May 27, 2008, 12:00 AM

Martha Stewart is cooking up a new e-commerce strategy

Martha Stewart Living Omnimedia plans to sell directly through its web site by 2009, says president and CEO Susan Lyne. She says the company previously lost money on e-commerce, and plans to use a third-party to manage the new business.

Martha Stewart Living Omnimedia Inc. plans to get back into the business of selling directly to online consumers, and this time hopes to make money at it.

The company founded by homemaking and cooking guru Martha Stewart plans to launch a new online retailing strategy in 2009, “but it’s going to be a very different e-commerce concept than we had before,” Susan Lyne, president and CEO, told a Goldman Sachs investors conference last week. “On the old site, we did the manufacturing, we held the inventory, the products were great and we lost an enormous amount of money. It’s not what we’re good at.”

The new concept is for MarthaStewart.com to attract consumers and inspire them to buy, while relying on a service provider to handle the actual transaction. “By 2009, we hope to be able to sell, or to make consumers believe they will be buying on our site,” Lyne said. “We will be working with a middleman partner on that.” She did not provide details and a company spokeswoman declined to elaborate.

MarthaStewart.com now offers products for sale, but consumers are redirected to the sites of retailer partners, such as Macys.com and Kmart.com to make the purchase, Lyne said.

The company largely phased out e-commerce two years ago as it refocused on developing content-rich web sites that would generate revenue from advertising. Martha Stewart Living reported e-commerce sales of $11.2 million in 2005, down from $14.4 million the year before.

In 2007, the company generated 6% of its revenue, or $19.2 million, from the Internet, mostly from advertising on the Martha Stewart sites that feature recipes, gift suggestions, wedding-related content and homemaking tips. While the Internet segment lost $4.4 million in 2007, Lyne said the company has been making significant investments, including acquisitions in online properties like WeddingWire.com, a site targeting engaged couples. The company registered a 31% increase in online advertising in the first quarter of this year as traffic to its web sites increased, Lyne said.

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