Kynetic
Careers at Kynetic
Mission
Kynetic owns and operates ecommerce businesses Fanatics, Rue La La and ShopRunner, which span the sports merchandise, designer fashion and consumer product markets.
History
Kynetic was founded in 2011 by Michael Rubin (“Rubin”). The Company has its roots in one of Rubin’s earlier ventures, GSI, which was established in 1997 after his sports equipment business merged with publicly-traded athletic footwear company Ryka. While GSI (formerly Global Sports Inc) initially focused on selling directly to retailers, the company began to pursue ways in which it could move its business online, following persistent enquiries from Wall Street analyst David Conn (“Conn”) – now Kynetic’s Chief Financial Officer – as to how GSI would integrate the internet into its business model.
After moving its business online, GSI began to generate significant revenue. In 2011, following several successful years, GSI was acquired by ecommerce giant eBay for $2.4 billion, at which time Rubin owned around 10% of the company. As part of the transaction, eBay divested certain assets at it deemed not core to its long-term strategy, specifically all of GSI’s online licensed sports merchandise business Fanatics and 70% ownership in Rue La La and ShopRunner. These assets were sold by eBay to newly-formed holding company Kynetic, with eBay loaning the Company $467 million and Rubin investing an additional $31 million.
Kynetic continues to operate its sports merchandise retailer Fanatics, designer flash-sale business Rue La La and ecommerce marketplace ShopRunner. It has also continued to attract funding, receiving an investment of $206 million from Chinese ecommerce giant Alibaba in 2013.
Business model of Kynetic
Customer Segments
Kynetic operates several ecommerce and retail businesses, that are primarily targeted at the general consumer market. It primarily serves customers in the US, which accounts for the vast majority of web traffic across the Company’s three principal businesses: Fanatics, Rue La La and ShopRunner. ShopRunner only accepts US and Canadian billing addresses. Rue La La additionally provides a cross-border trade service that targets consumers in China.
The Company’s Fanatics business is aimed at sports fans, particularly fans of the US professional and collegiate teams, but also serves fans of international soccer through its KitBag channel. Reports suggest that online fashion retailer Rue La La primarily targets more affluent customers, typically with annual salaries of more than $100,000, who are in their 30s and are regular user of mobile devices. Kynetic’s ShopRunner business follows a similar model to that of Amazon Prime. By charging a subscription fee it attracts the users that most frequently shop online, encouraging them to make more online purchases by offering free shipping services on all items.
Value Propositions
Kynetic provides value to consumers, retailers and sports organisations. It provides a broad range of branded products from a variety of categories and retailers to its customers. Fanatics enables customers to purchase officially licensed apparel and merchandise from a range of sports teams and bodies from one outlet, additionally serving customers in person through its in-venue outlets.
The company also provides value to sports teams by managing their ecommerce activities and platforms.
Both ShopRunner and Rue La La provide customers with discounts and deals that are not available elsewhere, with ShopRunner subscribers also receiving free delivery on all items. The Kynetic ecommerce businesses are all accessible through mobile and desktop websites, as well as mobile and tablet apps, enabling customers to make purchases from anywhere.
Channels
Kynetic outlines its activities and provides links to its retail businesses through its homepage hosted at www.kynetic.com. Its three ecommerce businesses – Fanatics, Rue La La and ShopRunner – operate their own websites at www.fanatics.com, www.ruelala.com and www.shoprunner.com. Fanatics also operates a number of ecommerce businesses on behalf of major professional sports teams and media brands, and its KitBag and FansEdge retail brands. Both Rue La La and Fanatics provide mobile apps for iOS and Android, while ShopRunner only offers an iOS app.
While ShopRunner’s retail business is entirely online, Rue La La and Fanatics also operate physical outlets. Rue La La operates a series of boutiques that host 48-hour flash sales, and Fanatics operates in-venue and event retail outlets in partnership with NBA, NHL, NASCAR organisations and collegiate sports teams.
Customer Relationships
Kynetic’s ecommerce businesses function primarily as self-service online businesses, with users able to browse and purchase products on the respective Fanatics, Rue La La and ShopRunner websites with no interaction with sales representatives. Both Fanatics and Rue La La also operate physical outlets where customers can receive personal assistance when making purchases.
Customers can make enquiries with Kynetic through an online contact form or can contact Fanatics, Rue La La or ShopRunner directly through their individual websites. These websites also host support resources such as FAQs. These businesses also interact with their customers through their various social media accounts, including with Facebook, Twitter, Pinterest, YouTube and Google+.
Key Activities
Kynetic builds and operates consumer-focused ecommerce businesses in the US. It operates three significant retail businesses: Fanatics, a manufacturer and online retailer of sporting apparel and merchandise licensed by professional and collegiate sporting bodies across the US; Rue La La, an online members-only retailer that sells designer fashion, home, beauty and travel products through 48-hour private boutiques; and ShopRunner, which runs a members-only service that offers deals and free shipping on various products spanning clothing, beauty, books, electronics, movies, sporting goods, pet supplies, toys, video games, luggage, and automotive categories from a range of brand-name retailers. In addition to its retail activities, Fanatics provides ecommerce and mobile technology solutions for organisations wishing to set up an online retail presence.
Key Partners
Kynetic collaborates with a range of partners through its Fanatics, Rue La La and ShopRunner businesses, including sports organisations, media houses, retailers, and consumer brands.
Fanatics’ key partners principally comprise sports organisations, including national bodies such as the NHL, NFL, MLS, NBA, NASCAR and PGA, US franchises such as Arizona Cardinals, St. Louis Rams, Chicago Bulls and New York Knicks, and international soccer teams such as Borussia Dortmund, Manchester United and Real Madrid. The company also partners with media outlets like NBC Sports and Yahoo Sports, and with sporting events, for instance partnering with Churchill Downs to manage online and on-site retail during Kentucky Derby weekend. Rue La La partners with designer brands, who provide surplus clothing or specially designed items to the company to be sold through its boutiques. ShopRunner similarly has a number of retail and brand partners that sell through its online platform, including Hugo Boss, American Eagle, Toys ‘R’ Us, PetSmart, Speedo and Staples.
Fanatics, Rue La La and ShopRunner all operate their own affiliate marketing networks, through which they partner with websites, bloggers and social media publishers to promote their services.
Key Resources
Kynetic’s key resources are the online sales platforms, IT infrastructure, distribution channels and personnel of its three ecommerce businesses. Fanatics, Rue La La and ShopRunner all rely in large part on their networks of partners in the retail, design and sports fields.
Additionally, Fanatics relies on production facilities in order to fulfil its design and manufacturing services. Neither Kynetic nor its businesses have any patent applications filed with the US Patent and Trademark Office.
Cost Structure
Kynetics incurs costs in relation to the development of its online business platforms, the sales and distribution of products, the operation of manufacturing and warehousing facilities, the maintenance of its IT infrastructure and the retention of its personnel.
The Company also accrues costs in relation to its physical sales outlets and 48-hour boutiques, as well as through its operation of offices across the US.
Revenue Streams
Kynetic generates revenue through its three online retail businesses: sports clothing and merchandise retailer Fanatics, members only flash sale site Rue La La, and ecommerce company ShopRunner. Kynetic does not disclose its financial figures; media reports, however, suggested that in 2013 Fanatics expected to make $1 billion in annual revenue, while Rue La La generated $440 million.
Fanatics and Rue La La have a revenue model based on more traditional retail activities. Fanatics generates revenue through the manufacture and sale of sporting apparel and merchandise through its website, third-party branded online stores and in-venue outlets. The company sells officially-licensed products from a range of sports teams and organisations across the NFL, MLB, NBA and NHL, among others. Rue La La’s revenue is generated through the sale of designer goods at discounted prices through its 48-hour, members-only in-store flash sales and online store.
ShopRunner operates a different revenue model, charging its customers a monthly or annual subscription fee, $.95 or $79 respectively, in return for free two-day shipping on all items – provided by more than 80 stores – in its catalogue. The company also takes a commission, reported to be between 3% and 5%, on all sales made through its online marketplace.
Our team
info: Michael has served as Kynetic’s Chief Executive Officer since founding the Company in 2011. He is also the Executive Chairman of Fanatics, Rue La La and ShopRunner, and the co-owner of the Philadelphia 76ers NBA and the New Jersey Devils NHL franchise. Rubin was previously Chief Executive Officer of GSI, an ecommerce company that Rubin founded in 1998. Through GSI, which was acquired by eBay in 2011, Rubin established himself as a significant player in the online retail space. Rubin has been a serial entrepreneur since the age of 12, when he began running a ski tuning shop in the basement of his childhood home. After making around $25,000, he set up a space in a local mall, operating under the name Mike’s Ski Shop. After graduating from high school, Rubin opened retail ski stores in Pennsylvania and New York, which led to his establishment of KPR Sports, leading distributor of sporting goods and footwear. He merged this business with athletic footwear company Ryka in 1997 to form Global Sports Inc, which later became GSI.
info: Michael has served as Kynetic’s Chief Financial Officer since September 2011. He oversees the Company’s investments in Fanatics, Rue La La and ShopRunner, of which he is also a director. Conn has worked with Rubin for a number of years, joining GSI in 1999, serving in strategic planning, sales and corporate development roles until 2006 when he was appointed the company’s Chief Financial Officer. Prior to joining GSI, he worked as a research analyst on Wall Street, serving from 1993 to 1999 as Vice President of Research at brokerage and investment banking firm Stifel Nicolaus.
info: Saj has served as Vice President and Chief of Staff to Rubin since 2011, having served briefly in a similar role at GSI. According to his corporate biography, Cherian was Kynetic’s second employee, helping Rubin to launch the Company following the eBay acquisition of GSI. Prior to joining GSI, Cherian held a range of roles. He began his career as an engagement manager at McKinsey and Company in 1999. He held this role for five years before joining Virgin Mobile USA as a director in 2004. In 2007 Cherian joined NBC Universal in its Wireless Business Development Division but left the company after a year to become a principal at Valhalla Partners.
