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Internet Invaders Start-ups are targeting the sporting-goods market
In 1995 Harvard sophomore Amar Goel came to a realization: By
selling products over the Internet, a business could eliminate
the middleman and achieve 24-hour global access. Goel, a member
of the Crimson varsity golf team, recruited a few pals to chip
in $80 apiece and started selling name-brand golf clubs from his
dorm room. "There was a lot of trial and error," says Goel, who
named his operation Chip Shot Golf (later changed to
chipshot.com). "But it didn't take long before we were turning a
profit."
Four years later a legion of other entrepreneurs have followed
Goel, and E-commerce is redefining the sporting-goods industry,
poaching customers from retail stores by offering a bigger
selection and competitive prices at the click of a button.
Forrester Research, a technology consulting firm, estimates that
on-line sporting-goods sales will total $137 million this year,
but they are predicted to grow to $1.9 billion (5% of total
sales) by 2003.
When Goel graduated last year, he headed to Silicon Valley and
secured millions in venture capital. Now chipshot.com averages
half a million unique hits a month, roughly 1% to 3% of which
result in a purchase, conforming to industry averages. Though
Goel, the company's CEO, won't divulge exact figures,
chipshot.com expects to generate between $5 million and $10
million in revenue this year. But, like most start-ups, it has
yet to turn a profit.
The company changed its focus two years ago from selling
name-brand clubs to customized clubs, which are made by the same
Taiwanese foundries that make clubs for heavy hitters such as
Callaway and Taylor Made. Chipshot.com's clubs sell for 50% to
70% less than comparable name-brand clubs. "The big clubmakers
are not fans of ours," says Goel. "But we think our model is the
wave of the future."
Chipshot's strategy of undercutting the giants stands in stark
contrast to the strategy of another successful Internet
start-up, Fogdog.com. Billing itself as "the world's largest
on-line sporting-goods store," Fogdog is an aggregator, meaning
that it offers little customized merchandise but sells more than
15,000 sports-related products from 250 manufacturers. Founded
by recent Stanford graduates Brett Allsop, Robert Chea and
Andrew Chen, Fogdog designed Web sites before it switched to
E-tailing. "We figured that selling on-line gives you unlimited
shelf space," says CEO and president Tim Harrington, 42, a
former IBM executive, who says he was hired because investors
felt the founders needed adult supervision. "A brick-and-mortar
store can't match our selection."
Fogdog abides by the brands' minimum-advertised-price policy and
is thus unable to offer deep discounts. Still, Fogdog predicts
that their strategy will change the industry landscape.
"Retailers don't like us, but the brands realize our value,"
says Harrington, who says the rapidly expanding company has yet
to turn a profit. "We can feature more of their products than
even the biggest 'box store.' Besides, they see that if they
don't get [on our site], someone else will get the traffic."
"We figured that selling on-line gives you unlimited shelf
space," says Fogdog's Harrington.
