Egghead looks to Web for survival

After the announcement by computer retailer Egghead that the company would be closing down all of its physical stores around the country and moving its business processes to the Web, the retail and computer industry is taking a new look at Internet commerce and whether it can save a floundering business. Egghead will be closing all of its brick-and-mortar stores during the next month and moving its business to three Internet sites: egghead.com, surplus.com, and surplusauction.com. The company decided to make the move based on the opportunity for new business, says a spokesman. 'The best opportunity for the shareholder and the customer was to put 100% of our energy and financial resources behind a very strong Internet opportunity.'

After the announcement by computer retailer Egghead that the company would be closing down all of its physical stores around the country and moving its business processes to the Web, the retail and computer industry is taking a new look at Internet commerce and whether it can save a floundering business.

Egghead has announced it will be closing all of its brick-and-mortar stores during the next month and moving its business to three Internet sites: egghead.com, surplus.com, and surplusauction.com. The company decided to make the move based on the opportunity for new business, according to John Hough, director of corporate communications at Egghead.

"It's primarily a choice about how to focus the company's management and resources," Hough said. "The best opportunity for the shareholder and the customer was to put 100% of our energy and financial resources behind a very strong Internet opportunity."

However, some industry analysts said that the move to the Internet was more of a last-ditch effort to save the company in the face of competition from "megastores" such as CompUSA.

"They were losing money, pure and simple, for years now," said Paul Johnson, research analyst at IDC. "Relatively speaking, Egghead was still a small company and they couldn't match price with some of the super stores. The way they look at it, this is better than going out of business and this is their last stand. That is what the Internet has done," he said.

"We haven't seen before a traditional retail store close down and move to the Web," Johnson said. "This may be the next phase of Internet-commerce development."

Whether it intended to or not, Egghead now finds itself exploring a new commerce model and all the problems that go along with it. And as it does so, it will be watched closely by others in the industry.

"There is no doubt from the reaction that the company has experienced that many industry leaders and other retail leaders are looking at the Egghead announcement as a trend," Egghead's Hough said. "Certainly time will tell, but the company is very optimistic about its chances."

"I don't think that we'll see that Egghead is a litmus test. The players we see today aren't necessarily going to be the players of the future," said David Prais, chief executive officer of Chumbo.com, a Minneapolis retailer of software over the Internet. "I believe there's a far longer game to be played out. The critical issue in this for us is the discussion and awareness that will be raised."

Egghead.com Inc., in Spokane, Washington, can be reached at http://www.egghead.com/.

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