Groupon says its focus is on the bottom line, rather than top-line growth.
Online sales have been largely relegated to the sidelines of the $150 billion worldwide sporting goods industry, but that may change as new players step up to the plate and existing players intensify efforts to build a dynasty.
Whereas the veterans doing most of the online business already operate successful catalog operations, such as Recreational Equipment Inc. and Eastbay, the mail-order arm of Venator, the new players range from traditional retailers to manufacturers to Internet-only operations.
Capturing much of the fanfare is a venture planned by Global Sports Inc., which in June announced agreements with six sporting goods retailers, including The Sports Authority and The Athlete’s Foot, to set up and run Internet sites for the stores. Under the arrangement, each of the retailers will have its own site, while Global Sports-which is in the process of divesting all of its non-Internet assets-will use a common infrastructure to process the orders.
Such cooperation is practically unheard of in the sporting goods business, where margins are razor-thin, but Global Sports executives are confident that the team approach will work. “Our goal is to be the
e-commerce leader for the sporting goods industry,” declares Michael Conn, Global Sports’ senior vice president for strategic development.
The Sports Authority has a partnership agreement with Global Sports, but for the other stores, Global Sports will assume the risk and return between 5-10% of the revenues to the stores. Global Sports plans to have the sites operating by October to take full advantage of the holiday season. “By not having to build name identity you save substantial dollars in marketing,” says Conn. The retailers will integrate their Web addresses into their marketing to help drive traffic to the sites, he adds, while a single infra-structure creates economies of scale.
Fogdog Sports, meanwhile, is trying to build name recognition with its recently launched TV campaign. “There’s not a high awareness that you can buy sporting goods online,” says Tom Romary, Fogdog’s vice president for marketing. The retailer also has alliances with America Online and other portals, including Yahoo, Excite and Snap.
Fogdog-formerly known as SportSite.com-launched its new site last November and generated more than $2 million in sales during the holiday season. Romary thinks his company is positioned to dramatically increase that figure this year and take over the lead in the market. “Customer retention is the key,” he says. “We think we can provide good information, good products and great service-and that ultimately will allow us to win.”
Also looming on the horizon as a competitive force are a number of e-commerce sites being set up by manufacturers, including Nike, Reebok and Rawlings. Romary thinks they will only help to increase awareness of the category online. Conn concurs. “Manufacturers will sell direct, just like some of them operate direct stores,” he says. “But I don’t think it will change the general operating model for sporting goods manufacturers. People want to look at multiple brands when making a choice.” Just who the category winner will be remains to be seen, but it is clear the race is on.