September 12, 2011, 9:02 AM

GSI Commerce founder launches a new e-retail company

Michael Rubin’s Kynetic includes Rue La La, online sporting goods retailers and ShopRunner.

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Michael Rubin

Michael G. Rubin, who sold GSI Commerce to eBay Inc. this year for $2.4 billion, today launched a new company, Kynetic LLC, that he predicts will produce more than $1 billion in revenue from e-commerce in 2012, its first full year of operation.

The new company encompasses three former GSI units that Rubin took away from the eBay sale: limited-time sale site Rue La La, a group of e-retail sites that sell team sports apparel and ShopRunner, the multimerchant free shipping program that competes with Amazon.com Inc.’s Prime.

“It’s fun to have a $1 billion private company focused solely on building these businesses,” Rubin tells Internet Retailer. He says he will be able to focus more on these three companies than he could on the roughly 20 businesses GSI ran before the sale to eBay, and he won’t have the pressure of quarterly financial reporting that he did with GSI, which was a publicly traded company.

And while he intends to focus on these three companies, he says within each sector Kynetic will have the capital to make acquisitions that complement its existing assets. Rubin’s company reportedly came away from the eBay deal with $155 million in working capital. EBay retains a 30% stake in Rue La La and ShopRunner, but Kynetic wholly owns the sports apparel business, a business unit that will be called Fanatics, the name of a company that GSI purchased and that operates e-commerce sites for many professional and university sports teams.

That Fanatics division includes TeamFanShop, which operates e-commerce sites for professional sports teams and leagues, including Major League Baseball’s MLB.com, NASCAR’s NASCAR.com Superstore and the National Football League’s NFL.com. MLB.com/shop is No. 119 in the Internet Retailer Top 500 Guide; NFLShop.com is No. 307 and NASCAR.com is No. 429. Fanatics also operates its own retail sites, including Fanatics.com and FootballFanatics.com, No. 98 in the Top 500 Guide.

Rubin projects the Fanatics division will generate revenue of $600-$700 million in 2012, virtually all of it online. The unit has about 600 employees, he says.

He projects revenue of $400-500 million for Rue La La in 2012; 2010 sales were $255 million for the flash-sale e-retailer. “Consumers are highly addicted to this space,” Rubin says, referring to limited-time sales, “and we have one of the two leading properties in the space.” Rue La La is No. 82 in the Top 500 guide; competitor Gilt Group Inc. is No. 49.

As for ShopRunner, which offers consumers free shipping for a year from dozens of web retailers for a $79 annual fee, virtually the same deal offered by Amazon Prime, Rubin says 50 merchants are already live with another 30 or so planning to introduce the service this year. Among the participating retailers are Toys ‘R’ Us, GNC and Newegg.com.

Rubin says retailers need a coalition offer like that of ShopRunner to compete with Amazon. “When you look at a company like Amazon that’s becoming more powerful than ever and doing such an amazing job it’s critical for retailers to be able to combat that,” he says.

Rubin says hundreds of thousands of consumers have signed up for ShopRunner, though he would not be more specific, and that the service will be more aggressively promoted over the next few months. Since the $79 fee covers free shipping on the web sites of all participating merchants, the ShopRunner offer becomes more valuable to consumers the more retailers participate. “ShopRunner started with 12 merchants and now has 50,” Rubin says. “The value proposition continues to strengthen, and as it strengthens it makes sense to aggressively market it.”

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