The move follows similar programs from Target and Amazon.
GSI to shed sporting goods inventory in a deal with Sports Authority
GSI will sell most of its remaining sporting goods inventory to Sports Authority.
Managing Editor, International Research
GSI Commerce Inc. has positioned itself as a jack-of-all e-commerce trades over the last several years, snapping up marketing, technology and supply chain vendors in an effort to become a one-stop-shop for e-commerce service and support. But it’s moving away from owning inventory for a major sporting goods client, one of its original services.
GSI, which got its start providing e-commerce services to sporting goods retailers, has long owned the inventory for many of its clients and sold that merchandise through the e-commerce sites of such client retailers as Dick’s Sporting Goods and Sports Authority, says Colin Sebastian, who leads digital media and Internet analysis at investment firm Lazard Capital Markets LLC.
However, as GSI added other product categories, such as health and beauty and apparel, it did not take on ownership of that inventory, Sebastian says. “Sporting goods was basically an exception, but it was also how GSI began selling online—as Global Sports Inc.,” he says.
As part of a deal announced this week, GSI said it will sell most of its remaining sporting goods inventory to Sports Authority Inc. in the first half of next year. “To support a more unified multichannel experience, Sports Authority will buy and own all merchandise sold through its web store, and will become the seller of record for its e-commerce business in the first half of 2011,” GSI said in a statement.
In a few cases, GSI will continue to own inventory, such as for professional sports league clients, including the NFL and NBA and its own private sale site Rue La La. The company says it also will continue to support the inventory needs of its remaining sporting goods clients through its network of drop-shippers, its ship-to store and ship-from store services, and its licensed goods inventory.
GSI will also continue to hold goods for its e-retailer customers in its distribution centers on a consignment basis, according to Sebastian.
The deal with Sports Authority signals GSI’s expanded focus on services, rather than on sales of goods, Sebastian says. “GSI has recently been shifting ownership of the inventory it owns to its retail customers,” he says. “As we anticipated, GSI is shifting inventory risk to the Sports Authority.”
As a result, GSI will book service fees or commissions instead of merchandise revenues with Sports Authority, he adds. Sebastian estimates Sports Authority will represent 5% to 7% of GSI’s revenue this year.
The deal puts GSI’s relationship with Sports Authority, No. 205 in the Internet Retailer Top 500 Guide, more in line with how it works with such retailer clients as American Eagle Outfitters, Toys ‘R’ Us and health and vitamin supplement retailer General Nutritional Centers Inc. that use the vendor for their e-commerce platforms, marketing and technology services—without having GSI take ownership of their inventory.
GSI also extended its contract with the Sports Authority through 2039 and will provide new services to the retailer to support its multichannel operations.
Sports Authority, which posted Internet Retailer-estimated web sales of $57 million for 2009, about even with 2008, will use supply chain management software from GSI subsidiary VendorNet Inc. for new ship-to store, ship-from store, in-store pickup and in-store ordering programs. The retailer also will work with several businesses in GSI’s Global Marketing Services division: digital marketing agency TrueAction, e-mail marketing firm e-Dialog, the Pepperjam affiliate network and ad retargeting firm FetchBack.
“Sports Authority is committed to delivering a consistent customer experience across all channels,” says Jeff Schumacher, executive vice president and chief marketing officer of Sports Authority. “This new deal supports our multichannel strategy and increases our flexibility and control over cross-channel merchandising.”
GSI, which posted net revenue of $536.8 million for the first six months, up 40% from $383.7 million for the same period in 2009, bought VendorNet and FetchBack earlier this year. It acquired e-Dialog in 2008 and Pepperjam in 2009.