Old Economy lines up to take over dotcoms

Is the new economy going to be bought out by old economy retailers?

UK High Street retailer John Lewis confirmed Tuesday that it will purchase the UK operations of troubled e-tailer Buy.com, as analysts claim that more "old economy" companies will follow its lead this year.

The deal will allow John Lewis, which has so far taken a cautious approach to Web, to offer much more of its product range on the Net. Terms of the agreement have not been disclosed but they are expected to be finalised by the end of February.

John Lewis claims that the move will allow it to take a leading presence online, something it has been slow to do to date. "We know that many of our customers already shop online, and with Buy.com we will be moving quickly to create the UK's best online department store offer," Luke Mayhew, director of trading at John Lewis, said in a statement.

Many of last year's dot-com darlings are facing difficult financial conditions at the moment, as was illustrated by Buy.com's $27.4m (£18.6m) losses in the fourth quarter of 2000. In the US, Buy.com is the second largest e-commerce company behind Amazon.com, which itself doesn't expect to reach profitability until the end of 2001.

Rebecca Ulph, analyst at Forrester Research, isn't surprised by John Lewis's move, and expects other traditional retailers to follow suit. "This is a classic example of an established brand, who've tried a few things online and not been very successful, buying both a dot-com name and its infrastructure," she said, explaining that the experience of Buy.com's workforce is a valuable asset. "I think this is something we'll see a few more times," Ulph predicted.

Buy.com isn't the first big-name Web site to be bought by a UK high street retailer. Another e-commerce site, UK-based Jungle.com, was snapped up by Great Universal Stores (GUS) last year for £36m. At its peak, Jungle was valued at £700m.

Although John Lewis has a far wider product range than Buy.com UK, which restricts itself to selling computer equipment, software and consumables, Ulph doesn't think it'll be rushing to put its whole catalogue on the Net. "Online isn't a great environment for hundreds of products. It's hard to navigate, so people tend to get lost looking for one particular thing. They'll probably move quite slowly at first," she explained.

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