(ma/sa/art) Branding vs Third Party Marketing
Tsig's business plan is similar to that of the
business that is the focus of the article below
Re-engineering e-tail
Cyberstock Investor Report 01/22/2000 7:00 PM
By Matt Ragas
ragingbull.com
"...Think about the dilemma an e-tailer faces. Spend millions on marketing and your losses mount, but your sales growth continues and some of your shareholders are appeased. Or, concentrate on the bottom line and cut back your marketing spending, and investors punish you for no longer showing generous top-line revenue growth. Either way, the end result is that product margins are constantly under pressure. Talk about a business model tinkering on the verge of being broken! Pure-play e-tailers focused on commodity categories such as books, music, and software seem to be engaged in a war they simply can't win.....
.....But back in May of last year, Global Sports CEO Michael Rubin hatched a new business model for his firm after investigating the numerous pitfalls of establishing an Internet presence. Rubin quickly learned that the costs to establish a new e-tail brand from scratch were atrocious, and that traditional sporting goods companies were largely unwilling to shoulder the costs of operating a Web division. At the same time, pure-play sporting goods e-tailers like Fogdog (FOGD) and Gear.com were burning millions of dollars in an attempt to build their brand and customer base. To complicate matters further, many sporting goods manufacturers were unwillingly to sell their products to these unproven e-tailers. Rubin came to the conclusion that there was a sizeable business opportunity lying in all this online turmoil. Thus, the complete re-engineering of Global Sports began.
....Think about the brilliance of this game plan for a second. Global Sports is now able to leverage the established brand names of The Sports Authority (TSA), Oshman's Sporting Goods (OSH), and The Athlete's Foot, among others, which now become part of Global Sports' e-brand portfolio. In addition, these agreements all require the offline sporting goods companies to promote their Web sites in all of their stores and in offline advertising. These marketing activities directly benefit Global Sports, and cut down on the company's own marketing spending enormously.
...The jury is still out on whether Global Sports can actually make this model work. I can write all day about the inherent cost savings and benefits I see, but the proof will lie in the execution...." |
