Egghead Software

Egghead Software was founded in 1984 as a computer software retail company. It grew into a chain with over 200 stores in the United States, and a few in Canada, primarily located in shopping malls. Faced with declining revenues, in 1998, the company shifted its focus to online business, closing its retail locations and selling entirely through its egghead.com website. Egghead.com merged with online auctioneer OnSale.com in 2000 and assumed the name Egghead.com. [ Sandeep Junnarkar , [http://news.cnet.com/Egghead,-Onsale-complete-merger/2100-1017_3-233368.html " Egghead, Onsale complete merger"] from [http://news.cnet.com/ "CNet News.com"] , November 22, 1999]

Egghead was hurt by a December of 2000 revelation that hackers had accessed its systems and potentially compromised customer credit card data. The company filed for bankruptcy in August of 2001. After a deal to sell the company to Fry's Electronics for $10 million fell through, its assets were acquired by Amazon.com for $6.1 million.

Bricks-and-Mortar Period (1984 - 1998)

Egghead was successful from the early days, expanding from a single store in Bellevue, Washington to a 200 store chain, with locations primarily on the West Coast. A 1989 newspaper promotion in the Los Angeles area announcing the grand opening of the Pasadena, CA store offered a coupon offering customers a free 5 ¼” 360k disk for showing up - at the time an unprecedented offer. Customers were lined up out the doors and down the block, an indication of the insatiable desire for software in the booming personal computer market.

A feature of Egghead’s business strategy was the elimination of salesmen’s commission on most sales in order to focus on quality rather than sales volume. Early on, the company focused on repeat business, customer service and sales integrity. Egghead easily became the premier retail vendor of software and peripherals in the United States. Egghead sold more Microsoft product than any other US vendor for a number of years and enjoyed distinctly favorable pricing as a result.

Among other things, Egghead's customers could sign up for a "CUE (Customer Updates and "Eggs"tras) Card", a card that would guarantee a slightly reduced price on certain items, while at the same time tracking user purchases.

Internet Period (1998 - Present)

Several years into the business expansion, the original founder (Victor Alhadeff) went into semi-retirement, and the board brought in George Orban as CEO, a man with retail experience in building the businesses of Ross Stores, Devon Stores, and Office Mart. George Orban was chairman of the board as well as a major stockholder. [Laurie J Flynn, [http://www.contextmag.com/archives/199903/Feature2QUICKCHANGEARTIST.asp "Quick-change artist: Egghead's CEO bets the company on a plan to become a 'store without stores,'] from "The New York Times," March 1999.] After a huge run up in internet stocks (1997-1999), and facing declining margins from increased manufacturer pricing as well as increased competition from so-called “Superstores”, Orban closed all 250 of its loss-generating retail stores to focus entirely on its small, but profitable and growing, web business. In January, 1998, the decision to close all retail stores was unprecedented, but bolstered by market research and a belief that web sales represented the future. Even as its retail outlets closed, Egghead expanded its online offerings with the purchase of Surplus Direct.

These moves were widely considered to be bold -- and risky. In brick-and-mortar, Egghead was outcompeted by Superstores and larger retailers with greater volume. Online, the same happened, as Egghead was ultimately outsold by online Superstores such as Amazon with greater resources and experience in online retail. In response, Onsale.com, a struggling online auctioneer, merged with Egghead to form Egghead.com in 2000, and Jeff Sheahan took over as CEO, while Jerry Kaplan and George Orban served as co-chairmen of the board.

In December, 2000, its IIS-based servers were compromised, potentially releasing credit card data of over 3.6 million people. [Robert Lemos, [http://news.zdnet.com/2100-9595_22-526642.html "Egghead cracked; data at risk"] from [http://news.zdnet.com/ "ZDNet News"] , Dec 22, 2000] In addition to poor timing near the Christmas season, the handling of the breach by publicly denying that there was a problem, then notifying Visa, who in turn notified banks, who notified consumers, caused the breach to escalate into a full blown scandal. [Thomas C Greene, [http://www.theregister.co.uk/2001/04/27/egghead_credit_card_hack_serious/ "Egghead credit card hack: serious questions remain"] from [http://www.theregister.co.uk/ "The Register"] , April 27, 2001.]

Sales were simply not enough to sustain the business, the stock plummeted and the company went into bankruptcy. In 2001, Amazon purchased Egghead for $6.1 million, and now operates Egghead.com.

References

External links

* [http://www.internetnews.com/dev-news/article.php/10_543591 Egghead.com Gets Hacked]
* [http://www.internetnews.com/dev-news/article.php/554091 Egghead.com: Credit Card Info Safe from Prying Eyes]
* [http://news.com.com/Lengthy+Egghead+investigation+costs+banks+millions/2009-1017_3-250745.html Lengthy Egghead investigation costs banks millions]
* [http://www.emergency.com/2000/cc-stolen.htm Details of Alleged 3.7 Million Credit Card Number Theft]
* [http://news.com.com/2100-1017-250433.html?legacy=cnet Egghead silent; customers angry]
* [http://www.internetnews.com/bus-news/article.php/932871 Egghead.com Becomes Amazon.com Property]
* [http://www.technewsworld.com/story/15122.html Amazon Buys Egghead in Bankruptcy Deal]
* [http://www.ecommerce-guide.com/news/news/article.php/942931 Amazon Relaunches Egghead.com]
* [http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&hdAction=lnkhtml&contentId=857412&history=true Multi-channel mistake: the demise of a successful retailer]