MVP.com - What Actually Happened
The Beginning
In 1995, David Schofman, started an Internet eCommerce company, IGoGolf, out of his living room. He was in the business of selling golf equipment. Within three years, David, and the team he assembled, took this business from a few thousand dollars per year to millions. He did this by adhering to a few basic principles:
-
Hire the best people and pay them fairly, including giving them a share of the business.
-
Put experts on the sales/service lines so that customers will have confidence in the company, and also in their purchases.
-
Form alliances with other eCommerce companies and information providers to increase visibility, sales, and profitability.
-
Always keep promises, this means promises to customers, partners, vendors, and employees.
In 1998, David sold the company to CBS SportsLine but, as general manager, he continued to have full operational responsibility. Under David’s leadership, SportsLine’s golf business became their most successful and the most profitable division. In addition, it was the largest of golf equipment retailer on the World Wide Web, and one of the most successful eCommerce sporting goods businesses in the world.
MVP.com
Then late in 1999, a meeting was held in New York with the people from SportsLine, Benchmark Capital, and John Elway. At the meeting it was decided to combine forces and create a major on-line sporting goods business. They would name the company MVP.com. John Elway got Michael Jordan and Wayne Gretzky involved, which provided a high level of credibility for the new company.
David got a call on the Sunday night following the initial meeting and, by that time, a term sheet had already been agreed upon. But, David’s contract with Sportsline gave him the right to block the sale., After a meeting with the investors and Sportsline’s management convinced of the potential of this new business, he agreed. Later, David saw a demonstration of the technology that would run the company; the demonstration was impressive.
The company was announced to the public during the Super Bowl, that next week, the entire MVP management team came down to Austin to meet with David. This is when things began to go wrong.
MVP management was determined to make significant changes to the systems that the golf team was using. They didn’t like the technology platform in place and insisted their system would be much better. While David had been very impressed with the demo, both he and his team were still concerned that the switch-over be smooth, so their customers wouldn’t be inconvenienced. MVP’s management thought the concern was misplaced, stating they could easily replicate the current system.
In addition, they wanted to change the fulfillment center, moving it from Austin to a centralized distribution center that would ship all merchandise sold from the same location. Again, there was concern; The golf team’s management didn’t want to lose control of the merchandise. They had worked too hard to develop a high level of customer trust, which meant filling orders correctly and efficiently. MVP’s management assured them everything would work perfectly; no need to worry, they knew what they were doing. MVP insisted that all the golf team needed to have was the call-center; they would take care of the rest. Finally, MVP made it clear that they didn’t have a choice.
As the integration process took place, it soon became evident that it wasn’t going to work. Everything was done too fast, with literally no advance planning. For example, one Friday they pulled up with a truck and took the golf inventory away, saying, “Don’t worry, Monday morning it will all be working perfectly; we’re flipping the switches to the new web site; all fulfillment will come out of our new distribution center.”
That’s not what happened. In the new distribution center, everything was going wrong. They were sending the wrong product to customers, sometimes they weren’t even getting their orders, or good orders were getting cancelled, or even double-shipped. The inventory on the web site was supposed to be real-time inventory but it wasn’t, which meant they were selling stuff they didn’t have, or, and just as bad, product they did have was showing “not available.”
It was a complete disaster for the golf team who were unable to provide the level of customer service they were used to. The worst part was that as call-center agents, they didn’t have any information on order status. As far as credit cards were concerned, some weren’t getting charged and some were getting charged up to five times. Even worse, the call-center people didn’t have the ability to go in and credit customers; they had to send emails to the administration office in Chicago.
After two months of frustration, trying to get MVP’s management to listen to reason, David gave up and resigned. Regarding the resignation, he said, “It seemed to me, since I couldn’t support the changes, especially the way they were taking place, that it would be better for everyone if I left. This was within 90 days of the deal being announced. MVP went forward with all of my employees, a few new people, and they brought in a new guy to replace me.”
Because everything you do on the Internet has lightening-fast repercussions, the crash of MVP took almost no time at all. For example, within 6 months, they took the golf business from about $2 million a month when David left, to about $200,000 a month; a 90% loss of business. The same was true for all of the other SportsLine businesses. The entire entity of MVP.com was bankrupt by the time the next Super Bowl came around. The initial investment of $150 million was gone … nothing was left.
Probably one of the most ridiculous results of the inability of the different systems (customer service, merchandising, and financial) to work together was what happened when a discounted purchase was made and then returned. The computer would refund the customer the full regular price of the merchandise. It didn’t take long for some customers to figure this one out. …
The Rest of the Story
It turned out that MVP.com never installed the system that the Big Edge people had demonstrated. There was no way they could get a system that complicated ready in 6 months, let alone of the 6 weeks they were given.
After MVP went bankrupt, David’s new eCommerce company bought their entire inventory at 10% of its original value. When they went to the MVP warehouse to pick up the merchandise, they found a basic shell warehouse. There was no conveyer belt, no racking, and only five computers. It was just a large warehouse with pallets of merchandise on the cement floor. By the way, all of his employees came back to work for him.
David ultimately sold his new company to Callaway Golf and is currently a senior executive running their entire Internet operation.
As far as the arrogant, incompetent management of MVP.com … they, too, went on to bigger and better things, and I am not being factious. … Once you make executive status you are almost always forgiven your mistakes no matter how many millions you lose in the process. The elite protect their friends and associates. The idiot who brought this company down went on to be a major executive at another global company. I have no idea who he blamed this fiasco on but you can be dam sure he blamed it on others.
Copyright 2010, Brad Fregger |
