Egghead Suspends E-tail Operations

Beleaguered computer e-tailer Egghead.com, which has been operating under Chapter 11 bankruptcy protection since August, suspended all of its operations late last week and indefinitely halted all commercial activity.

"Our plan had been to sell the assets of the business as a going concern and continue providing Egghead customers with great value and selection," the e-tailer said in a notice posted on its Web site. "Unfortunately, we have reached a point where we are unable to continue active operations."

As a result of the shutdown, the Menlo Park, California-based company said it would begin Monday to notify customers who had placed orders about their status. Customers who have received shipping confirmations will not be affected by the closure, Egghead said, but those who have not received confirmations may have their orders canceled.

While its URL and Web site will remain accessible, Egghead said all of its shopping and fulfillment functionality will be disabled.

Return to Sender

Egghead indicated that returned merchandise that the company receives after October 25th might be shipped back to customers without crediting their accounts. Moreover, the company said it is no longer accepting any customer returns, including those that may contain defective items.

In its memo to customers, the e-tailer also announced that it will no longer provide support service via its toll-free telephone number, but that "for a limited period of time" it will try to provide basic customer service via e-mail and will do its best to respond as quickly as it can, "given [its] limited resources."

Scrambling for Sales

As one of the earlier pure-play e-commerce entrants, Egghead has been struggling for the better part of a year to shore up its financial footing and remain a competitive player in the largely unprofitable online electronics goods market.

Faced with what it called a "dramatic and unexpected decline in sales," Egghead announced August 15th that it was selling its assets to Silicon Valley-based brick-and-mortar retail chain Fry's Electronics as part of a Chapter 11 bankruptcy filing.

At the time, Egghead said it would keep its site open for business until the transaction was complete, with Fry's taking over the operational reins once the bankruptcy proceeding cleared. A Fry's spokesperson was unavailable to comment to whether the status of the deal had changed.

Sunnyvale, California-based Fry's, which does not currently have an online arm, operates 12 stores in California, three in Texas, two in Arizona and one in Oregon. According to Egghead, assets that Fry's did not purchase were expected to be sold under bankruptcy court supervision.

Cutting Costs

Alongside its asset sale to Fry's, Egghead laid off all but approximately one-third of its workforce, or reportedly 130 employees.

In addition to several workforce reductions throughout the year, Egghead also outsourced the auction portion of its store to dynamic pricing services provider FairMarket in July in a bid to cut costs.

In its last quarterly financial earnings release, for the period ended March 31st, Egghead reported a net loss of just over US$8 million on revenue of $85.3 million. During the same quarter a year earlier, revenue was $152 million.