The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased ...
Some web-selling pundits claim that unless you’re a category killer, you can’t make money on the web. Michael Rubin has made a business out of that notion.
The high-energy, 28-year-old Rubin heads Global Sports Inc., an end-to-end service provider for sporting goods retailers looking to get online-and make a profit. And what a list of clients he has: 14 major retailers including Kmart’s BlueLight.com, Broadband Sports (and subsidiary AthletesDirect), buy.com, Dunham’s Sports, Fox-Sports.com, iQVC.com, MCSports, Oshman’s Sporting Goods, Sports Chalet, The Athlete’s Foot, The Sports Authority, Toysrus.com, WebMD and the recently acquired FogDog (see Newsline, p 8). “Providing the e-commerce infrastructure for big brands is where the opportunity is,” Rubin says.
With the success that Global Sports has experienced, Rubin contends: “It’s ‘Game Over’ in the online sporting goods sector.”
Brashness is not in short supply around Global Sports, to say the least. But many who have watched Global Sports’ meteoric rise say it’s warranted. “This guy moves fast and makes things happen,” says Frank Poore, president and CEO of CommerceHub, which connects retailers to suppliers and has worked with Global Sports on warehouse systems integration. “He’s taking control of the sporting goods supply chain and his company is in a position where it is dominating.”
Rubin has built his business based on consolidation of inventory and operations. Global Sports runs the sporting goods web sites, fulfillment, delivery and customer service operations for most of the major players online today, providing the same services to many retailers without compromising differentiation. But the brands are paramount to Global Sports. Nowhere does a customer ever know that he is buying from anyone other than the site where he is shopping.
In spite of his youth, Rubin had a decade and a half of experience that led him to the formation of Global Sports. When he was 13, he started a ski shop in his parents’ basement. That expanded to five retail stores by the time he graduated from high school, then evolved into KPR Sports International Inc., an off-price athletic footwear and apparel business. KPR merged with Ryka Inc. to form Global Sports Inc. in 1995. “Global Sports’ success has a lot to do with the fact that Michael Rubin was in the sporting goods space for a long time,” says John Lovett sporting goods analyst with Gomez Advisors.
In the late 1990s, seeing the inherent opportunities to move retail online, Rubin sold the branded and off-price action sports divisions of the company and set out to build a web business. There was no magic to his insight, he contends: “It was intuitive.”
To Rubin, it was obvious that while retailers had well known brand names they did not have the infrastructure to bring their businesses online. At the same time, he was convinced that pure-plays would not be able to build a brand and get a return on their investment capital. His plan was to invest in the infrastructure, then seek the brands that wanted to be online.
But while intuition was the inspiration, the contacts he had built up helped provide the execution. Rubin still had long-lasting relationships from his former sporting goods business and he says that those contacts were willing to bet on what he could do with his e-commerce business model.
Furthermore, the timing was right. Two and a half years ago, everybody was trying to figure out what this new selling medium was. Few understood that sites selling similar products could be made to appear to the shopping public to be completely different from each other. And Global Sports really was the only e-commerce play that provided a total solution.
As Rubin predicted, this is exactly what sporting goods retailers were looking for. “He was on the cusp of the Internet boom with a business model that companies needed,” says Lovett. “And he was first to the space with a model that could attain profitability.”
Both The Athlete’s Foot and Sports Chalet say being a total service provider was key to choosing Global Sports. “For us not to have an Internet presence would have put our business at risk,” says Craig Levra, CEO of Sports Chalet, which has been a partner since November 1999. “We didn’t have the resources to build a first-class web site and Global Sports did.”
Bob Corliss, CEO of The Athlete’s Foot, a partner since 1999, says his company believed from the beginning that bricks-and-clicks would be the prevailing model for e-commerce. “We have enormous brand equity in our name. Michael came up with the model to do the e-commerce side,” Corliss says.
While Rubin leveraged his business contacts, the company set out to build the infrastructure by hiring buyers, web site designers and staff who knew how to run fulfillment operations and customer service. In only two years, Global Sports is making a huge impact on the e-commerce market, observers say.
The capacity of the back-end operations allows Global Sports to take up to 20,000 orders per day, thanks to its move in May to its own warehouse fulfillment center in Louisville, Ky. The company originally worked with PFS Inc., a third party order management and fulfillment company. As its business grew-and because it already operated its own customer service centers-it wanted more control over fulfillment. Global Sports invested nearly $7 million in a 300,000-square-foot facility, which it can expand to 450,000 square feet. The company fills 3,000 packages per day with an average ticket of $100. Global Sports employs 200 in Louisville and 150 at its headquarters and customer service center in King of Prussia, Pa.
Global Sports owns each of its retailers’ web sites and pays the retailers a 5% commission. The company employs 30 buyers and merchandisers who work with the partners on the kind of stock they want. While some partners have products that are unique to their site, based on their vendors and specialties, they all have access to Global Sports’ inventory of 1,000 brands and 60,000 SKUs, for which it secures volume discounts that might not otherwise be available to the individual web stores. This centralized inventory, and the fact that it is now operating out of its own warehouse, keeps operating costs down.