Boots will give away 3 million discs at its 1,400 UK stores and is backing the venture with an pounds 11m investment over the next three years. However, it said it had no plans to follow Dixons' strategy with Freeserve and float the business.
Boots' decision to call its service handbag.com caused surprise with many women describing it as "patronising". Boots defended the name, saying it had "researched well" with women. "The handbag is a lifeline for women," a Boots spokesman said.
City analysts expressed disappointment with the idea, saying they had hoped it would be based more heavily on the Boots brand.
Internet experts say there could now be 100 free internet service providers and that the market has now become "commoditised". A shake-out is predicted with experts saying only four or five could survive, with the biggest names like Freeserve, Tesco and AOL having the best chances. They said survival could depend on targeting particular groups rather than adopting a "one size fits all" approach.
Boots said it was aiming its service at women as 90 per cent of British women shop with Boots every month and women account for two-thirds of high street purchasing decisions. It said the proportion of female Internet users is also rising.
Boots, which is running the service as a joint venture with Hollinger, the publishing group, is aiming for 500,000 subscribers by the end of next year. It aims to be profitable by 2003.
The launch came on a busy day for Internet start-ups. Yesterday also saw the launch of Bigsave.com, an Internet site offering cut-priced branded goods such as Ralph Lauren, Calvin Klein and Toshiba.
Backed by Jim Mellon, the Regent Group financier who forced the break up of Hambros, the fledgling company already has its eyes on a stock market float.
It has appointed ABN Amro and Bear Stearns to advice on the process, which Mr Mellon reckons could value the company at pounds 300m. Mr Mellon has also recruited Nigel Whittaker, the former Kingfisher director, as a non- executive.
Bigsave will source its goods direct from manufacturers, not from the grey market. However, analysts questioned whether the business would be offering a unique service with rival firms entering the market.
Separately, beenz.com, the Internet company that provides an on-line currency called beenz, has agreed a new round of financing to raise a further $20m. The backing has come from private investors including Larry Ellison, head of Oracle, the US computer giant.Reuse content