American Vertical Commerce Store Fanatics Reaches 25 On CNBC Disruptor 50 List

Fanatics makes and sells official sports apparel and merchandise. Photo by Mike Clarens // CC BY-SA 4.0

Fanatics is an American online retailer of licensed sports apparel and merchandise. The company has recently been named as number 25 on the CNBC Disruptor 50 List. The company has shown exponential growth since its formation in 1995 as a brick-and-mortar store, and 2011 inception as a vertical e-commerce business.

Fanatics is now a $4.5 billion company, and has the exclusive rights to manufacture and sell sports apparel for major sports leagues in the USA and beyond, leagues such as the NFL, NHL, NBA and MLB, as well as college and university competitions. Fanatics make and sell sports jerseys, caps, sideline gear and official team merchandise across these popular leagues.

Fanatics A Top Disruptor – Here’s Why

Fanatics, in its current form, was started by billionaire Michael Rubin in 2011, and is now run by Doug Mack, who joined the company in 2014. Fanatics does around $2.3 billion in annual sales, with this figure forecasted to increase dramatically as the company expands internationally.

Fanatics have recently opened offices and fulfilment centres in Hong Kong, India, Tokyo and Spain, and have their eye on the UK and Chinese markets. They have also signed recent partnerships with the governing bodies for English and German soccer, as well as the Japanese baseball team SoftBank Hawks.

Aside from its exclusive partnerships in the USA and its expansion plans abroad, Fanatics holds a lot of disruptive power in its business model. They take a very customer-centric approach, and define themselves as a vertical e-commerce business that serves the needs of specific audiences, in this case sports fans. In 2018, the company introduced its Cloud Commerce Platform, which provides greater ease for its mobile users – around 80% of its customers.

The company utilizes AI and machine learning to understand trends, demands and customer preferences and deliver a highly personalized experience. The on-demand model allows Fanatics to respond quickly to market forces, specifically the changing dynamics and stories of the sports world.

If a particular athlete becomes a rising star, they can quickly create and make new merchandise to meet the demand from fans. If a key player is transferred to a new team during drafts, such as when LeBron James moved to the Lakers, Fanatics can quickly produce the player’s new jersey for the team. If the tides shift in the NFL, and current Oddschecker SuperBowl favourites New England Patriots are bested, then Fanatics can quickly accommodate with merchandise that tells the story.

The deal means Nike will make the player jerseys, while Fanatics will provide for the fans. Photo by Keith Allison // CC BY-SA 2.0

Recent Deal With NFL and Nike

Fanatics has made several deals in the last year or so which have helped to catapult them to the position in which they currently sit. One such major deal was a long term contract secured between the Fanatics, the NFL and Nike. Deals with Nike are not easy for a startup to secure, but seem to come easily to Fanatics.

The deal outlines a 10-year partnership to manufacture and distribute all adult Nike NFL products for the fans, online and in-store, including jerseys and apparels, sideline gear and merchandise. Nike will remain the exclusive supplier of on-field equipment for the players of all 32 NFL teams, and will still sell fan merchandise from their online and retails stores, while Fanatics will be the provider for the fans.

Fanatics' made-to-order model should help to capitalize on the unfolding drama of the league as the 2020 season unfolds. The deal also keeps official NFL gear firmly off the Amazon marketplace, aside perhaps from occasional resells by fans. Nike gear made by Fanatics will still be sold on the NFL Shop and individual team websites, which Fanatics also operates, as well as team retails stores.

The NFL deal is a very similar one that was struck up between MLB and Under Armour, though Under Armour later backed out of the deal as it changed its marketing strategy. It has this year been announced that Nike will take over the licensing deal from Under Armour.

Recent Deals With Kohl’s and Walmart

The expansion of Fanatics depends on making deals with relevant retailers and online stores, and its a strategy that the company seems to have adopted very well. They recently signed yet more super deals to place their products in front of the eyes of millions of buyers.

Kohl’s is the largest American department store retail chain in America, with over 1,150 stores and a huge online presence. Kohl’s already work with Fanatics, selling a selection of official sports merchandise across its stores. Yet up until now, the online partnership has been left untapped. The new deal between Kohl’s and Fanatics will bring Fanatics’ apparel and merchandise to Kohls.com.

Kohl’s will be able to choose from Fanatic’s huge inventory of hundreds of thousands of products, including items from other brands such as Adidas and Nike as well as those manufactured by Fanatics themselves. Kohl’s will handle the sales, promotions and customer service, while Fanatics will handle the fulfilment and distribution of orders.

It’s a slightly different style of deal than the one struck up between Fanatics and Walmart in January 2019. In this case, Fanatics will have a “store-within-a-store” on Walmart.com. Fanatics will therefore handle much more of the marketing and back-end, as well as fulfilment, but will benefit from Walmart’s huge platform, and become the exclusive provider of officially licensed merchandise for the retail giant, giving Walmart more grounds to compete with Amazon.

This year, Fanatics also made a similar deal with Coupang, operating a “store-within-a-store” on the largest online marketplace in South Korea, starting from this summer, a sure sign of the validity of their claims to international expansion.

Fanatics has truly made a name for itself as the official sports apparel and merchandise retailer in the major USA sports leagues, from the NBA to the NFL. Its approach to the market, to its customers and to the deals that it makes with its partners has allowed the company to grow to the multi-billion dollars. As it expands internationally into new sports markets, Fanatics is expected to continue to grow, while its made-to-order model will allow the company to keep up with growth.