An Investment Opinion
Fogdog vs. mvp.com: A Battle of Business Plans
The predominant color on mvp.com's website is jet black, while the overwhelming color on the Fogdog site is white. Fogdog's site is also generally more colorful than mvp.com's site with blue and orange prevailing. More prominently, at mvp.com are MVPs (most valuable players) of three big sports: Michael Jordan (basketball), Wayne Gretzky (hockey), and John Elway (football). At Fogdog, the focus is on specialty shops dedicated to individual sports.
Both companies sell sporting goods and fan paraphernalia exclusively online -- that is, they don't operate retail shops in the "real world." As far as I can tell, their product lines are similar: a complete range of sports equipment and apparel. By sport, mvp.com covers 27 activities, while Fogdog has more than 40 categories, including such specialized areas as field hockey, squash, kayaking, and sailing.
Pricewise, it's not so easy to price-compare because of differing brands and product styles. I checked a few items: A Columbia women's Willow Creek Sweater that cost $79.99 at mvp.com was selling for $55.95 at Fogdog. A Zebra "Rolled Face Mallet" putter at Fogdog cost $119.95, while a similar item was priced at $129.99 at mvp.com -- the pictures and descriptions of the two were slightly different, so it's hard to tell if they are the exact same product. I encountered the same problem looking at basketballs (by the way, did you know there are balls made for men and balls made women, not to mention ones for indoor versus outdoor play?), where the exact brands and models didn't match on the two sites.
Both mvp.com and Fogdog give tips on how to buy stuff -- how to choose the right products -- as well as how to do stuff. For instance, Fogdog gives advice on how to break in, say, a baseball glove and how to care for it. Similarly, mvp.com provides information on how to begin a running program and how to train for a marathon.
One major difference between the two competitors is that mvp.com pushes its affiliation with superstar athletes. In fact, some of its advice comes from such legends as Jordan and Elway. For example, the insight from MJ is that ankle support is key to a basketball shoe, and that it takes some time to break in new shoes and adjust to the fit.
In contrast, Fogdog has enlisted the services of lesser-known sporting goods veterans, who have expertise in buying, selling, producing, or designing sports equipment and apparel. Last week, Fogdog announced several additions to its management team, including the former head of a tennis apparel maker, a longtime bicycle industry executive, and a former manager at Callaway Golf (NYSE: ELY).
Of course, mvp.com's strategy of using big-name athletes for its marketing campaign is the more expensive route, but considering an industry defined by distinct, high-profile personalities -- top brands, if you will -- mvp.com's strategy has brought it a lot of free publicity and a more well-recognized brand. The name "mvp.com" itself is very fitting for sporting-good retailing and also very easy to remember. Fogdog, while distinctive, is less intuitive and not so obviously tied to sports.
It certainly doesn't hurt that mvp.com, which just officially launched in January, has Elway as its chairman and Jordan and Gretzky as board members. The three also head up the company's Board of Advisors, designed to comprise top athletes and experts from a wide range of sports.
The business brains behind the venture appear to be CEO John Costello, former senior executive vice president at Sears, Roebuck & Co. (NYSE: S). mvp.com also has backing from CBS (NYSE: CBS), which provides $85 million in advertising and promotion over four years. In a related 10-year, $120 million marketing deal, SportsLine.com (Nasdaq: SPLN) also has an equity stake in mvp.com, which now owns and operates SportsLine.com's online retail business.
Other investors in mvp.com include venture capital firm Benchmark Capital, Freeman Spogli & Co., and sporting good retailer Galyan's Trading Co.
Fogdog, on the other hand, was founded in October 1994 as Cedro Group. It changed its name to Fogdog in November 1998 and went public this past December at $11 a share. After reaching as high as $22, the stock is now trading in the $10-$13 range. Its management comes largely from the sporting goods industry. Its CEO, Tim Harrington, formerly worked for GolfWeb and Cobra Golf. Its president, Tim Joyce, came to Fogdog after a 20-year career at Nike.
Speaking of Nike, one of Fogdog's competitive advantages -- at least for now -- is its agreement with Nike (NYSE: NKE) that gives Fogdog "access to Nike's generally available product lines and product information, as well as advance availability of mutually agreed upon, newly released Nike products." However, even though Nike got warrants for roughly 4 million shares in Fogdog stock, the agreement is only for two years, and it's unclear how much preference Nike actually gives Fogdog given Nike's wide range of clients and Nike's own online store. I mean, you can order Nike shoes from nike.com or Venator's (NYSE: Z) footlocker.com, so the agreement doesn't seem all that exclusive.
Two Internet sporting retailers, two business strategies. It's still too soon to tell which will win this game -- or if either will win at all. Stayed tune. The game is just kicking off.