The More Things Change…
Fashion trends have become more important in sports licensing, but wins and losses still drive sales.
A focus on fashion, premium apparel growth, strong video game sales and continued expansion in women’s apparel are among the trends propelling licensed sports product retail sales.
The business saw a 5% bump in the United States and Canada in 2014, according to The Licensing Letter Sports Licensing Report 2015, with sales reaching $14.1 billion at retail, up from $13.44 billion in 2013. Collegiate-licensed merchandise added another $3.4 billion to the total, although that sector fell 2.5% from the $3.43 billion reported the previous year, per The Licensing Letter. The core categories of apparel and accessories both increased by 5.8%, together accounting for nearly half (48.8%) of industry sales overall.
An end-user attraction to premium products is one of the main trends leading the sales proliferation.
“The better goods are seeing growth,” says Duane Adams, president of Sports Fever, citing higher-priced authentic goods from Nike and VF Corp. as examples.
“Customers are interested in sideline products from key brands like Nike, Under Armour and adidas, and are willing to pay the premium retail [prices] for those items,” says Chad Haring, vice president and general merchandise manager of athletic apparel and licensed products, Dick’s Sporting Goods.
Licensees such as Peter Millar are driving price points even higher. The fashion label launched a high-end men’s collection featuring 55 universities, focusing on cashmere sweaters that retail for $100-$150.
Performancewear — a premium product category itself, paired with team and collegiate graphics — remains an industry standout. For universities represented by the Collegiate Licensing Co. (CLC), men’s performancewear sales increased 42% in 2014, according to Gary Dubiel, vice president of retail development, CLC.
Outerwear and knit hats have sold well in many markets, thanks in part to a cold winter in 2014. “We’re seeing strong sales in NFL lightweight outerwear, performance fleece tops, and knit headwear,” Haring says. “Similarly, popular items in NCAA include ¼-zips and fleece.”
Lisa Piken Koper, vice president of licensing for the National Basketball Association (NBA) reports that the headwear category, led by the snapback, continues to grow. “Originally, when we first introduced it, we wondered if the snapback would be a short[-term] trend, but it [has] become a significant business,” she says.
Adams, on the other hand, reports that while headwear sales remain hearty, the snapback, a leading item for three to four years, is starting to lose steam.
Piken Koper also has high hopes for socks, thanks to the NBA’s new global agreement with Stance. “It’s only been a couple of weeks [since the introduction], but the sell-in has been amazing,” she says.
Much of the innovation in wearables centers on embellishments and manufacturing techniques. “It’s the small details,” says Jim Gardner, founder of Brüzer, a licensee known for its chunky sweaters. “For us, it’s all about usability and wearability. How can we finish [a sweater] so it’s usable but looks great?”
Details on these garments include toggle closers, pocket holes for headphone wires and longer cuffs for use as thumb warmers, while fleecewear features arrow motifs and phrases such as “Keep Calm and Graduate.”
John Staton, president of loungewear licensee College Concepts, points to digital sublimation printing as a key trend. “Sublimation has become a more important part of the product mix, from boxer briefs, to activewear, to T-shirts, to swimwear,” he says.
Focus on Females
Women’s apparel continues to gain momentum at retail, a trend that keeps many in the industry bullish on the revenue-generating potential of these products. “We’re trying to get more space on the floor for women’s [apparel],” Adams says. “Women like the higher-end products. They’ll spend $5-$10 more for something nicer.”
Dubiel reports that CLC institutions saw a 15%-17% increase in the women’s demographic in the first eight months of 2015 across an ever-broader range of products. “Some companies are doing missy contemporary styles with fuller cuts, and some are doing juniors’ with more fitted designs,” he says.
“Fashion-forward apparel in the ladies’ market is important,” explains John Jankovich, a buyer at Cracker Barrel Old Country Store. “Today vs. even five or six years ago, there’s a big difference. There are so many great options now for beautiful things that women can wear on game day.”
In the women’s sector, if you’re not innovating, you’re going backward, Staton says, adding that leagues, suppliers, and retailers are all putting significant marketing dollars toward the category.
The trend during the past 10 years has been for more fitted women’s apparel, but Gardner is starting to see a reversal. “We found the women are buying the men’s products now, as well as the women’s,” he says. “So in ladies’ [apparel] we’re making things a little bit longer and not as fitted as they used to be.”
For the NBA, the youth market has been a bright spot. “There’s been growth in the [demographic], and licensees are reacting by creating great youth products,” Piken Koper says. Jerseys represent 50% of the kids’ business, while key partners in hardgoods include Spalding for balls and hoop sets, and Bleacher Creatures for plush products.
Ten or 15 years ago, the apparel category was saturated, says Rick Van Brimmer, director of trademarks and licensing services at The Ohio State University. Now, he says, more product selection in more categories means brands can have lifestyle appeal.
Sports Fever’s Adams notes that novelties, which represent more than 20% of sales at Sports Fever, have higher margins than apparel and are less risky since most are not tied to often-traded players.
The video game category has been a success story of late, especially for the NBA and National Football League (NFL). “Our video game business is through the roof,” Piken Koper says. Its most recent release, NBA 2K16, sold 4 million units worldwide in the first week, with digital sales doubling compared to the previous edition. What’s more, the prior year was considered a record year as well, she says.
A Tale of Two Footballs
Despite controversies ranging from “Deflategate” to bad behavior, the NFL remains ahead of the pack compared to other professional sports leagues when it comes to retail sales. In 2014, its NFL merchandise sales increased by 5.2%, more than double the 2.4% gain for sales of Major League Baseball (MLB) licensed products, according to The Licensing Letter.
“Certainly the NFL is the beast,” Staton says. “But the NHL and NBA have really made strong comebacks after the slowdowns of a couple of years ago. Both are at all-time highs for us.”
Meanwhile, soccer — whether it’s Major League Soccer (MLS) products or international club merchandise — also is starting to emerge, mirroring a trend that indicates the sport’s budding popularity among casual spectators and fans in the U.S. “MLS merchandise sales have continuously grown over the last three years, specifically with the launch of Orlando City Soccer Club and New York City Football Club team merchandise this year,” Haring says. “European Club merchandise continues to grow for us as well, and is actually outpacing the popularity of MLS currently.”
College Concepts recently added MLS to its roster of licenses. “The appeal is not 100% there yet, but it’s growing,” says Staton, who is considering English Premier League clubs as well.
Fermata Partners, a relatively new boutique agency in the sports brand licensing game, represents 10 Premier League clubs, including Liverpool, Manchester City and Tottenham Hotspur. The firm’s licensing program focuses on categories outside of those offered by the teams’ respective jersey and kit suppliers (Nike, adidas, Puma or Under Armour). It has signed close to 25 licensees, including ‘47 Brand and Outerstuff.
The Celeb Factor
“Signature athlete lines continue to be important for us,” says Haring, mentioning Nike’s Jordan, KD and LeBron lines, as well as Under Armour’s Curry line.
Piken Koper says athletes always have helped drive sales for NBA-licensed products, but there has been a surge in the number of players who now are nationally recognized. “There’s a lot of opportunity around our young talent,” she says.
Similarly, NFL Players Association (NFLPA) licensees are reporting that player-identified merchandise is growing as a percentage of total sales, according to Steve Scebelo, vice president of licensing and business development for NFL Players Inc., the licensing and marketing arm of the NFLPA, which handles group licensing for the 1,800 active NFL athletes. Many are nationally known, largely thanks to fantasy football.
“There’s a real allegiance to players on [a] roster, and [consumers will] buy merchandise featuring those players,” Scebelo says.
Of course, celebrity athletes can be unpredictable and the consequences of their off-field actions can be felt at the cash register. “On a player-by-player basis, [bad behavior] absolutely has an effect,” says Steven Heller, president of The Brand Liaison, a consultancy representing sports clients for outbound licensing and assisting licensees in securing sports licenses. “For Michael Vick, Ray Rice or Adrian Peterson, their off-the-field activity has definitely affected sales of their licensed products.”
Such high-profile cases have not affected overall sales of NFLPA- or league-licensed merchandise.
Innovation is Important
During the past decade or so, the four major sports leagues have been narrowing their licensee lists, especially in apparel and accessories. A new wrinkle in 2015: Some leagues are purchasing equity in key licensees, reflecting their interest in more vertical consumer products operations. The NFL invested in Outerstuff, while the NHL took a stake in both Outerstuff and Fanatics.
“Probably the greatest impact will be on product development and distribution,” says Marty Brochstein, senior vice president of industry relations and information, International Licensing Industry Merchandisers’ Association (LIMA). “You have a closer relationship when the league is one of your owners. The fewer pieces there are to mesh, the easier the meshing becomes.”
This trend is likely to make entering sports licensing even more difficult for newcomers. For example, Brand Liaison client Zumer Sport, which holds patents for products made from sports equipment materials such as basketball leather, entered the market by partnering with multi-league licensee Concept One, rather than seeking a direct license.
“[Partnerships are] a creative way to get to market faster and in a larger way,” Heller says. “You’ll see more joint ventures and collaborations as the leagues contract the number of licensees and as growing companies seek to enter the market with a greater likelihood of success.”
A unique product offering also is critical. “There’s no way we would have gotten as far as we have now without our unique design,” says Brüzer’s Gardner, whose company has been in the U.S. market for five years.
Licensees also need to supply product quickly and in small quantities. “Companies are innovating behind the scenes to be closer to the market and have a quicker response to consumer demand,” says Scott Buoyack, co-founder of Fermata. “Those that have performed best are those who have implemented systems to respond quickly and manage their business better.”
Staton says the days of booking 80% of retail inventory and chasing 20% are over. The ratio has flattened to 50/50. “From a retailer perspective, there is more focus on inventory,” he says. “[Retailers are] lighter, leaner and more nimble. As a supplier, you have to change the way you do business to match the way the retailers do business.”
Despite the importance of fashion trends, sports licensing remains led by fans. “It’s mostly driven by teams being successful on the field or court, especially teams in big markets that haven’t won in a long time,” says Matt Powell, NPD Group’s vice president of industry analysis, sports and leisure trends.
“Everyone is increasingly sophisticated about leveraging these hot markets, [and] cutting production times to address the demand for merchandise tied to championships and personal records,” Brochstein says. “That has become a very, very well-oiled machine, particularly for soft goods.”
And that’s a positive development because the business has become more regional, seasonal and hot market-driven than ever. “It’s gotten so fractured,” Staton says. “It used to be, especially in NFL and college, there were four to five teams that sold everywhere nationally. Those days are gone.”
“Where you make your big money is your local hot markets,” Adams says. “We live and die by the local teams.”
Karen Raugust, a Minneapolis-based freelance writer, specializes in licensing, marketing and other business topics. For more information or to comment on this article, or to read her twice-weekly licensing trends blog, visit raugustcommunications.com.