A Blue Light Specialist

Mark Goldstein launched--and sold--three tech startups. Now he's bringing Kmart online

BlueLight.com CEO Mark H. Goldstein has started and sold three technology companies in the past 14 years, becoming a multimillionaire along the way. So at 38, he could easily kick back on his houseboat in Sausalito, Calif., and spend his days pursuing his favorite outdoor activities--swimming, biking, and skiing. Fat chance. Goldstein is one of those people who starts companies for the thrill of it. "For him, the fun is in the making," says Hue Rhodes, an executive at Kmart Corp.'s $270 million e-commerce startup. And the tougher the challenge, the better. "Mark loves being the underdog," says D. Rex Golding of Softbank Venture Capital, Kmart's lead partner in the venture.

Bringing Kmart up to Internet speed is no easy task. Like many traditional retailers, the Troy (Mich.) discount chain has been an e-commerce laggard, making its first feeble efforts on the Web barely a year ago. To make matters worse, its brick-and-mortar stores were clobbered in the 1990s by rivals Wal-Mart Stores Inc. and Target Corp. Now, Wal-Mart is threatening Kmart again, this time online. After a poor start, it's relaunching its Web site, Walmart.com, and has hired former Gap Inc. superstar Jeanne Jackson to lead the charge. Yet Goldstein says he wouldn't want to trade places with Jackson. At Wal-Mart "there's no upside," he says, "because the expectations for Wal-Mart to win are so complete."

Not so at Kmart, which has struggled for years to find its niche between Wal-Mart's low prices and Target's more upscale appeal. At BlueLight.com, which is 60%-owned by Kmart, says Goldstein, "I can help mold and create something different." With his "sticky bricks" business plan, Goldstein aims to build customer loyalty by linking BlueLight.com with Kmart's brick-and-mortar stores in a "stickier" shopping experience. A shopper who bought something online, for instance, can return it to her neighborhood Kmart store. Or, at a kiosk in the store, she can order an out-of-stock item or request a home delivery.

Goldstein also aims to attract new customers to the Web by offering free Internet access and discounts on everything from Martha Stewart linens to PCs. As a stand-alone company, BlueLight.com will be more than just Kmart online. It carries three times as many products as a typical Kmart store, from big-ticket items such as appliances to financial advice and parenting tips.

Goldstein's batting average in startups is pretty good. At the University of Pennsylvania, he ran a beer distributorship from his dorm room. He and a college buddy formed Reality Online, a financial-services software company bought by Reuters Holdings PLC. Goldstein's next was

NetAngels, an early developer of Internet marketing tools. His most recent venture, a provider of merchandise systems for Internet portal commerce, was bought by Inktomi Corp. a year ago.

Goldstein landed as entrepreneur-in-residence at Softbank, where he and Golding hatched the plan for Kmart's Web business--named for the flashing blue lights that announce sales in Kmart stores. Almost inevitably, Goldstein ended up becoming CEO.

But his notoriously tough negotiating style has bruised feelings at Kmart headquarters. For instance, BlueLight.com's deal with Kmart calls for it to be Kmart's exclusive site. So, when the site was launched last December, Goldstein insisted that Kmart dismantle its existing corporate site--which was unpopular within Kmart.

Publicly, anyway, Kmart executives have thrown their full support behind Goldstein. "He's an engaging person who is laying the groundwork for an exciting e-commerce site," says Kmart Vice-Chairman Michael Bozic, who is also chairman of BlueLight.com.

Still, Goldstein has a way of pushing people beyond their comfort zone. Last September, when he invited Rhodes to his houseboat to discuss a top job at BlueLight.com, Goldstein insisted that Rhodes dive off the side and join him for a swim in the 55-degree water. In e-commerce, Kmart might still have just a toe in the shallow end. But with Goldstein running BlueLight.com, it'll soon be time to sink or swim.

Before it's here, it's on the Bloomberg Terminal.