2000: Business - E-tailers seek holiday cheer

This time of year usually finds merchants in good cheer – Santa’s pending arrival brings coveted cold cash.

But when Santa double-checks his list this holiday season he’ll find fewer golf e-tailers than in 1999. Y2K has proven a lump of coal for many – some have either closed shop or hang on by a whisker.

With some pure dot-com players faltering – and the category shakeout chugging along at a relentless pace – the reason for the season becomes as plain for some merchants as Rudolph’s nose: rake in enough cash to tide them over until investors’ faith in dot-coms (hopefully) revives.

Yet, while some golf e-tailers fight for survival, others see the consolidation as a snowplow clearing the way to plumper profits.

In any case, there’s reason for optimism; industry observers predict an e-retail boom this Yuletide.

Forrester Research, for instance, predicts $10 billion in online holiday shopping, with an average outlay of $603. Gomez.com, a leading Internet quality measurement firm, ups the ante to $11.4 billion – nearly double the revenue for the same period last year. Jupiter Research completes the trifecta, with a figure of $11.6 billion, up 66 percent from last year’s $7 billion.

Despite those financial glad tidings, one thing remains uncertain: Do these figures translate to golf e-tailing?

That’s anyone’s guess. Jupiter Research, for one, offers no specific projections for holiday revenue from the golf industry. What is clear, however, is this holiday season could be make-or-break for some golf e-tailers.

“This holiday season should be a clear indication as to the viability of several of these companies,” said Christopher Todd, an analyst with Jupiter Research, a New York-based Internet research company. “If online golf retailers are not able to meet their sales goals over this holiday season, you will likely see many investors grow weary of continued support.”

Already two of the top six on Gomez.com’s Top Internet Golf Stores for Summer 2000 list have suffered financial fatigue.

Gomez.com’s No. 1, chipshot.com – the Sunnyvale, Calif. online pro shop owned and operated by Chip Shot Golf Corp. – filed Sept. 28 for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.

Once considered a top contender to dominate the golf e-tail category, Chip Shot raised more than $50 million in venture funding since mid-1998 but dumped a bundle into building its brand. It recently signed an agreement to have its assets acquired by Eco Associates -- an affiliate of venture-capital firm Interfase Capital, which specializes in struggling Internet companies. Eco Associates plans to operate Chipshot.com as an on-going concern and will feature it on Mall.com, an online marketplace, according a report in The Wall Street Journal.

Similarly, Mammothgolf.com – No. 6 on the Gomez list – got buried in a cash-flow hazard. In August, its parent company Mammoth Sports Group Inc. announced it was selling its business divisions because of failing operations. On Dec. 6, its key assets -- the dot.com operation, components business and retail superstore -- were acquired by Milestone Golf Enterprises Inc. The new owners say they will pursue a diversified business strategy rather than focus primarily on e-commerce.

Despite these troubles, surviving golf e-tailers are cautiously optimistic about this holiday season, buoyed by, if nothing else, record projections. Jupiter Research estimates that 35 million Americans will purchase gifts online this holiday season, up from 20 million last year.

Indeed, LiquidGolf.com – rumored to be on the financial ropes – expects “a boom in sales for this holiday season” and anticipates proceeds will represent 25 percent of their annual revenue, said CEO Dwain Brannon. Despite late spring layoffs, Brannon contends, “This holiday season is no more or less critical to our company than the last holiday season or the next,” alluding to the category shakeout. “We have not only survived in this environment, but have continued to grow significantly.”

That online shopping is expected to boom this holiday season is tonic to e-tailers, given the problems with missed shipping deadlines and backordered shipments that characterized holiday purchases last year. Indeed, the biggest fear among online shoppers last year was tardy delivery, according to survey Bizrate.com. No. 2 and 3 were privacy and out-of-stock products.

Many golf e-tailers have moved to safeguard against those glitches through increased investment in inventory planning, inventory management, and merchandising, and in some cases, real-time inventory management. They insist delivery is a nonissue.

That wasn’t always the case last year for Golfbargains.com, which “felt the pressure, but all in all did well,” said Travis Erickson, company controller and information technology director. “Most issues were unfortunately due to product availability from the manufacturers. Even so, we have upgraded many of our systems and order handling processes to streamline things even more. I’m confident we will be in good shape this holiday season.”

Even as many golf e-tailers have beefed their inventory and delivery systems, experts say most have jettisoned the marketing emphasis and returned to business fundamentals.

Whether that makes any difference depends on whether gift-seekers shop online ’til they drop. The anticipated holiday e-boom, experts say, will be driven by increased Internet access and the rise in consumers who use the Internet as a shopping outlet.

That too rings true with serious golfers, as indicated in a recent Golfweek/golfweek.com survey that found serious golfers who made purchases online rose to 80 percent this year, up from 64 percent last year. Of the respondents who made purchases, 62 percent have purchased a golf-related product or service, up 10 percent from 1999.

The problem, said John Krzynowek, a partner at Golf Datatech, the Kissimmee, Fla.-based research firm that conducted the study, is serious golfers may buy online, but they don’t buy enough big-ticket items.

“Golfers seem much more likely to purchase products like golf balls over the Internet rather than big-ticket items like golf club sets,” said Krzynowek.

Brannon couldn’t disagree more: “Our average ticket is well over $200 per sale. We feel our commitment to customer service and the fact that we have PGA professionals working with our customers makes them very comfortable making the larger purchases with us.”

While Erickson also contends Golfbargains.com moves big-ticket items, he explains the “reluctance (toward big ticket items) is more in the spouses or relatives not knowing for sure what the recipient needs – it’s such a personal sport that most people make the bigger purchases for themselves. Gifts tend to be the safer items, like apparel accessories.”

In any case, this holiday season shapes up as a tale of two golf e-tailers – the floundering and the flourishing.

While some golf e-tailers will lose sleep eyeballing every ducat that comes in, the latter suffer the anticipation of a child the night before Christmas.

Consider the folks at Golfgods.com. CEO Louis Preziosi Jr. expects a sleighful of cash under the tree this year. Last year, between Thanksgiving and Christmas, the Brandon, Fla.-based golf retailer netted about $300,000 in revenue. Preziosi Jr. expects to eclipse $1 million – about 25 percent of annual sales – this time around.

For that, they can, in part, thank their fallen dot-com comrades.

“We do feel that with the departure of some of the other Internet players that we are in a great position for this holiday season and the future,” Preziosi said. “We feel very optimistic about this holiday season – we think we will sell well in all of the products that we carry.”

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