Giving Retailers a Boost Into the Online World - TheStreet

Giving Retailers a Boost Into the Online World

Former Staples and barnesandnoble.com executives have a plan to put bricks-and-mortar firms on the Web map.
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Despite the success of purely online retailers like

Amazon.com

(AMZN) - Get Report

, the road from the real world to the Internet is littered with big-name flops. Easing the so-called bricks-to-clicks transition is already a lucrative consulting specialty, but it is about to become a business all to itself.

Henry Nasella, former president of

Staples

(SPLS)

, and John Kristie, former chief technology officer for

barnesandnoble.com

(BNBN)

, have raised $62 million for

Online Retail Partners

, a new business intended to take brand-name retailers from the earth to the Web, the company plans to announce on Tuesday.

"The Internet is really just another channel of distribution for these great brands," Nasella says.

That outlook would seem to directly contradict the approach taken by Internet retailers, which have successfully started their own distinctly online brand names. And it would seem to resemble the approach taken by traditional retailers, which have often failed to attract viewers, much less paying customers, to their Web sites.

Toys R Us

(TOY)

is an example of the latter.

The list of investors betting Nasella is right reads like a roll call of new media playmakers:

Liberty Digital

(LDIG)

,

Comcast Interactive

, a

Comcast

(CMCSA) - Get Report

unit,

Oak Investment Partners

,

Ramsey Beirne Associates

and

Pequot Private Equity

. (

TheStreet.com

(TSCM:Nasdaq), publisher of this Web site, has received funding from Oak Investment Partners and

Pequot Capital Management

, which runs Pequot Private Equity.)

But he still must convince big-name retailers to play along.

The New York-based company plans to form separate dot-com companies as joint ventures with established brand-name retailers. The selling point, according to Nasella, is the ability to share the expensive technological know-how retailers often have trouble attracting.

"There were a handful like

Gap

(GPS) - Get Report

that were early adapters, but mostly they sat on the sidelines," Nasella says. "They were competing against pure plays

exclusively online retailers for people, and they didn't have the stock and equity. They tended to underinvest."

The new company, which employs 75, will provide both venture capital and management for the Internet spinoffs.

Once the sites are established, Nasella says, traditional retailers will use their established brand names and bulk purchasing power as tools to attack purely online retailers. The new dot-coms will also share customer lists with one another and with their brick-and mortar-cousins.

Nasella's familiarity with retailing and the pace of change associated with operating online has investors convinced, but bricks-and-mortar executives will be another hurdle altogether, says Chris Vroom, a

Thomas Wiesel Partners

analyst who has followed Nasella's career at Staples.

"He's going to need to be able to convince these brick-and-mortar management teams that they need to build their businesses in a different way," says Vroom, whose firm hasn't done underwriting for the company but does plan to meet with Nasella Wednesday. "That won't be easy to do."

The company plans to start with so-called category killers, businesses that establish a foothold in one merchandising category for one distribution method, in this case the Internet.

So far, the companies Nasella has won over are much lesser-known brands:

Zany Brainy

(ZANY)

, the specialty toy retailer, and

Dick's Sporting Goods

, the Coraopolis, Pa.-based company that runs about 80 stores.

Both companies already have Web sites, and Dick's already offers merchandise on its site. Officials at Zany Brainy and Dick's couldn't be reached for comment.

Nasella says the new company plans another round of financing in a few months and hopes to usher eight to 10 businesses to the Internet within the next 15 months.