For Fanatics, a specialist in licensed sports merchandise, the Asian market has become the fastest growing e-commerce business outside of North America.
Sport Industry Group spoke to Masanori Kawana, managing director of Fanatics in Japan and South-East Asia, about the opportunities for UK brands and rightsholders in the region, as well as the benefits of Fanatics’ much vaunted “vertical commerce” model.
Q. Can you explain the relevance of your so-called vertical commerce model in sports merchandising?
We started off as pure e-commerce centric company in the US, serving our e-commerce capabilities, with customers buying our products from us. We noticed the needs of a more agile supply. Fans wanted more products in a timely manner, but performance brands and suppliers are not that swift in terms of a supply chain, so we were losing a lot of opportunities with customers.
With a rapidly changing sports world, from player transfers and retirements, to records and championships being won, hot market opportunities, we realised that if we could design and manufacturer by ourselves, that could enhance our customer satisfaction and experience.
We call this the chase model, chasing the fans demands immediately instead of predicting what’s going to happen in 10 months. Who could imagine Leicester City winning the Premier League? That’s almost impossible. That’s how we got in to this vertical model.
Q. Given its unpredictability, is sport the ideal category for vertical commerce?
I definitely think it’s going to more relevant and valuable in our industry, where demand changes so quickly. Having this vertical capability is going to result in a much better experience from manufacturing to the consumer.
In Japan (with the Softbank Hawks baseball team), we have built made-to-order production capabilities, to react and immediately design and produce ourselves. This results in us being able to make championship t-shirts and hoodies in a very short period of time, which is going to have a big impact for fans accessing new products.
If delivery timing is two months after a team wins, It’s no longer a hot market, it’s already cold. Fans don’t want to be waiting for two months. This is how we can really change this industry and celebrate the fans.
Q. Drawing on the example of your Softbank Hawks deal, can you explain how the vertical commerce model is different in practice from traditional merchandising practice?
We are doing our best to change the whole experience for fans online and in stores. We already have almost four years relationship with the Hawks as an official jersey supplier, but now we are turning this into a more comprehensive partnership.
Being able to control the merchandise and leverage the Hawks brand, we can increase assortment and provide a better experience for the fans, especially on the online front.
With our sophisticated supply chain operations, we will be able to supply products to fans in regular ecommerce time - the next day or two. This will even be the case for our personalised or hot market products.
Q. Could you paint a picture for us of the Asian sports market? Who are the fans?
In Japan, baseball is the biggest sport, with 2.5 million annual attendance per year per team, which is quite comparable to what it is in MLB in the US.
Following the quality performances of Shohei Ohtani, the Japanese MLB player for the LA Angels in the US, the sales we saw from our customers were 20 times more than any other player. It was a phenomenon, and the LA Angels became very popular in terms of merchandise aspects. We are exceeding expectations, we sold more than a couple of million pounds of Ohtani products.
South East Asia has a huge English Premier league following, with football dominating.
In China, it’s all about the NBA, where compared to fifteen years ago, it’s much bigger now. There are millions of followers of the NBA and a lot of opportunity for us. Establishing offices there, the NBA is a growing presence and by far the best in terms of globalising their brand in Asia.
The NFL is also tapping into China, so it will be interesting to see what will happen there, but with regard to the Chinese domestic football teams, the sport is still in its infancy and so the level of sophistication of the sports business is not there yet. We do believe it’ll grow over the next decade though.
Q. Can you identify any specific opportunities for European rights holders in the SE Asian market?
There’s a decent fan base for European football in Japan. Even with the time zone difference, there are a lot of people watching the games late at night, however there are very few places you can buy the merchandise right now. Even if there are stores selling, the range is very limited, featuring one or two players.
So, it’s a case of capturing this fan appetite to buy merchandise, have a better assortment and serve customers locally where they are definitely going to be beneficial for the fans.
Q. What impact do you expect to see from upcoming major events in the region – the 2019 RWC, Tokyo 2020 and Beijing 2022?
Take the Tokyo Olympics in 2020, there are a lot of opportunities where we can help fans to celebrate in a better way, which has never happened in a previous Olympics. If we can clear these challenges with rights, we are really looking forward to working on great ideas for the event. With athletes winning gold medals, why not celebrate around that?
Q. How much does counterfeiting impact your business? Is the scale of the problem in the region rather a support or a hindrance to Fanatics’ offering?
It can be an issue in a couple of countries and it’s something we really care about. We want to ensure that as a partner of the brands, clubs and the leagues, that fans buy 100% genuine products. There is a lot of demand in buying the genuine product.
If our products are to be sold together with other brands, we don’t want to be compared against counterfeit products. In Japan, there isn’t really a counterfeit issue, it’s very minimal. But there are definitely some issues in some countries, so that’s something we need to focus on if we are to work with these market places.
Q. What are your ambitions and plans for the coming years?
Japan is unique in the way that we have big domestic professional sports that have decent merchandise business, so we want to capture other opportunities, working with other teams on the same strategy that we’ve done with the Hawks. We are already in talks with other teams.
We have a great set of rights that we can bring to the market, but we are definitely exploring to develop further. Over the next five years, we envisage more opportunities with global brands, such as the English Premier League, NBA and MLB, bringing in the best retail experience with larger assortment and availability for those fans in Asia.
Our target will be a localised customer experience, support and production, where we can introduce these hot market products, crucial to make global brands’ merchandise successful.