Monday, January 28, 2002		Article

AS Kmart Corp filed Chapter 11 for bankruptcy, 40 persons who work at the company's Internet division, BlueLight.com, were contemplating to move to a cheaper office building and hoping the lights would stay on.

"It's business as usual for now," Dave Karraker, a spokesman for BlueLight said. "It's way too early to say what will happen. Everything is under review."

While the bankruptcy filing leaves BlueLight's future in question, uncertainty is nothing new for Kmart's online division. After a poorly timed launch in the summer of 2000, the twilight months of the dot.com boom, BlueLight has gone through numerous restructurings as Kmart looked for a model that worked in an increasingly tough dot.com environment.

Although the online retail business remains extremely tough and BlueLight has many challenges ahead, at least some analysts believe it has a decent chance of surviving the troubles at Kmart.

"BlueLight's costs have been stripped down pretty dramatically in recent months," Ken Cassar, an analyst with Jupiter Media Metrix said. "It is a much easier business to justify today."

BlueLight today looks nothing like the company it had once set out to be. Its staff has been slashed from a peak of 220, and its spanking new headquarters building is now vacant, a cost-saving move that nonetheless cost Kmart a $12 million write-off.

Once designed as a separate company with plans to spin off its own stock, BlueLight has gradually been folded back into Kmart, with most management duties being handled by the parent company in Troy, Mich.

Many of its services have also been pared down. The site no longer sells any clothing, and a free Internet service BlueLight had offered to move more of its customers online has been replaced with one customer must pay for.

A state-of-the-art e-commerce platform that BlueLight had built in-house and spared no expense has been scrapped. Now BlueLight outsources cheaper infrastructure from another company.

These were all painful changes for a company that had once set out to be a major retailer in its own right, but the pain could be what ultimately saves BlueLight. Karraker said that it has slashed its operating costs some 75 per cent since August 1.

And he said, its operating performance is not bad either.

BlueLight does not disclose financial results, but it did say that in the latest holiday season it surpassed most industry forecasts for 10 to 20 per cent sales growth.

And, even in bankruptcy, it has a lot more merchandise to sell.

"Everything that is ordered from our Website is in a warehouse right now and ready to ship," said Karraker. "We do not expect any lapses in service."