It was a revolutionary idea at the time -- and the time was not long ago. Egghead, a chain of retail software stores, closed all brick-and-mortar outlets to go online.

Egghead had 150 retail outlets in 1997 and by or about 1999 it had none. The idea was to trade retail locations -- and costs -- for sales and profits on the Web.

The good news about online locations is that there's never a shortage, never a prime spot, and never a premium rental. Anyone can set up shop online without worries about leases, parking, or local demographics. Online you are instantly everywhere and immediately accessible to millions of homes and businesses. Given that the "Egghead" brand name was well-known, the company had a marketing advantage when compared with many online start-ups.

Had Egghead been successful the commercial impact would have been enormous. Malls, strip centers, and stand-alone retail locations would have emptied out. Why pay a dime to landlords if an equal level of sales and profits can be obtained online and at less cost? Why employ armies of managers and clerks if a small number of people can do the same work with less expense?

Going online for Egghead made particular sense because in many cases it could ship goods via e-mail or download. Software -- unlike shirts, t-squares, and much else -- moves seemlessly across the digital divide.

In July, 1999, Egghead merged with OnSale, Inc. to form an online colossus. Combined sales for the year were expected to reach $500 million and the joined fim had $160 million in cash. The all-stock transaction was valued at approximately $400 million.

Last week Egghead.com announced it would file a Chapter 11 bankruptcy and, if okay with the count, sell certain assets to Fry's Electronics of San Jose. Under the plan, Fry's will operate the Egghead web site and two-thirds of the current Egghead employees will be laid off.

Egghead was a retailer virtually made for the Internet in terms of it's product line, name recognition, and funding. As well, you could buy online and not pay a sales tax.

So what happened?

There's little doubt that products can be displayed and orders taken online. But being online is plainly not cheap. There may not be rent in the sense of space at the mall, but workers must be located somewhere. And while a multi-unit retailer can dump huge numbers of managers and clerks by going online, sophisticated web sites require skilled technologists who earn a lot more than most retail employees.

Egghead didn't do anything "wrong" and company management would be on magazine covers today if the firm evolved into a profitable retailer. It tried what seemed logical and reasonable at the time, at least according to most analysts, seers, and Internet consultants.

And there, of course, is the problem. Great minds not long ago said Internet retailing was a sure bet. Go online and cash in. It seemed so obvious, so simple.

But now the new formula is go online -- and keep those retail units. Go for clicks-and-bricks rather than clicks alone.

The reality is that clicks-and-bricks was always the better choice -- and will continue to be the better choice well into the future. People like to browse, to touch. Going to the store is something to do, a kind of "retail therapy." Local shopping is a social event, a form of hunting. And the Internet, for all it's convenience, is best seen as an additional place to do business, not a replacement address.

No less important, if you shop locally and don't like something you can return it. With online merchandise, there's nothing to touch. Colors and sizes that could have been checked in moments locally are a guess online. And the Internet return and refund process is clumsy for consumers and costly for retailers. Little wonder Amazon announced yesterday that you can now order appliances online -- and pick them up at a nearby Circuit City location.

Egghead was one of the first big retailers to abandon local malls and stores for online marketing. Its fate will no doubt be mentioned as other retailers consider online marketing, much to the relief of commercial property owners nationwide.

For more articles by Peter G. Miller, please press here.

Published: August 21, 2001

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