This under-the-radar e-commerce giant is the NBA’s new best friend – Recode

When the National Basketball Association opened its new flagship store in New York City less than two years ago, it picked a low-profile e-commerce brand called Fanatics to run it.

And when the NBA announced a new partner this year to design and sell its player replica jerseys online, Fanatics was the partner it chose.

What started as a business inside GSI Commerce has come a long way from its first sports e-commerce deal in 2002 with Nascar.

Today, after a series of acquisitions and cash injections from investors totaling around $800 million, it’s a giant online retailer of licensed sports apparel that sells jerseys and other fan gear through Fanatics.com, as well as the online stores of the four major sports leagues and more than 200 professional and collegiate teams. It expects to generate $2.2 billion in revenue this year — profitably.

But under the leadership of executive chairman Michael Rubin and CEO Doug Mack over the last two years, Fanatics has been working hard to become more: A new breed of retailer that is part tech company, part e-commerce expert and part manufacturer.

The result is deals like the NBA’s above, plus jersey licenses with the NHL and Major League Baseball, investments from MLB and the NFL, and on-demand production and delivery that lets fans get championship gear the morning after a big win.

“We want to best service the sports fan in whatever channel they want to buy in,” said Rubin, the serial entrepreneur who built GSI Commerce and sold it to eBay for $2.4 billion.

At Recode’s Code Commerce conference on September 13 and 14 in New York City, Rubin will appear onstage with NBA Commissioner Adam Silver for a candid discussion about these current partnerships and how tech and on-demand services will influence the sports experience of the future, both in-home and in-arena. Silver will also discuss how the league’s aggressive use of social media helps build its global brand.


Fanatics created Warriors championship shirts to sell through its sites immediately following Golden State’s Game 5 win.

Fanatics

While Rubin runs Fanatics’ parent company that also owns Rue La La and ShopRunner, the executive chairman spends the vast majority of his time on Fanatics. He’s a sports fan who is part-owner of the Philadelphia 76ers and New Jersey Devils, but one who has a clear vision for how Fanatics should position itself to thrive in an ultra-competitive e-commerce world.

“I think Amazon and Alibaba can be trillion dollar businesses,” Rubin said, “so if you’re a third-party retailer, you’re pretty screwed.”

Transation: If the core of your business is selling other people’s brands, Amazon and Alibaba are coming for you.

“Fanatics,” on the other hand, “is the only large-scale, verticalized e-commerce company,” he said.

The claim of it being the only one is debatable, in part because the definition of “large-scale” is open to interpretation. But by vertical e-commerce, Rubin is talking about the idea of a single company that designs and produces its own branded goods and sells them to customers through its own websites.

Fanatics’ vertical commerce model allows the company to produce new designs on-demand and sell them almost immediately through its own websites following a big win. This was on display last month when a Fanatics facility pumped out new Warriors shirts immediately after Golden State’s Game 5 Finals victory.

It added to its manufacturing capabilities by buying the Majestic sports apparel maker earlier this year. About 75 percent to 80 percent of Fanatics’ $2 billion-plus revenue comes from direct-to-consumer sales through its websites and the online shops of teams and leagues, Rubin says. And the best-selling brand of apparel is Fanatics’ own.

One challenge is that many customers don’t know it, because they are mainly buying a piece of apparel for the team name on the front. The company hopes to build more brand awareness next year with big marketing campaigns, including TV spots.

That brand-building would help Fanatics raise its profile as giants like Amazon tiptoe into its space. It would also bolster Rubin’s vision for Fanatics broadening its appeal through collaborations with lifestyle and fashion brands.

“I’m really thinking about how can we turn the $25 billion global sports licensing business into $50 billion,” he said.

In the interim, the company says it is not currently working on an IPO.

“Our focus is building a great company and growing the industry globally through innovation,” a spokesman said, “and investing in a vertical model that best services the real-time expectations of sports fans with more unique products readily available across retail channels.”

You can hear more from Rubin, along with the NBA’s Silver, by registering to attend Code Commerce in New York on September 13 and 14. They join a lineup that already includes the CEOs of Williams-Sonoma, Blue Apron and Bonobos, with many more to come.

Update: This article has been clarified to reflect how and when the current iteration of Fanatics was started.


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