Adidas and Nike Have a New Rival on the Soccer Pitch
(Bloomberg) -- Prince William's favorite soccer team may be at the forefront of a revolution.
Aston Villa F.C. has just signed a kit manufacturing deal with U.S. e-commerce specialist Fanatics Inc. While the company is huge on its home turf, operating merchandising for the NHL, NBA, NFL and MLS, it's little known on the other side of the pond. If the English trial goes well, expect that to change.
Fanatics isn't like Nike Inc., Adidas AG or Under Armour Inc. You'll never see an Aston Villa jersey bearing the Fanatics logo, a red "F" which resembles a waving flag.
Instead, the SoftBank-backed company has paid for exclusive licensing rights for all Aston Villa merchandise for several years. It will then sell on separate rights deals for different bits of that merchandise: kit, baseball caps, homewares, and so on. For the matchday jersey, it will be a menswear brand from the club's home city Birmingham called Luke 1977.
Villa’s pioneering move comes as the bigger brands are doubling down on monster deals with a few top-rank clubs. Those agreements mean that the lowlier teams (Villa has been in England's second tier the past two years) secure little marketing attention from the sportswear makers. While they snap up all the rights, they often make a much smaller range of kit for everyone apart from the giant teams.
The new Villa jerseys will be made by Fanatics itself. That's a big shift from classic kit sponsorship deals. While Nike and Adidas design and market soccer gear, they seldom make it, instead contracting a third-party (sometimes Fanatics itself). Premier League champions Manchester City, for instance, are a Nike team but their kit is made by British company Dewhirst Group Ltd.
Fanatics, by contrast, controls the whole value chain. It will make the Luke 1977-branded Villa shirts, own the warehouses that store them, and build and run the websites and apps that sell them.
In the classic soccer kit business model, a Nike or an Adidas might pay a contract manufacturer $10 per jersey, then sell it to a retailer such as SportsDirect International Plc for $30, which in turn sells it for $60. The brand is left with $20, from which it must pay the club a royalty.
Because Fanatics is integrated from manufacturing to the point of sale, there are fewer parties taking a slice. It might cost $5 to make each jersey, and there might be an additional $20 in logistical and associated costs, but it is left with $35, rather than the $20 the classic brand might take.
Fanatics’ preference for local manufacturing should help too. Teams usually have to order their jerseys a year or more in advance because they’re made in far-flung places, but Fanatics can work on much shorter timeframes. For example, if Villa is promoted this season, then Fanatics will be able to respond quickly to any extra demand. The local production model is akin to Inditex SA, whose fast-fashion chain Zara has done better than Hennes & Mauritz AB, which has 80 percent of its manufacturing in Asia.
Aston Villa's large fanbase but lowly position make it a less risky and less expensive entree to English football, especially if it does reenter the Premier League this year.
The whole deal remains something of an experiment. The club clearly hopes that its brand is strong enough to sell the jerseys without the backing of a big sportswear name. Of course, the Chelseas and Manchester Uniteds of the world are unlikely to eschew their $1bn-plus Nike and Adidas sponsorship deals. But for the up-and-comers and also-rans, it’s an intriguing alternative.
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