Finish Line E-Commerce Hiccup Cost Retailer $3M in Lost Sales

EDITOR'S NOTE: Additional information about the Finish Line website's performance during the holiday season has been added to this article since it was originally published.

Even though digital sales at Finish Line were up a healthy 25% in Q3, they might have been as much as $3 million higher. After going live with a new e-commerce platform November 19, the athletic footwear and apparel retailer noted poor customer experiences and lower-than-expected online conversion rates. The issues were severe enough that after only three weeks, Finish Line reverted to its legacy online technology, which had been running in parallel with the new system as a standard safety precaution.

"We believe the new site, which came online November 19, cost us approximately $3 million in lost sales for the third quarter," said Finish Line CEO Glenn Lyon during a recent conference call discussing Q3 2013 financial results. "Following the launch, it became apparent that the customer experience was negatively impacted, evidenced by a decline in several key performance indicators. Therefore, we made a strategic decision on December 6 to transition back to our previous site given the importance of the selling season."

According to data from website monitoring firm Panopta, experienced nearly four hours and 20 minutes of downtime in November 2012, including a total of 2.8 hours of downtime on Cyber Monday, November 26, 2012. The site was also down for nearly 1.4 hours on December 2, 2012.

For the quarter that ended December 1, 2012, Finish Line net sales increased 5.2% over the same period the previous year, to $296.6 million; comp store sales rose 3.6%. Digital sales, which are included in the comp store sales results, rose 25%. Other factors affecting Q3 results included a faster-than-expected rise in the popularity of basketball footwear compared to the retailer's traditional strong suit, running footwear. Finish Line executives admitted they had difficulty in adjusting inventory quickly enough to respond to the change.

In addition, Finish Line executives say they may have been overconfident in scheduling the platform's go-live just before the all-important holiday selling season kicked into high gear. In addition, "we had consumer experience issues that were primarily driven by the site design and functionality," explained Samuel Sato, president of the Finish Line Brand. "In fact, traffic on our new site did not change from our previous legacy site. In fact, it grew a tad. It was really about conversion that led us to make the strategic decision to move back to our legacy site and to ensure that we could preserve our important holiday selling season."

Responding to a question about whether performance issues were limited to front-end site design or included integration with back-end systems, Sato said the customer experience and conversion metrics were both "largely impacted by both site design as well as functionality of the back end."

After returning to its legacy platform, "we got back to the same metrics that we were seeing on our old site previously," said Finish Line CFO Edward Wilhelm. "So there was no lingering effect."

The retailer will make a decision about whether to re-launch the new site within the next 90 days, according to Lyon.

Finish Line is in the midst of a major technology and business transformation. It has substantially completed the rollout of handheld devices and a new POS system for its stores, and plans to add more functionality to the mobile devices during fiscal 2014.

The retailer is also embarking on a major partnership with Macy's. "Everything is progressing on plan towards our upcoming launch in April, at which time we'll be managing the athletic footwear inventory at all Macy's stores followed closely by the digital launch," reported Lyon. "We expect to take roughly 18 to 24 months to roll out Finish Line shops to the 450 planned Macy's locations. Once fully ramped up, we believe this business in total will generate an incremental $250 million to $350 million in annual sales for our company."

Lyon insisted the challenges the retailer faced last year represented only a bump in the road: "To be clear, the course of our transformation is intact. It's the speed of that that is being changed."

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