It was supposed to be the operation that expanded GSI Commerce Inc. from sports to gifts and luxury goods. But only nine months after it closed on its $14 million acquisition of luxury gifts retailer Ashford.com, GSI Commerce is selling Ashford to Diamond.com and as a result incurring a fourth-quarter net loss of $7 million to $10 million.
Ashford didn’t bring GSI what it wanted because it was too far afield from GSI’s focus on sporting goods retailing. “Based on the cost of maintaining a jewelry-specific infrastructure in Houston, we reached the conclusion that the business would likely continue to be unprofitable for GSI for the foreseeable future,” Michael Rubin, chairman and CEO of King of Prussia, Pa.-based GSI, said in announcing the sale.
GSI was unable to take advantage of the strong year that online jewelry sales are experiencing, rising 66% in November over the same period a year earlier, and that all comes back to category expertise, analysts say. “The difference in achieving success in the marketplace right now is in the ability to execute retail strategies,” says Jim Okamura, retail analyst with J.C. Williams.
That expertise is certainly something that Diamond.com believes it brings to Ashford. “Ashford will double our size and make us profitable,” says Jeff Kornblum, COO of Diamond.com parent Odimo Inc. He notes that Odimo will ship over 90,000 orders this year, up 15% from last year.
GSI, which operates web sites for sports retailing chains, changed its name last year from Global Sports Inc. to indicate its intentions to branch out. And even though the Ashford strategy didn’t pan out, GSI has landed several new retail clients over the past year, including retailer Tweeter Home Entertainment Group and footwear maker Reebok International Ltd.