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November 22, 1999
Dorm Room Idea Pays Dividends
Shanthi Shankarkumar in Chicago
Four years ago, Amar Goel, a Harvard University student and golf team member launched www.chipshot.com in his dorm room, with just about $ 350. He wanted to sell golf equipment and make some fast money.
Four years later, his "putting" in long hours of work has certainly paid off as his company has grown into one of the leading electronic-commerce web sites. Goel and associates have watched their privately held business grow 2,300 per cent between December 1997 and December 1998. Today, www.chipshot.com sells thousands of clubs per week.
www.chipshot.com is the Internet's direct source for tour-quality golf equipment, accessories, apparel and information. www.chipshot.com's vertically integrated manufacturing and retailing e-commerce model bypasses traditional channels to sell high quality equipment directly to the consumer at significant savings.
With www.chipshot.com's 'PerfectFit' customization tool, golfers can research and order tour-quality golf clubs, customized to their physique and style of play, for less than half the price of comparable brand names. In addition, www.chipshot.com sells the best brand-name equipment and hundreds of accessories, and offers site visitors a comprehensive library of golf tips, lessons and tutorials.
The days of scrounging for money are behind them too. The company has raised in excess of $ 20 million from investors like Sequoia Capital and Oracle Venture Fund. More than 900,000 visitors in August, a multimillion-dollar advertising campaign and marketing agreements with Internet portals like America Online, Lycos and Yahoo have all helped to bring in the money.
www.chipshot.com was ranked 12th among 40 e-tailers in September by PC Data Online, with more projected buyers than such e-tailing giants as eToys.com, Gap.com and Yahoo.com.
It has been a long, hard climb for chipshot. The company has gone through all the classic -- and clichéd stages: from a one-man operation in a dorm room, to a classic garage start-up, to a small cash-strapped venture to a multimillion dollar e-business.
Goel ran the company on his own for two years. Later younger brother Rajeev Goel and Harvard friends Nick Mehta joined in. The business really took off in June 1998, the year Amar Goel and Mehta graduated from Harvard with master's degrees in computer science.
The company was growing faster than they expected and soon they had to move out of their garage into a spacious office in Sunnyvale, California.
"Last June we were three people, today we are 150," said Amar Goel who, at 23, is president and founder of the company. His brother Rajeev, 21, is vice-president (technology) and Mehta, 22 is vice-president (marketing). All three are first-generation children of Indian immigrants.
The initial years of struggle and hard work are beginning to pay dividends, but Amar Goel refuses to be complacent.
"There were a lot of hard times and there will be a lot of hard times. People look at us from the outside and think the voyage is all fun and easy," said Amar Goel.
Initially, the biggest challenge was how to build traffic awareness for www.chipshot.com with almost no money. But by focusing on grassroots and stepping up marketing efforts, the site was soon being bombarded by hits.
Another problem was the website system written by Amar and his college friends. "We never thought a multi-million dollar business would be run on top of it, so it just wasn't built to scale. It has been a huge project to e-architect the entire platform to run it as it runs today," said Rajeev Goel.
Amar Goel remembers the days when he precariously balanced many roles. He was working towards a master's degree at Harvard, he also had to participate in golf tournaments and he was also an editor of an Harvard newspaper. And, of course, there was www.chipshot.com.
"Sometimes I would get so busy with schoolwork that I just would not have the time to offer customer service for my orders," he recalled.
"We didn't have an easy way to update prices and equipment, so the web pages started becoming stale. I wrote some new software in the summer of '98 to try to make it easier to update the information -- it was an evolutionary process."
Rajeev Goel's support was also phenomenal.
Rajeev, who would graduate from Johns Hopkins University in Baltimore with a triple major in economics, political science and Spanish, took five courses in the spring semester of his senior year while working about 50 hours a week in California and managing a group of 15.
Every Tuesday night he flew to San Francisco to be in the office on Wednesday morning and returned to Baltimore on Sunday to report for class on Monday. This lasted for about 12 weeks till he graduated in May this year.
The brothers are a great team.
"It is quite easy working with Amar. In fact, I would say that we get along better since we started working together. We almost always agree on ideas and issues," said Rajeev. With no technical training, the self-taught Goel, heads the IT department of 40.
Mehta first started using computers as a six-year-old and by the time he was eight he had taught himself several programming languages. He shares not only Amar Goel's passion for computers but also his entrepreneurial interest.
"We worked together on many of our projects in our computer science classes and spent many late nights talking about businesses to start instead of finishing the code we were supposed to write!" said Mehta.
The three share a passion for success and are ready for a long haul together.
"We complement one other quite well. Amar is perhaps more even-tempered about things, which is a nice balance because I tend to go through the ups and downs a lot more. We are all really passionate about anything we do and love seeing companies grow," said Mehta.
At stake for the golf sites is a piece of an estimated $ 40 billion pie or one-fourth of the $ 150 billion sporting goods industry. Forrester Research estimates that online sporting goods will reach $ 56 million in 1999 and rise to $ 1.9 billion in 2003. The Internet will account for an estimated $ 250 million in golf merchandise sales within four years.
The demographics of golfers and those who use the Internet match perfectly.
They are educated and wealthy. According to the National Golf Foundation and McKinsey and Co, more than 26 million Americans golf and four-fifth of them have household incomes of at least $ 75,000.
Being a privately held company, chipshot.com would not disclose its sales but its officials believe it will hit $ 100 million in revenues in two years.
How does the site overcome the absence of "tactile" experiences while buying golf equipment? Shoppers cannot go online to take practice swings or try on golf apparel or feel how a ball comes off the face of the newest titanium driver.
Amar Goel admits it is a handicap they are constantly working on with the help of technology and, occasionally, by stepping out of the cyberworld. Today, www.chipshot.com's patent-pending PerfectFit technology allows users to fit themselves online quickly and easily for a set of clubs built to their specifications and needs. Their product display shows rotating 3-dimensional pictures of the clubs.
"We post comments from other people who have bought equipment. We have a 90-day money back guarantee and we do a lot of promotions to try and get the product into the hands of people," said Amar Goel.
In May, the company launched a web site in partnership with portal Lycos. This is dedicated to the Japanese golf market which, according to government estimates, spent $ 1.6 billion on wholesale golf equipment in 1998. The Japanese golf market is said to be biggest after the United States.
Soon the company hopes to target markets in Europe, Korea and India.
According to an article in Golfweek, 'chipshot.com's exclusive focus on e-commerce as against other competitors' reliance on bricks-and-mortar stores and managing information sites, has proved to be to its advantage. But critics are watching with caution and concern.
'The company's limited track record in the golf industry and its access to brand name inventory from the "gray market" (the process of buying goods for resale from other retailers and distributors without the manufacturer's permission) could spell trouble for it down the road.'
The article points out that 'online retailers who buy their brand goods through the "gray market" sell these items at markedly lower prices to generate traffic at their sites. Such practice weakens the original equipment manufacturer's ability to control distribution and protect brand equity.'
Also by eliminating the "middleman", the company sells its own products as well as other brands without the costs that burden conventional manufacturers, such as maintaining a sales force and investing in research and development. Naturally, the Goels and their associates like to refer to themselves, as the "Dell" of the golf industry. Dell was the computer company that owed its success to its direct selling approach.
The site recently launched "Stores-within-stores" for golfers-juniors, beginners, experts, women and left-handers. "I think we always need to find ways to improve our customers' experience with the site. We are adding a new feature in the future which will allow customers to chat online with our customer service representatives," said Mehta.
With Christmas round the corner, chipsgot.com is gearing up for the holiday crush. Their 20,000-square foot, 50-person manufacturing facility can produce up to $ 4 million merchandise per month. Their site has been revamped and relaunched with a whole host of new features and a gift center, which makes it easier to find that special Christmas gift.
It is also stepping on its visibility strategies. National television ads featuring Superbowl hero John Elway began airing recently on the Golf Channel, which is piped into 28 million American and Canadian homes. Other long-term plans include branching out into multiple sporting goods categories.
Despite the professional success and media attention, Amar Goel sounds humble when he talks about bringing the web to the off-line world of golf.
"I just thought golf and e-commerce went together well," he told a reporter.
"I certainly didn't think we would be where we are today."
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