In the most recent Everton Business Matters podcast, John and I had a reasonably heated discussion over outsourcing particularly in relation to our merchandising capabilities and our ability to grow our retailing presence.
That, and with the details coming out of the Liverpool FC/New Balance court case prompted me to have a closer look at Fanatics, the company responsible for our merchandising.
The Everton relationship started back in 2009 with Kitbag which in turn became Fanatics. Most Evertonians do not need reminding of the numerous deficiencies relating to our merchandising throughout the majority of this period, poor stock levels, inaccuracies with orders and particularly outside of the Liverpool City area almost no national nor international physical retail presence.
So, it was somewhat of a surprise that in February 2019, Fanatics announced it had “expanded its partnership with Everton Football Club”.
Details of the deal included the continued running of Everton One, Everton Two and the club’s own online store. Additionally, in the future, Fanatics will run the new retail presence at Bramley-Moore’s new stadium.
Without giving detail, it is claimed the relationship would also allow Everton to “further benefit from Fanatics’ own international expansion programme, providing greater international visibility and distribution thanks to an expanding supply chain, global warehousing and increased production capability.”
Sasha Ryazantsev commented further saying “Thanks to this agreement, Fanatics will continue to deliver and grow Everton’s global retail operation regionally, nationally and internationally. Our fans can look forward to an even wider range of Club merchandise, no matter where they are in the world.”
Brief history of Fanatics
Now, I looked at Fanatics’ past to try and get an understanding of who we are partnering with and why today they have a hugely impressive client list with incredible retail offerings.
The founder of Fanatics is a guy called Michael Rubin, now Executive Chairman and co-owner of the Philadelphia 76ers and looking to acquire a NFL team.
Rubin set up a sports goods retailer in 1991 called SKR Sports. By 1995, annual turnover was approaching $50 million. However profit margins were extremely poor so in an attempt to build a vertical commerce model they acquired other businesses to form a new company called GSI Commerce.
The company focused on becoming logisitics experts as well as building a substantial e-commerce capability. As a result they started to acquire significant clients; NASCAR’s first online store in 2002 and by 2006 included the MLB, NHL and NFL as clients. When the NBA became a client in 2007 they had the full suite of major North American sports’ leagues.
Rubin had to acquire a brand suitable for its professional sports clients. As a result they acquired a “bricks and mortar” retailer called “the Football Fanatics” for around $275 million. Such was their presence (managing more than 2.5 million square feet of fulfillment ) and expertise that eBay acquired the GSI Commerce business for $2.4 billion in 2012.
As part of the deal, Ruben re-acquired the rights to Fanatics from eBay. Within a year Fanatics had a value of $1.5bn placed on it through external investment in the company. In order to continue its expansion, Fanatics, still run by Rubin attracted investment from the likes of Alibaba and the Softbank Vision Fund.
Fanatics Model – V commerce
Fanatics do not just provide the retail front end and the logistics required to deliver merchandise to millions of fans. Fanatics also manufacture goods under licence from most of the major sportswear brands. This allows them to optimise inventory but also react more quickly to specific situations driven by events, so-called “hot market opportunities”.
Today, Fanatics manage more than 300 online and offline partner stores, plus over 200 professional sports teams and associations, including Manchester United, Manchester City and Real Madrid.
Their partnership with Walmart in the US has allowed Nike to be sold on Walmart.com for the first time. There is a realisation that many of their customers or potential customers will buy from established retail stores rather than specialised single sport or single club based sites. Through the partnership with Fanatics there’s also an exceptional growth opportunity to introduce specific sportswear brands to current e-commerce platforms where they have no presence.
Currently Fanatics generates around $2.2 billion of annual turnover, yet is forecast to grow that figure to more than $10 billion within the next 5 years.
What is the relevance of this to Everton?
My point is that the scale of the Everton retail and merchandising presence of offering is a result of Everton’s doing, not Fanatics. Fanatics have the capability to do whatever we demand of them in terms of the stock they carry, the stock they can manufacture under licence, and the scale and visibility of an Everton branded retail experience.
If we are invisible in different parts of the world (even different parts of the UK) that’s down to us, not our outsourced partner. If there is limited stock of away shirts in the US that’s likely because we’ve not accurately estimated the demand for such.
Now some will say if we are not a recognised or successful club then why would Fanatics or their partners hold/offer our merchandise? My argument is that with our history, our unique record and presence in the top League of English football, the range and stature of the international players certainly in the past and hopefully in the future we should be recognised, and more importantly have a strong enough story and brand to build sales if campaigns are resourced properly and strategically.
LeBron James, Serena Williams and Drake
Liverpool won the right to deny New Balance the opportunity to match Nike’s deal not because Nike’s distribution capability was stronger, they did so because the Judge was convinced that Nike could use global names of the calibre of LeBron James, Serena Williams and Drake to assist their marketing activities. Liverpool do not get that association because of success on the pitch. They do so because over years they’ve built a story, a brand independent of success on the pitch.
It might take Everton a decade or more to achieve such. But on the assumption our profile rises with the building of Bramley-Moore, perhaps greater future success on the pitch, we should be putting in the hard yards now to build our presence firstly in specific markets (hello the 2 Tims) but wider also. As Evertonians let’s not blame our partners if our offering is not to standard, let’s ask the club to make sure it is. On the evidence of Fanatics’ relationships and partnerships globally the capability is there, as is their desire to grow their own business.