New Report: E-Sports Will Exceed $4 Billion Or 7% of Total Retail Sales by 2004

"Online sporting goods sales are poised to ramp significantly as e-commerce spreads to new verticals for Holiday 1999," says Shawn C. Milne, consumer analyst at Hambrecht & Quist and author of a recently released industry report.
     The report points out that independent research estimates online sporting goods sales (e-Sports) will exceed $4 billion by 2004 or 7% of total e-commerce retail sales. Milne states that, "we believe the $150 billion global sporting goods category is ripe for transition to the Internet, driven by the opportunity to combine content and product recommendations and by the highly fragmented nature of the supply and retail channels. Additionally, Milne says, "we believe concerns over purchasing 'sight unseen' in the sports category are significantly overly exaggerated."
     The author believes that there has been little investor attention paid to the convergence of the Internet and sports. Milne states that this is rapidly changing as several companies are poised to ramp online sporting goods sales while existing players in the sporting goods category look to actively participate in the e-commerce space. "Taking it to the 'Net" makes sense because there is high consumer appeal to purchasing sporting goods online combined with shared demographics between target audiences and e-commerce consumers.
     The report identifies the huge online sporting goods opportunity; outlines some of reasons why the industry has been slow to "get the 'Net"; reviews the online competitive landscape, including public and private companies; and provides initial thoughts on valuation in the category.
     Milne mentions in the report that "While the industry is beginning to understand the power of the Internet, issues surrounding product distribution remain key in a market with no master distributor. Moreover, the largest brands in the category remain hesitant to sell to online retailers -- making access to branded product a significant competitive advantage."
     The report claims that there is no category killer in e-Sports as different models are emerging to capture the significant opportunity from pure plays (e.g., Fogdog Sports, and Gear.com) to hybrid models (e.g., REI.com and Global Sports, Inc. (GSPT, $22.13, NR) to content plays such as SportsLine USA (SPLN, $29.38, BUY), soon to be renamed Sportsline.com, and Altrec.com. At the same time, industry giant Nike is poised to "just do it" in the dot.com world through its own Web site. The author expects valuations in the e-Sports category will mirror other e-commerce categories -- as the Street focuses on top-line growth, increasing traffic, and strong brand awareness. He also believes that portal strategies that include both advertising and e-commerce revenues will command a slight premium.