Fingerhut Buys Into

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Cataloger Fingerhut continued its strategy of growing through the Internet last week by purchasing a 19.9 percent equity interest in the Zone Network, Seattle, the parent company of mountain sports Web site

The agreement allows Fingerhut, Minneapolis, MN, to increase its stake to a majority interest and president Will Lansing said it eventually plans to take the company public as an affiliate. Fingerhut purchased an equity interest in online retailer PC Flowers and Gifts in July.

"It's all part of a big Internet initiative," Lansing said. "We're buying Internet companies, we're growing on our own, we're moving our Fingerhut customer base over to the Web."

Fingerhut will sell selected merchandise at and expand its customer base to include visitors to that site of mountain sports enthusiasts and the Zone Network travel site MountainZone sells more than 5,000 outdoor products and e-commerce generates 60 percent of its total revenues, said president/CEO Chuck Gottschalk.

In turn, MountainZone will have access to Fingerhut's database of 30 million households. Buyers from Fingerhut's Outdoor Spirit catalog will be one of the first segments targeted for cross-selling.

While Fingerhut contributes a massive merchandising and back-end fulfillment infrastructure, it will take advantage of MountainZone's Internet expertise to help leverage current online offerings and develop new sites. The partners will also draw on varying media to promote e-commerce.

MountainZone drives traffic to its site through the normal means -- strategic relationships with ESPN, Lycos, banner advertising and search engine placement -- and also relies on content-based word-of-mouth promotion, such as its annual cybercast of the ascent of Mount Everest.

As one of the largest commercial mailers in the United States, Fingerhut provides yet another significant source of traffic. The cataloger promotes its five other sites primarily through the 500 million mail pieces and 30 million packages it sends annually.

"It's a cross-media traffic press as opposed to us buying a lot of banner ads," Lansing said. "We do buy banner ads but that is not the best way for us to build traffic."

Fingerhut sells to a base of moderate income customers that are increasingly choosing to shop online. According to Lansing, one-third of Fingerhut customers own computers and two thirds have Internet access. He added that the company Web sites are becoming a leading source of new customers.

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