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Two Billionaires Bet They Can Sell Sports Merch to the World

Fanatics Inc, which replaced Nike this year as the biggest seller of player merchandise, is planning a global push after a $1 billion investment. But US-style sports merchandise could be a tougher sell abroad.
NFL emblem on a jersey | Source: Shutterstock
  • Bloomberg

JACKSONVILLE, United States — Fanatics Inc. has crushed the competition in the U.S. sports-merchandise industry by selling fans things they didn't realise they needed, like a $40 New York Yankees money clip or a $50 Green Bay Packers bikini.

Now, armed with a $1 billion investment from SoftBank’s Masayoshi Son, fellow billionaire Michael Rubin aims to tackle a tougher challenge: sparking an American-style hunger for sports-team gear in fans from Bristol to Beijing.

Jacksonville, Florida-based Fanatics has exclusive licensing deals with everything from Nascar to the National Football League, plus English Premier League soccer teams such as Manchester United and Manchester City. It pairs those with a fast-fashion-inspired logistical operation that lets it sell shirts and caps celebrating on-field achievements mere minutes after the action ends.

That attracted the attention of Son, who is betting that the American way of buying sports merchandise gains more favor overseas than American sports themselves. Rubin is already pretty flush himself, having sold sports-gear startup GSI Commerce to EBay for $2.4 billion in 2011, but he’s thinking bigger: Fanatics is targeting markets such as the U.K. and China in its aim to quintuple annual sales to $10 billion over the next five years. The global market is worth $25.3 billion, according to the International Licensing Industry Merchandisers’ Association.

But while the American appetite for burgers or craft beer flows across borders with ease, selling sports gear to fans means rubbing up against entrenched cultural norms and, in China’s case, the economic ambitions of a global powerhouse.

“Fanatics is an incredibly ambitious organization, but it faces sociocultural and political obstacles going global,” said Simon Chadwick, professor of sports enterprise at the University of Salford. “The world isn’t ready for their sports business model.”

Tribal Norms

Despite eye-watering broadcast-rights deals, English soccer teams have been more reticent than U.S. sports franchises to fully embrace commercial opportunities. Most Premier League clubs were formed in the 19th century, as working-class social and cultural hubs rather than businesses, and still play their home games in the same location.

“British football fans have been conditioned in a very different environment to U.S. sports fans,” Chadwick said. “They’re more guarded about the excesses you see in U.S. sport because the tribal norms are very different.”

To succeed, Fanatics will need to cultivate a culture of buying soccer jerseys in markets like China that's riddled with counterfeits.

Take pregame rituals. Tailgating parties give Fanatics the opportunity to hawk branded grill covers ($65) and cornhole sets (up to $250) to fans in the U.S. But in England, where soccer authorities have been battling hooliganism for decades, the buildup to a game is a less relaxed affair. Streets around stadiums are heavily policed and alcohol is banned in the stands, so thousands of fans pack into local pubs every Saturday lunchtime to sing and drink.

Fanatics believes American sports fans buy more merchandise than their British counterparts because they have greater access to a wider range of memorabilia. When Sergio Aguero broke Manchester City’s all-time goal-scoring record in Naples this month, Fanatics released commemorative T-shirts, as well as a mug and a scarf, which facilitated a doubling of the player’s merchandise sales that week.

Eastern Promise

While Fanatics’ international sales currently amount to about $200 million, Steve Davis, the company’s newly appointed international head, expects business outside the U.S. to make up about a half of the company’s $10 billion target. He plans to open manufacturing facilities in Germany and China next year, then in Japan and Australia in 2019.

China, where President Xi Jinping is aiming to build a $750 billion sports industry by 2025, is a particular source of excitement for Fanatics. But China has a graveyard of foreign retailers. Online fashion retailer Asos Plc shut down its unprofitable Chinese business last year amid intense competition. Marks & Spencer Group Plc ended its own China project after failing to tailor its quintessentially British styling for the local market.

To succeed, Fanatics will need to cultivate a culture of buying soccer jerseys in a nascent market that’s still riddled with counterfeit products. The company intends to recruit managers locally to gain a better understanding of the nuances of the market.

Fanatics will also be going up against the might of the Chinese state, which wants the domestic league to compete financially with the Premier League. Chinese Super League clubs, backed by the country’s biggest businessmen and state-controlled companies, spent a combined $451 million signing players in 2016, according to FIFA. That is attracting fans to matches, too: Attendance has increased at an average rate of more than 10 percent a season since 2014, according to Euromonitor International. At that rate, attendance will surpass the Premier League’s by 2020.

Fanatics believes the rapid growth of interest in Chinese soccer will boost, rather than detract from, interest in the Premier League.

“There’s a huge fan base in China that’s completely underserved,” Davis said. “It’s the biggest and most pressing opportunity for our partner clubs.”

By Sam Chambers; editors: Eric Pfanner and John J. Edwards III.

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