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Global Sports Scores With Web Business

E-commerce: The firm is hitting it big by selling merchandise for established retailers rather than running its own store.

March 26, 2001|HOPE YEN | ASSOCIATED PRESS

KING OF PRUSSIA, Pa. — While other Internet ventures crash and burn, The Sports Authority isn't worried about its e-commerce.

The bricks-and-mortar retailer lets Global Sports Inc. do most of the work, a 1999 decision that it says has produced profits from the start.

"Looking back, we were geniuses," said Janis Altschuler, Sports Authority vice president. "It was to our benefit to outsource the Web site so we could focus on our core business of running 200 stores."

Global Sports, based in King of Prussia, Pa., is hitting it big with a venture that now runs Internet stores for 14 of the nation's bigger sporting goods retailers, including Oshman's Sporting Goods, Bally Total Fitness and FoxSports.com.

The company, the brainchild of 28-year-old chief executive Michael Rubin, reported fourth-quarter sales of $20.3 million, nearly a four-fold increase from the same time in 1999, its first year of Internet operations.

It gobbled up main competitor Fogdog Inc. for $38.4 million last fall. Fogdog was a high-profile online sporting goods retailer with aggressive marketing and coveted accounts with Nike and Callaway, but it couldn't turn a profit in a souring New Economy.

Global Sports officials said the firm expects to reach profitability this year and may expand beyond sporting goods.

"Global Sports is certainly exceeding expectations," said Shawn Milne, an e-commerce analyst with Wit SoundView in San Francisco.

It wasn't always so. When Rubin steered his company into e-commerce in 1999, most believed that expensive brand-name building and flashy advertising--a strategy pioneered by Amazon.com, Fogdog and many others--would lead to profitability.

But Rubin, who began selling skis out of his parents' suburban Philadelphia home at age 13, focused on getting sporting-goods retailers to back his company, which would run Internet stores for all of them. Global Sports would then save millions in advertising by tapping into the retailers' already established brand names and customer bases, he said.

"I looked at the need all the retailers had who desired to get into Internet sales, but had no ability to go on their own," Rubin said. "When people said the New Economy is about building new brands, I basically said, 'You're wrong.' . . . We bucked the trend and invested money in infrastructure."

Global Sports piggybacked on the brand names and business relationships of its partners in traditional retail. That allowed it to cut expenses as Fogdog and other online retailers fell apart.

Under Rubin's business model, Global Sports puts up the capital, pays the expenses and takes the risk of owning inventory. The retailer, whose main obligation is to promote the Web site address in advertisements at its stores, takes away 7% to 10% of the profits.

And because the retailers use shared software, inventory and shipping operations, Global Sports has been able to drive down operating expenses and build revenue as it adds more partners, analysts say.

"Global Sports has separated itself from the e-consumer pack on the strength of its superior operating model," said Lauren Cooks Levitan, an e-commerce analyst with Robertson Stephens in San Francisco.

Some analysts believe Global Sports might expand to areas such as housewares, apparel or jewelry. Cable-television shopping network QVC Inc., which sells those and other goods, has a 19% ownership stake in the company.

"I think the potential for us to leverage the existing infrastructure in other categories is certainly a possibility," Rubin said.

Still, challenges remain.

Nike, which allowed Fogdog to sell its athletic shoes online, pulled its account after Global Sports' acquisition, citing a "conservative approach to Internet retail channels based on market uncertainties."

That lack of access to such a major brand troubles Kmart's bluelight.com, one of Global Sports' partners.

"I wish Global Sports was better at getting the big-name brands out there, like Adidas and Nike," said Brian Sugar, bluelight.com's chief Web officer. "For the moment, we can't sell them."

But he adds, "Global Sports knows what they're doing. They understand retailing, they understand the partnership, they understand how to do business online."

On the Net:

http://www.globalsports.com

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