BOSTON -- The dog-eat-dog athletic footwear world has a new breed -- strategic alliances in which the line between vendors and suppliers is blurred.
Early last week, Nike Inc., Beaverton, Ore., announced a partnership with online retailer Fogdog Sports, Redwood City, Calif., that gives Fogdog exclusive Internet-only sales rights to Nike products until March 2000. As an added twist, Nike has acquired 12 percent equity in Fogdog, and Nike President and Chief Operating Officer Tom Clarke will be taking a seat on Fogdog's board.
At a press conference last Tuesday, Nike Chairman and CEO Phil Knight and Fogdog CEO Tim Harrington fielded questions. Knight cited Fogdog's growth and aggressiveness as key factors in the decision to join forces with the Internet company. While Nike gains a distribution channel, Fogdog will have the ability to purchase a full line of Nike's generally available product, including exclusives and special promotions.
When asked if the relatively short-term deal would impact his business, Harrington replied, 'Six months is a long time on the Internet.' He added, 'This gives us a good head start.' An extension to the agreement has not been determined.
The answer to how much impact the joint forces would have came on Wednesday when Fogdog filed for a $60 million public offering. As part of the agreement, Nike received warrants to buy 6.2 million shares for $1.03 per share. The stock then rose considerably as the result of a deal by a private investor, earning Nike millions on paper. And the IPO will possibly push Nike's gains higher again.
Many questions concerning the impact of this alliance on brick-and-mortar accounts, as well as Nike's own sales site were addressed during the press conference. Knight said Fogdog would be treated as any other special account, similar to Nike's brick and mortar store retailers. 'This agreement is not mutually exclusive,' he said. Knight stressed that exclusivity pertained strictly to e-commerce.
Regarding Nike.com, Knight said he saw no conflict and the site would remain operating. 'The Internet has been compared in importance to the industrial revolution,' he said, noting it is time for Nike to work with a more experienced partner.
Brick-and-mortar retailers that also sell online will be affected by the alliance. Global Sports, which operates Web sites for retailers such as The Athlete's Foot and The Sports Authority, could be excluded from selling Nike products.
