Lycos moves into e-tailing

Not only does Lycos want to be an online mall--it wants to be its own department store, too.

The company today announced that it will begin selling goods on its primary search and directory site, as well as via other subsidiaries within its network of Web sites, such as HotBot, WhoWhere, and Tripod.

The move into e-commerce is intended to drive traffic to the company's main site. The new service, called Lycos Store, allows visitors to shop in a number of categories ranging from autos to travel and to pay for various brand-name goods and services in a single credit card transaction. Lycos said it will outsource OrderTrust, an order-processing network, to manage orders, merchandising, customer services, and accounting for the new site.

This latest effort by Lycos--which prefers to call itself a "hub" instead of a "portal," as its competitors are labeled--makes the company the first in its space to assume the role of retailer in addition to information provider. Traditionally, portals such as Yahoo, Excite, and MSN.com aggregate links to retail partners on their sites, stopping short of selling the goods themselves.

Analysts, however, are skeptical. "It's inevitable that if they want to sell a product that anyone wants to buy, they'll end up competing with their advertisers," said Ken Cassar, an analyst at Jupiter Communications. "Advertisers could realize that they are fundamentally becoming competitors, and a threat, and decide that their advertising dollars could be better spent offline or somewhere else online."

Cassar added that Lycos's new service could also become a litmus test for other portals that want to become the retailer of choice for their audiences, but are afraid to upset their partners. If Lycos's store succeeds without angering partners, other portals could follow suit.

"It will boil down to how merchants react," said Cassar. "If merchants start to really draw a line in the sand, the portals will have to back off."

However, Jeff Bennett, Lycos's managing director of e-commerce, maintained that the Lycos Store will actually strengthen its relationship with commerce partners by stimulating e-commerce traffic in general. He also said the store will not compete with existing high-profile partners, such as Barnes & Noble, and CDnow, by selling similar goods.

"Barnes & Noble has a long history of knowing how to sell books, and we're glad to have them as a partner," said Bennett. "If we were to envision a direct sale of books, I assure you we wouldn't have gone down such a big path with Barnes & Noble."