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Nike enters Web retail pact
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September 27, 1999: 4:22 p.m. ET
Minority stake in Fogdog gives online retailer exclusivity rights through holidays
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NEW YORK (CNNfn) - Hoping to boost its sagging U.S. sales, Nike Inc. forged its first online merchandising alliance Monday, purchasing a minority stake in Internet sportswear retailer Fogdog Sports.
The Portland-based athletic apparel and shoe company plans to take a 12 percent stake in Fogdog, a fledging online retailer that currently offers more than 500 athletic brand products, including roughly 160 Nike products.
In exchange, Fogdog will become Nike's exclusive "pure-play" Internet retailer through March 2000, giving it greater access to Nike products through the upcoming holiday season. The deal does not affect Nike's ongoing agreements with other retailers, some of which include online components.
Nike Chairman and Chief Executive Philip Knight said although Nike has been slower than some in utilizing the Internet as a part of its retail strategy, the company is confident it has found the right partner.
"In our view, the web represents true revolution, Knight said. "Essentially, our initial reaction was to sort of step back and try to understand it better. We feel we've got our arms around it a little better now and it's time to take this step."
"Best and most aggressive" site
The two-year agreement comes as Nike is struggling with slumping U.S. sales through its traditional bricks and mortar outlets and the company's own Nike.com Web site, which will also continue to offer company products.
In Fogdog, Knight said Nike has tapped the country's "best and most aggressive" online athletic retailer.
Fogdog Chief Executive Tim Harrington said the agreement does not assure Nike certain prominence on his site, nor will Nike products be offered at deep discounts.
However, by offering the full-range of Nike products, Harrington said customers will be able to better compare prices and quality with the site's other product brands, which include Nike competitors Adidas and Reebok, among others.
Harrington said he expects Fogdog's relationship with those companies to continue despite Nike's investment in the company, which also provides Nike one seat on Fogdog's board. Currently, 17 percent of Fogdog's sales comes from Nike and Adidas products.
"It's really getting [customers] access to the Nike products," he said. "We have not been and never intend to be a deep discounter of products."
In conjunction with the Nike deal, Fogdog filed for its initial public offering Monday. Launched three years ago, the Redwood City, Calif.-based company lost $6.8 million through the first half of this year on net revenues of just more than $1 million.
The company expects those losses to continue as it ramps up its advertising efforts following its public offering. But the deal with Nike gives the firm some much-needed publicity as well as discounted access to Nike products.
"Anyone who's looking for a meaningful bump in [Nike] sales is mistaken," Harrington said. "We're looking at it as more of strategy move."
Nike (NKE) shares closed up 2-9/16 to 56-3/8 Monday.
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Fogdog Sports
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