Footing it online

Nike has been quietly making plans to launch an online store to sell its footwear and apparel. Niketown.com, as the site will probably be called, could be open as soon as next month, said sources close to the project.

Vada Manager, a Nike spokesman, wouldn't confirm the existence of a Niketown.com project. Instead, he compared electronic commerce to "something in the test tube", and noted that Nike "is in the laboratory right now".

Initially Niketown.com is expected to carry a small number of products, including the company's new Alpha Project, a sub-brand it created for its high-end line. "The whole momentum behind online sales is to support Alpha," said a source familiar with Nike's plans.

Nike is collecting names and e-mail addresses of interested consumers. The current Nike.com site includes a user questionnaire about the Alpha Project, but it doesn't mention that the products eventually could be sold online.

Another source cautioned that Nike has moved slowly in implementing online initiatives. For example, the company began selling posters on Nike.com around Christmas. That project had been conceived almost a year earlier, he said. The source also noted that Nike has yet to resolve questions about order fulfillment for Niketown.com.

However, the same source contended that high-level Nike executives are serious about selling goods over the Web. "I know that selling online has gotten some traction there," he added.

As the largest sportswear brand, Nike's decision to move into direct online sales could have a profound impact on what has otherwise been a sleepy e-commerce category. Foot Locker has been the leading online footwear seller. The division of New York-based Venator Group last year expanded to include more than 20,000 products for sale. Rival FootAction USA is priming for a response. Meanwhile, a handful of cataloguers and Web-grown startups have entered the market, including Sneakers.com, the Online Shoe Store and Fogdog.com.

On the manufacturer side, only K-Swiss and Skechers USA are selling products online. Larger players, including Reebok, Adidas, Converse and Fila, have built sites that do little more than pitch products or, in some cases, provide store locators. Most of the footwear companies have steered clear of direct sales, for fear of alienating the retail stores that carry their wares.

Once Nike plants an e-commerce stake, though, others will follow.

Reebok is investigating e-commerce, but the Stoughton, Massachusetts-based company insisted it won't speed up its plans now. "Sure it will have some effect, but we don't model our business on what Nike does," said Marvin Chow, director of interactive marketing at Reebok.

Tim Harrington, CEO of San Jose, California-based Fogdog.com, said Nike's move should benefit the online companies that sell sports-related apparel. "If the manufacturers want to get into the game of selling on the Internet, I welcome it," he said.

Of course, selling apparel over the Web has its own specialised complications. Some shoppers will always prefer to touch and feel the clothes they buy. And the success of apparel and footwear manufacturers has traditionally been strongly tied to their links with retailers.

Foot Locker, for instance, has stronger ties with Nike than other footwear chains, and it carries a greater variety of Nike products than rival FootAction. Nike, meanwhile, forbids online retailers, TV shopping networks and cataloguers from selling its products without permission.

For some Net newcomers, that means they won't have access to the top-selling footwear brand. Nike commands 45 per cent of the $US12 billion US athletic footwear market. Reebok, Adidas and Converse each have 20 per cent or less.

Nike has some motivation for opening up an online retail arm. While it maintains a commanding market share, the company has struggled with a softening market. For the six months that ended November 30, Nike reported a 12 per cent drop in revenues, due to dwindling demand and falling retail prices.

"All the retailers, especially those that specialise in athletic wear, are incredibly dependent on Nike," said Margaret Mager, an analyst for Goldman Sachs in New York. Mager doesn't buy the argument that Nike has to heed retailers' concerns about selling direct. "I think it's ridiculous for these companies to be held captive by the retailers."

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