Small Business 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 ( - 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 -- 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 (SPLN: Research, Estimates).

Why did fail? Certainly shrinking capital markets played a role. But 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.

" 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.

  graphic  underestimated both the time requirements and the financial resources required to achieve the critical mass of customers needed to sustain the business.  
  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. should also have shown more restraint when opportunities arose to acquire smaller competitors, says Jill Frankle, director of retail e-commerce at

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

Although 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 business they perhaps didn't fully believe in or support."

Despite its mistakes, 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, [] could have eventually survived."  graphic