Tim Harrington`s Fogdog is no longer a pup, but it`s no billion-dollar show dog---yet

On a September afternoon when he’s supposed to be on the mound for his company’s softball team, Fogdog Sports CEO Tim Harrington was huddled in his office, pitching something far bigger for the fledgling e-retailer. Just how big becames clear when the news broke a few days later. In a double play, Fogdog announced an exclusive, six-month deal to sell the full line of Nike Inc. sports gear at a discount. What’s more, Fogdog unveiled plans to go public, backed by Nike’s 12% stake in the company.

The moves put Fogdog into position for reaching Harrington’s goal—becoming the Web’s next category killer, a $1 billion company in five years. “We want to be the first-ever global brand in sports,” he says, “a collection of authentic specialty stores all under the Fogdog umbrella. It’s retail sports as an all-encompassing concept.”

A seasoned pro

That’s a bold strategy for a company that set up shop only a year ago in a line of business with no dominant retail players, hundreds of closely guarded specialty brands and a distribution channel with more twists and turns than a Barry Sanders blast. Well-known brands like Nike have been wary about letting e-stores sell their goods. But Harrington comes to the job a seasoned business pro. He spent 20 years climbing the ladder at International Business Machines Corp., where he gained deep experience in corporate strategy, operations, sales and marketing.

IBM also gave Harrington the time and place to make a career switch, sending him off to Stanford University’s graduate school of business in 1995. There, he indulged a lifelong passion for athletics by researching the sporting goods industry. After finishing his degree, Harrington decided not to return to IBM. He signed on at Cobra Golf Inc., as director of national accounts, a dream job for an avid golfer like Harrington. “I wore two hats there,” he says, “developing the entire corporate strategy, setting up a string of accounts and a sales force, and getting into an Internet strategy.”

After just six months, Harrington was on the move again. He left Cobra for an Internet pure-play, GolfWeb, an information site based in the Silicon Valley. As general manager, he continued building up the site and soon negotiated its sale to CBS SportsLine, putting himself out of a job. But not for long. Since his days at Stanford, Harrington had been building a wide network of contacts in both sporting goods and the Internet. In June 1998, he joined Fogdog, a timely intersection for both, he says: “I know the industry, I know the Internet, I know big business and the importance of dealing with customers.”

The Stanford connection

Fogdog was the brainchild of three Stanford graduates—Brett Allsop, Andrew Chen and Robert Chea—who met while living in the university’s Cedro dormitory. Allsop remains the e-retailer’s chairman and heads its international division, based in London. Chea and Chen hold vice president posts.

The three got their start in site development. In 1994, they formed the Cedro Group, which created Web sites for more than 100 sporting goods companies and trade associations. Eager to make the leap to e-commerce, in June 1998 the trio revised their business model and launched SportSite.com, Fogdog’s forerunner. Their first round of funding netted $5 million from J.H. Whitney & Co., Draper Fisher Jurvetson, and Marquette Venture Partners. A second round last spring included new investor Intel Corp. and brought in another $20 million.

Harrington came to a company flush with cash but lacking a clear game plan. One of his first acts was to dump the site’s old moniker, which he found functional but flat and generic. Harrington argued that name recognition on the Net is a make-or-break proposition. So he and his colleagues pored over hundreds of names tossed out by consultants, choosing one, ironically, that has nothing to do with sports. Even the dictionary definition—a bright or clear spot in a fog bank—lacks the allure the name generates on its own, though it’s consistent with the company’s philosophy. In short, Fogdog has cachet, says Harrington: “It’s a name we thought we could build soul around—and it had 100% recall in focus groups.”

Reborn as Fogdog.com last December, the site introduced a raft of new interactive features and a whole lot of products—15,000 to be exact, representing 500 brands and 60,000 SKUs.

“First movers have an advantage that is absolutely essential,” Harrington says. “Yahoo! was a first mover, and Amazon.com has built a brand name for itself. Name recognition like that gives you the advantage in moving a brand.”

Equally important is keeping the storefront spruced up and changing with customers’ needs. Makeovers occur regularly, and the under-50K site loads at a speedy rate. It now logs about 40,000 visits a day, up from 3,000 a year ago. Recent innovations include “Fogdog Fetch,” a retrieval service that finds equipment based on the shopper’s level of skill and experience, and “My Fogdog,” a profile builder that suggests products tailored to a shopper’s interests.

Selection and service

Fogdog aims for depth as well as breadth. The site features merchandise in more than 15 sports, and six prominently displayed specialty shops offer an even deeper selection of golf, tennis, fan memorabilia, soccer, baseball and outdoor gear. New shops are in the works, boosted by Fogdog’s recent acquisition of Sports Universe.

The deal brings more action equipment and Generation X shoppers to Fogdog, and both will help accelerate plans to add specialty shops in hockey, skateboarding, cycling and snowboarding and other adventure sports. Each shop takes months to build, set up with manufacturers and distribution partners, and staff with experts who can help shoppers find merchandise that fits their level and needs.

“Others talk customer service,” says Harrington, “but we’re one of the few with an 800 number posted on the front page. We staff it seven days a week, not with operators but with sports consultants—full-time employees who have a stake in the company.” The stake is an equity position given to all full-time employees, many of them ex-coaches and others with years of experience selling sporting goods. If that’s not enough, shoppers also can call on the advice of celebrity consultants like fitness expert Therese Iknoian, San Francisco Giants equipment manager Mike Murphy and Adventure Network outdoor specialist Michael Hodgson.

A customer planning a camping trip can send Hodgson an e-mail describing the excursion and asking what kind of tent to buy. For example, a customer buying a baseball glove can call on the staff for help in choosing the right one, breaking it in, and caring for it.

Fogdog’s consultants are one way the company seeks to avoid what some see as a downside to online sports retailing. “There’s a certain try-it-before-you-buy-it thinking with sporting goods retail,” says David Cooperstein of Forrester Research Inc. “There’s a certain feel you lose online.” For many types of equipment and sports apparel, he adds, online purchasing works much the same as clothes shopping from catalogs. But with more sophisticated gear, shoppers generally want to test out or try on what they’re buying.

So far, Fogdog’s business model has generated sales of less than $10 million annually. “We’re on track with our business plan,” says Harrington, adding that sales are growing 8 to 10 times earlier levels from quarter to quarter, and he projects the company will break even in 2001. PC Data Online recently ranked the company 25th among the Web’s top 40 e-retailers.

Brand is central

To ensure it stays in those ranks, Fogdog sticks closely to the Amazon approach, spending 70 cents of every dollar of revenue on marketing. That ranges from customer support to advertising campaigns to sponsorships and affiliate deals. Fogdog’s offline advertising includes cable television, radio in markets with high Internet use, and print and billboard in the San Francisco Bay Area. In mid-June, the company launched a national ad campaign featuring Fogdog, a friendly character in a shaggy dog suit who comes to the aid of athletes caught in various sporting goods dilemmas. The spot, created by San Francisco ad agency Odiorne Wilde Narraway & Partners, currently airs on cable channels like ESPN, ESPN2, Classic Sports, and the Golf Channel.

“We’re trying to get across three things,” says Harrington. “We’re passionate sports enthusiasts, we have lots of products, and we’re out to have some fun.” The cable ads cost an estimated $5 million, part of an overall campaign that’s pegged at $8 million.

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A recent multimillion-dollar deal with American Online puts Fogdog in several key areas of that portal, building on existing agreements with the Go Network, Snap, WebTV, and Yahoo! Fogdog is also affixing its name to athletic events around the country. It’s a sponsor of the Hi-Tec Series, 10 regional competitions involving teams of three in kayaking, trail running and mountain biking. It’s also the chief sponsor of Let-It-Fly, a four-on-four flag football tour through 15 cities.

Along with driving traffic and sales to the site, these promotions are building name recognition for a business that fluctuates even more seasonally than the rest of retail. “Baseball and soccer equipment sells in March, for example, so sporting goods are always going to be seasonal,” notes Harrington. “It’s the choice we provide that’s going to remain constant.”

That’s a long shot in the highly fragmented world of sporting goods, where a company that makes basketballs typically doesn’t make soccer balls. Technology is an issue, too. Some manufacturers don’t even carry SKUs, product descriptions, and images in a digital format. Fogdog’s partnerships with seven major manufacturers, distributors, and catalogers are aimed at smoothing out these and other kinks. “We may be slower sometimes because we take the time to integrate the distributors. But we’re going to (help them) grow with us and our distribution plans,” says Harrington.

That’s why Fogdog goes slow in adding new categories of merchandise and specialty shops. In lining up new merchandise it works with pure distributors as well as the brands themselves. The setup also includes third-party distribution centers, which handle 20 to 30% of Fogdog products, and catalogers that can pick, pack and ship smaller orders of harder-to-find goods.

Anticipating the holiday shopping season has meant making sure suppliers are prepared. On the front-end, Fogdog will offer customer conveniences like special gift selections, profile registries and gift-wrapping. “We are building business with front-end marketing,” says Harrington, “as well as back-end distribution.”

Both ends pose enough challenges to chase away all but the most tenacious. “It’s not by accident that no one dominates the sporting goods category,” says Michael Conn, vice president for strategic development at Global Sports Interactive. Global Sports, one of Fogdog’s competitors in the online market, adheres to a model of e-commerce that emphasizes behind-the-scenes management of established bricks-and-mortar operations like the Athlete’s Foot and the Sports Authority. “We create a structure and a strategic relationship with these retailers and we run their e-business,” Conn says.

Manufacturers, especially the makers of high-end and specialty products, have their own hesitations about selling on the Web. Many want to be sure that brand identities built up over many years get suitable merchandising and service. It’s why a brand like Calloway golf clubs wouldn’t sell its products in a discount chain in the bricks-and-mortar world. Web stores must build trust, says Harrington, proving to manufacturers as well as customers that they’re not facades but real companies that stand behind their merchandise with knowledgeable staffs and good service policies. Others manufacturers simply aren’t convinced the sales are there. In fact, overcoming worries that the Internet channel won’t pay off in the long run is one of Fogdog’s biggest challenges.

“The sporting goods business has always been a little behind the times,” Harrington says. Faced with easing this anxiety, this February he unveiled a set of e-commerce certification standards at the Sporting Goods Manufacturers Association Super Show in Atlanta. His nine-point plan includes setting minimum standards for site quality and performance, security and availability, personalized customer service, support staff, marketing, product presentation, delivery, international capabilities and industry relationships. “The Internet standards are there to help the brands get them over the hurdle of a new channel,” he says. “We’re saying to them ‘It’s safe. This is where your customers are going to go. Let us use our guidelines to help you.’ ”

Aiming to lead by example, Harrington says his approach does not presume exclusive arrangements with the brands: “We are telling them that if anyone else meets these standards, then they’re capable of selling your products on the Web. And since then, other sets of standards have sprung up—all echoing our idea.”

In the long run, Fogdog aims to use these quality standards to contend with some serious numbers. According to Forrester’s latest projections, online sales curently acount for just $165 million of the nation’s $150 billion sporting goods market, though the number is projected to reach $4.2 billion in 2004. Harrington, of course, has designs on a quarter of that pie.

A goal that lofty requires bench strength, and Harrington is especially proud of the team he’s assembled at Fogdog. Along with finding customer service consultants who really know their sports, Fogdog recently recruited two veterans from the sporting goods industry: vice president and general merchandise manager Ron Berry, who’s held key management positions at Foot Locker, and career Nike executive Tim Joyce, who came aboard this fall as Fogdog president. Joyce, most recently Nike’s vice president of global sales, spent 20 years with the manufacturer.

“We are going to be the category killer,” Harrington says, “but if this was a one-mile race, then we’re still just one lap around the track. So far, we’re in front, not far enough ahead to be cocky, but far enough to be the clear leaders. People are going to have to move fast to catch up.”

William Cocke is a freelance writer based in Charlottesville, Va.

March 1997-April 1998: General manager, GolfWeb (now owned by CBS SportsLine)

June 1996-December 1996: Director of national accounts, Cobra Golf Inc.

June 1976-June 1996: Financial operations management at IBM, including chief operating officer of the company’s $700 million education division.