AOL, Yahoo Team with Retailers

The first of an expected slew of marketing alliances between major Web players and retailers took shape Wednesday as Yahoo Inc. and America Online Inc. struck deals with two of the nation’s biggest retail chains, Kmart Corp. and Circuit City Stores Inc.

Kmart, the No. 3 U.S. retailer, said it would form its own Internet company, teaming with Web media network Yahoo and retail partner Martha Stewart Living Omnimedia Inc. to provide consumers with free Web access, personalized content and shopping services.

Circuit City, the No. 2 U.S. seller of consumer electronics, will promote the products and services of top U.S. Internet service provider AOL under a marketing pact, the companies said. AOL will piggyback on Circuit City advertising and in turn will make Circuit City a key fixture on its online shopping channels.

Kmart’s new BlueLight.com was named for the retailer’s famous in-store “blue light specials,� or sales, on products in aisles with flashing blue lights. The site should be fully functional by late spring or early summer of 2000, the company said.

“The way we see it, you don’t have to pay to get into a Kmart store, why should you have to pay to visit the Kmart Web site, or for that matter, any Web site?� Kmart Chief Executive Floyd Hall said at a news conference in New York.

Hall said that Softbank Venture Capital, a unit of Japan’s Softbank Corp., has committed $62.5 million to establish BlueLight.com, and that Kmart will be the majority owner of the company, with about a 60% stake.

The San Francisco-based BlueLight.com also received investments from Martha Stewart Living, which already has a retail partnership with Kmart, and Web media network Yahoo, which will provide BlueLight.com subscribers with personalized Web content and other services, Hall said.

News of the Kmart deal comes as major Internet firms have been scouring the nation’s retailers trying to forge major partnerships.

Earlier Wednesday, AOL unveiled a marketing pact with Circuit City in which the retailer will promote AOL’s Web services in its 615 U.S. stores, and in return will become an anchor tenant on ShopAOL, America Online’s shopping service.

The Circuit City deal marks the first time AOL is using the real world to increase sales in the virtual world. In addition to dedicated shelving for AOL, Circuit City will also begin offering co-branded interactive computer products with the online company.

It also signifies the electronics company’s commitment to using the Web to increase sales--a natural space for electronics customers, analysts said. What’s more, Circuit City will have a new audience for its cable modems and other high-speed, broadband products.