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Buyers Beware: Bluelight.com Announces Staff Layoffs

Bluelight.com Thursday announced a round of layoffs in its marketing and merchandising departments to streamline operations and improve its profitability.

It's an indication Bluelight.com and its parent company, Kmart Corp., can't, and perhaps shouldn't, keep its online and offline operations completely separate.

As a private company, it is not required to disclose the number of employees fired. Dave Karracker, Bluelight.com spokesperson, said employees were notified Wednesday afternoon and given a generous severance package and outplacement services. Before Wednesday, there were 194 employees.

"There's been a slowing in the Internet economy and its not growing at the rate that everyone predicted, Karracker said. "So, the board of directors took a look at how to achieve profitability and the easiest way to do that was to leverage the assets represented (at Kmart)."

Randy Allen, Bluelight.com board of directors chairman, said the ISP model is sound, and that increased synergies with Kmart will only reinforce its operations.

"We are extremely proud of Bluelight.com and the results it has delivered to date," Allen said. Now, as we move past the first-year launch phase, the board of directors felt it was important to increase efficiencies, thus improving operations and recognizing greater economies of scale."

The free ISP has been in operation since 1999, an online experiment by Kmart to see if providing free Internet access would bring online customers to its site. After initial success, it bought out its ISP provider, Spinway, and beefed up its staff.

But while the free ISP was brining in revenues, officials at Kmart were expecting a profit from its online arm. Bluelight.com quickly instituted a tiered pay-for-free-access model, which bought officials some time.

Thursday's announcement is the latest step by Bluelight.com to increase its profitability.

Kmart has 2,100 stores nationwide and thousands of buyers who already specialize in purchasing much of the merchandise peddled at its online site. But, in order to keep the organizations separate, Bluelight.com hired its own staff of buyers and marketing reps -- an expensive way to prove the two companies were unique.

Bluelight.com kept many of the employees who specialized in online retailing and marketing, releasing only those that duplicated the efforts of the parent company.

Karracker said the decision is one many bricks-and-click organizations are going to have to make in the coming months. He said a report coming out from Jupiter Media Metrix "for e-tailors to really survive and excel, they need to more closely realign themselves with their parent company. Other than just being a retail channel for them, they need to be a marketing vehicle for them."

Bluelight.com will continue to operate out of its headquarters in San Francisco as a separate company.