Egghead cracks problems

Troubled US retailer Egghead Computer will close all 80 of its retail stores in the US to concentrate entirely on Web sales.

Egghead, to be re-named Egghead.com, has become the first company to move out of the high street and onto the internet exclusively. The chain will take a one-off charge of $42 million and lay off 800 of its 1,000 staff as a result.

The retailer made a loss of $6.6 million in the third quarter ended 27 December 1997 and turnover of $99 million. In addition to the charge, the company will be seeking funds to finance the move to e-commerce. It expects to lose money over the next two years and then begin to show profit.

Paul Berry, chairman of Simply Computers, described Egghead's decision as a brave move. 'You can give better service on the internet and get your customers to do your work for you,' he added.

He pointed out that Simply Computers was looking to gain 15 per cent of its revenue from Web sales within a year.

A source at Dixons Stores Group claimed that Egghead's decision showed the difference between internet penetration in the US and UK. He said Web sales in the US would always be higher.

Shiraz Jessa, sales and marketing director at Watford Electronics, said he could not see the same thing happening in the UK. He said that until phone calls at least as cheap as in the US, take-up would be slow.

Jessa believed customers in the UK wanted face-to-face advice and the chance to touch the kit before buying. He said Watford planned to have a chain of about 24 stores by the end of 2000.

Software sales on the internet are predicted to be the first to benefit from the increase in e-commerce. Egghead operates three sites and received about 10 million visits during December.

See Editorial, page 15.