Baseball Hat Case Study

Hats
In 1993, Ben Fischman was a college junior who realized from observing his Boston University classmates that there was an opportunity in the baseball hat industry. He noticed that many students, like him, only wore 1 or 2 caps because the rest of their hats did not fit properly. Consumer needs were not being met. “We all owned 30 to 40 hats, but only wore one or two because those were the only ones that fit properly. There was a complete misunderstanding from the industry about what the customer wanted,” Fischman later said. What started as a mall kiosk quickly turned into 350 stores where the baseball hat consumer could get every team’s cap in any size they needed. Lids Corporation was based on the needs of the consumer. Fischman
Retail stores were left with excess inventory because of lackluster sales and used the online commerce stores as an outlet. Some of the other major flash sale competitors include Zulily, Guilt Groupe, Haute Look and Beyond the Rack (see Exhibit 1). Fischman’s Rue La La wasn’t the first website of its kind on the scene in 2008, but he says that isn’t a problem in business. Describing his business idea philosophy, Fischman says, “A good business idea isn’t one no one ever thought of before…take an existing business and figure out how to do it better. How can you take what people are passionate about and do it uniquely?”(Johnson, 2011). Rue La La grew its membership to over one million in the first 18 months despite existing competition. IBISWorld foresees increased competition over the next 5 years in an already highly competitive industry. Also fueling a change to the flash sale site industry is a recovering U.S.
Only one year later in October 2009, e-commerce services provider GSI Commerce purchased Retail Convergence Inc. for $350 million. GSI Commerce CEO Michael Rubin said at the time, “Rue La La’s short, intense events are entertaining and engaging. They have proven to be an effective solution for brands and retailers to sell significant opportunistic merchandise in a compressed time period” (Evans, 2009). Ben Fischman stayed on to run Rue La La and SmartBargains.com, reporting to Rubin. In March 2011, GSI Commerce was acquired by eBay, which also has a 30.0% ownership of flash-sale site rival Gilt Groupe. In that $2.4 billion transaction, Retail Convergence, including Rue La La, was spun out as an independent subsidiary, with eBay retaining 30.0% ownership. eBay placed ShopRunner, a members-only shopping service, and Rue La La into a new holding company called Kynetic. The newly formed company was initially run by GSI’s founder, Michael Rubin. eBay’s CEO John Donahue said at the time of purchase, “What we see happening today is that commerce is changing rapidly. The boundary between offline and online commerce is coming down at a stunning rate.” There is an ongoing shift in the retail industry as companies work to reach new