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Small Business
MVP.com strikes out
February 7, 2001: 3:46 p.m. ET

A postmortem on the defunct online sporting goods seller
By Kevin McLaughlin
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NEW YORK (Business2.com) - Wayne Gretzky, Michael Jordan and John Elway may have dominated their respective sports, but they've learned that athletic prowess doesn't necessarily translate to e-commerce success.

Their wakeup call came earlier this week, when MVP.com -- the online sporting goods store backed by the three superstars -- announced that it will shut its operations, selling off its assets to sports media megalith Sportsline.com (SPLN: Research, Estimates).

Why did MVP.com fail? Certainly shrinking capital markets played a role. But MVP.com also made a number of crucial mistakes, according to industry watchers.

One of the biggest was failing to control its burn rate, which made it impossible for the company to attract a loyal customer base before its cash ran out.

"MVP.com underestimated both the time requirements and the financial resources required to achieve the critical mass of customers needed to sustain the business," said Paul Ritter, an analyst with the Yankee Group.

To make matters worse, "The Web experience for consumers was clunky at best, and exasperating at worst, based on feedback [Yankee Group analysts] received," Ritter said.

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  MVP.com underestimated both the time requirements and the financial resources required to achieve the critical mass of customers needed to sustain the business.  
     
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  Paul Ritter
analyst, the Yankee Group
 
Bringing an Internet-only business to profitability requires managing multiple factors that are sometimes in direct opposition with each other, according to Ritter. For example, companies must generate enough exposure to create substantial visitor traffic, while also spending prudently on customer-acquisition costs. "Very few firms have hit on the proper balance between those two factors," he said.

MVP.com should also have shown more restraint when opportunities arose to acquire smaller competitors, says Jill Frankle, director of retail e-commerce at Gomez.com.

"[MVP.com] was wrong when it acquired a number of companies [such as PlanetOutdoors.com and IgoGolf.com] in order to broaden its inventory base, because that diluted their brand a bit," she said.

Although MVP.com had the backing of three of the biggest stars in the history of sports, Jordan, Elway, and Gretzky weren't actively involved in promoting the company.

"In my opinion, they could have done a better job of capitalizing on the cachet names of Gretzky, Jordan, and Elway," Ritter said. "It always seemed to be a very low-key involvement on their part, possibly because of a concern of being too closely associated with a dot.com business they perhaps didn't fully believe in or support."

Despite its mistakes, MVP.com would have eventually prospered if the money hadn't dried up, according to Heath Terry, an analyst with Credit Suisse First Boston. "Sporting goods in the offline world is a tough business, and companies like Sports Authority and Foot Locker have taken a long time to establish their brands," says Terry. "Given unlimited access to capital, [MVP.com] could have eventually survived."  graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.