is in an evolution right now,” Stern says. “They initially had very big plans to be the dominant ISP. That and remaining an independent e-commerce site are probably not going to materialize.”
However, BlueLight officials say Kmart CEO Chuck Conaway “loves the ISP strategy,” considering it a crucial point of differentiation between BlueLight.com and other online retailers. The BlueLight spokesman adds that plans to promote the ISP service are not likely to change.
Tracking the evolution
As liquidation sites become more popular and as online retailers like BlueLight struggle to survive in the current market, some observers wonder if BlueLight.com would become for Kmart what the BlueLight special is in the stores: a liquidation vehicle. But BlueLight contends that the different product mix between the stores, which carry more apparel and seasonal items, and the web site, which has 220,000 SKUs compared to a store’s 75,000, ensures that the web site will not be an outlet for overstock. BlueLight will continue to house its own products in its Ohio-based warehouses with fulfillment vendor Submit Order.
Most retail analysts believe BlueLight is heading in the right direction and will maintain its online presence even without the high-profile Goldstein at the helm. “BlueLight has struggled as much as anyone else to get the right mix online,” Stern says. “It is trying to evolve as the market evolves.”
Christopher Merritt, principal at retail consulting firm Kurt Salmon Associates in Atlanta, says BlueLight has opportunity to grow by using Kmart’s resources. “It will be interesting to see how fast it leverages those resources to broaden its web offerings,” he says.