Merchant Innovation

Why In-House eCommerce Made Sense For Dick’s Sporting Goods

If they waited until now to consider their eCommerce options, legacy retailers hardly have the luxury of waiting around and window shopping for the supporting tech partner that’s the best match. However, signing away one’s online future means less control — something Dick’s Sporting Goods evidently could not abide.

Instead, as TechRepublic reported, the outdoors and athletics retailer decided to bring its budding eCommerce operations in house for greater control and more granular adjustments than would be possible by continuing to outsource to its former partner, eBay Enterprise. With several of its subsidiary brands already up and running on their own branded sites, Dick’s CEO Ed Stack explained on an investors call that, by bringing eCommerce operations internal, it’ll be able to find more financial wiggle room and possibly profit by transforming fluctuating per sale percentage payments into more manageable and predictable costs.

“I won’t give you the exact percentage, but we provide the same percentage whether we sell a pair of $50 shoes or a pair of $100 shoes,” Stack said. “And it doesn’t cost [eBay Enterprise] any more to pick a $50 pair of shoes than we do a $100 pair of shoes. So, what we will be able to do as we go forward is to leverage those costs, which we can’t do today because they are all variable. So, there is a very meaningful increase in profitability when we roll off this [eBay Enterprise] contract.”

While the tactics of handling an ongoing eCommerce pivot make sense for Dick’s, the financials behind it leave something to be desired. With $65 million pledged toward the repositioning, plus added costs related to server space and data center purchases, Dick’s won’t break even until four years after the project’s expected completion in Jan. 2017.

Still, the extra $20 million in annual pre-tax earnings might tempt any retailer to try its own hand at the eCommerce revolution.

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