Smartbuy last week signed an agreement to provide electronics retailer Tandy with e-commerce capabilities, in a deal which cements Smartbuy's transition from a proposed e-tailer to an Internet services and consulting business.

The contract has saved Smartbuy from potential disaster and is a huge weight off the shoulders of founder and general manager Tony Gattari, who launched the company in February this year. Tandy becomes the company's first e-commerce customer, vindicating Smartbuy's change in business model to become "the brand behind the brand".

"It is a very different e-commerce model to a lot of other businesses," Tandy managing director John Winstanley said. "The key thing is we are not expending any money on building a Web site and fulfilment, which is an expensive business."

Under the agreement, the operation of Tandy's online superstore, tandy.com.au, will be licensed to Smartbuy for an initial period of three years. Smartbuy will maintain the site and manage content, administration and online marketing for the Web site.

The site, which will be launched by Christmas, will also allow Tandy to expand its product range by up to eight times. The site will incorporate around 30,000 items. The retailer hopes to incorporate Internet kiosks into the store so both customers and staff can use tandy.com.au to access product information.

"Our stores can currently only carry around 30 to 40 software titles," Winstanley explained. "By integrating our Internet site we can increase our inventory to hundreds."

Tandy foresees the site also helping to drive business to its 220 stores around the country and 125 dealers without compromising its channels.

Winstanley also predicts the site will drive sales in the company's growing computer product line.

"Being a national retailer, we have a very strong neighbourhood presence, and because we deal in technology, our customers are very savvy. A lot want to buy top-of-the-range computer products and at the moment they cannot do that. Allied with the organic growth in computer sales, I think we will become very strong across the range in the next 12 months."

Gattari initially intended to launch Smartbuy as a pure-play retailer in May. But as investors grew increasingly wary of online ventures and dot-coms fell by the wayside, the company's business plan evolved to reflect an industry-wide move toward bricks and clicks.

The deal is also likely to satisfy Smartbuy's investors, Allco Finance Group, Brait Capital and Colonial First State Equity, and gives Gattari the green light to pursue other business opportunities.

Smartbuy has partnered with a number of companies to deliver its e-commerce solutions. Australia Post's newly launched logistics business will take care of warehousing and fulfilment. Web developer Unique Web will take on the site's design and integration.

Tandy announced plans to ship its inventory online last year to bring the company in line with its Canadian affiliate Radioshack. Its business has increasingly focused on computers and telecommunications. But the company has been wary of jumping into online retailing, preferring to protect its bricks-and-mortar business and wait until the dot-com shakeout had stabilised.

"Smartbuy is clearly positioned - they are focused and they have no other business. We wanted to have e-commerce capability without spending huge amounts of money - a lot of businesses have come a cropper that way," Winstanley added.