Federated Department Stores Inc. of Cincinnati announced last month that it planned to shut down its Fingerhut catalog and Internet operations, dropping the curtain on its foray into e-commerce. "Federated Department Stores said [it planned] to dispose of Fingerhut either through sale or liquidation," confirms Fingerhut spokesman Ben Saukko.

Federated, which owns such upscale retailers as Bloomingdale's and Macy's, bought Fingerhut Cos. Inc. of Minnetonka, Minn., in March 1999 in large part because of the catalog company's expertise in order fulfillment. Federated's plan was for Fingerhut to provide third-party distribution services to other retailers—particularly to dot-com merchants—that were interested in home delivery. For a while, Fingerhut handled e-fulfillment for several merchants, including Wal-Mart's online business. (That relationship ended more than a year ago.)

Lackluster online sales this past year dimmed the prospects for success for a third-party logistics provider supporting Web merchants. "The decision [to sell or liquidate] is a reflection of business conditions, including a shift in e-commerce, which affected the direct consumer and e-fulfillment business," says Saukko. "These opportunities have tightened up."

With online sales slowing, industry analysts were not surprised that Federated was retreating from its e-fulfillment plans. "E-fulfillment has leveled off," says John Fontanella, an analyst with AMR Research in Boston. "People are going to Web sites for research and to check prices, but they're buying at the store."