Part 6 - An Insider’s Guide to the World of Licensed Sports Products: Selling Licensed Goods - Why it’s not as easy as it looks

Greeting folks!

This note is written by Scott Sillcox in fall 2023 in response to a lot of readers asking me two questions:

A. You wrote and posted this 12 part blog in 2012-ish, is it still relevant today? Short answer - absolutely! The basics of sports licensing change very little over the years, so I strongly suggest that if you are trying to learn about sports licensing, read away! I have also tried to update certain areas where there have been significant changes, so I feel comfortable in telling you that this information is still highly relevant.

B. You mention that you are a consultant and might be able to help me, do you still do consulting? Short answer - absolutely. I work in the licensing field virtually every day of my life, so if you have questions or would like my help, contact me! The two primary ways I work are hourly telephone consulting ($175US/hour) and face-to-face meetings where I come right to your office for a full day ($1500US/day + $650 travel expenses).

Many thanks and happy reading -
Scott Sillcox

Please also note: This 12 part series initially appeared on my "Heritage Uniforms and Jerseys" blog, but I moved it in March 2012 to this blog which has a more single-focus on the world of licensed sports products.

================

Greetings!

This is Part 6 of a 12 Part Series of blogs Scott Sillcox wrote called “An Insider’s Guide to the World of Licensed Sports Products in 12 Parts: Practical Lessons from the Trenches”. For a backgrounder on Scott Sillcox and his company, Maple Leaf Productions, please see the introductory blog and/or watch his 11 minute introductory video. Scott is available to consult with anyone interested in pursuing a sports license.
The 12 Parts of this Licensed Sports Products blog are:
Part 1: How Licensing Works - Follow The Money or How $5,000,000,000 can be less than you think
Part 2: What’s Involved in Getting a License – You need them far more than they need you
Part 3: The Landscape and some of the players
Part 4: Quality Control – Where The Real Power in Licensed Sports Lies
Part 5: Royalty Reporting and Audits
Part 6: Selling Licensed Goods - Why it’s not as easy as it looks
Part 7: Players Associations and Current vs. Retired Players
Part 8: Royalty Rates – Is 12% the norm and when 12% isn’t enough
Part 9: Local Licenses – myth or reality?
Part 10: Packaging
Part 11: Ten Things (Actually 12 Things) I Learned Along The Way
Part 12: Ten More Things (Actually 14 Things) I Learned Along The Way

I’m afraid of being seen as a bit of an old fashioned school teacher beating a lesson into his students’ heads, so I will try to go easy kind reader, but the lesson I would like to impart in this blog really gets to the essence of the licensed sports business and why it’s such a tough retail business. If you understand this point – and I mean truly understand it – and you still want to get into the world of licensed sports, then I will be satisfied that I have done my job and you’re entering a great, but tough, business arena with your eyes wide open.

As I’ve told this story to friends (my goodness he must be boring), I have taken to calling this “The NFL has NASCAR envy” – let me explain but please understand that while I am using the NFL as an example, I could just as easily be talking about the NHL, MLB, NBA and even the NCAA.

In 2002 the NFL Properties team had a great idea, which was to bring together all of their hardlines licensees and all of the team stores (aka concessionaires) and some league sponsors (FedEx, Visa, Coors, Pepsi, Frito Lay, etc.) and a handful of retailers in a multi-day event built around a mini-trade show (the licensees were the exhibitors and the team stores were the primary attendees) and punctuated with lots of daytime and evening networking opportunities. We were told at the time that the team stores accounted for 10% of all NFL sales, and while that is certainly not the case, it was a great excuse to get a number of related parties together. The setting was a Holiday Inn in Green Bay in February 2002 (talk about a captive audience) and the 3-day event was called “The Hardlines Summit”. It has since been expanded to include the soft goods licensees, many of the teams’ key marketing staff and a somewhat larger number of retailers. The 2011 edition of the event was hosted by the New England Patriots at Gillette Stadium in Foxboro Mass but at its core it’s still the same event.

Maple Leaf Productions' booth at the 2004 Hardlines Summit in Denver

Maple Leaf Productions' booth at the 2008 Hardlines Summit in Miami

At one point in the inaugural event in Green Bay, the NFL wisely brought all of the licensees into one meeting room with the topic of discussion being “Selling NFL licensed products”.

And I will never forget one of the most senior, well respected members of the NFL Properties team standing up in front of the room, looking 80+ NFL licensees straight in the eyes and saying that the NFL envied NASCAR. Not only did the NFL envy them, he went on to say that try as the NFL might, they could never have what NASCAR had. I remember not quite believing what I was hearing - something must be wrong – here was a senior leader of the NFL, the most powerful licensed sports brand in America, maybe the world, the king of the hill, and he was telling us with a straight face that the NFL could never have what NASCAR had?

Exactly.

Here was his point – I have written this from a 2002 perspective but the point remains as valid as ever:

No matter what the NFL does, no matter how well the NFL markets itself, it is still 32 very distinct, somewhat small markets spread across the country. The NFL isn’t a single national brand when it comes to retail, it’s 32 regional brands.

Think about it. If a bricks and mortar store in Massachusetts – big or small or anywhere in between - is going to carry licensed NFL product, it will carry New England Patriots products and very few products from other NFL teams – maybe no other NFL team products. Similarly a store in Dallas is going to carry Cowboys products and very little other NFL product. Ditto Miami, Seattle, Arizona. The NFL is 32 regional brands. (The one exception to this is the world of licensed jerseys and ballcaps – those products are somewhat national and could be/are carried by retailers “out of their region” – but no-one reading this blog is likely to be entering the world of licensed jerseys and ballcaps so let’s keep things in perspective).

Ah, but when it comes to NASCAR, a retailer who sells NASCAR products, no matter where the store is, will likely carry the Top 5, maybe the Top 10, drivers’ products – [in 2002 this meant] Tony Stewart and Mark Martin and Kurt Busch and Jeff Gordon and Jimmie Johnson and Rusty Wallace and Dale Jr. would sell in Philadelphia. They’d sell in DC. They’d sell in Atlanta. They’d sell in Chicago.

NASCAR is a national retail brand and the NFL is 32 regional brands. Nothing the NFL can do will change this fact. The NFL has NASCAR envy.


Let’s leave the 2002 NFL Hardlines Summit in Green Bay and allow me to make my point another way.

Let’s view the world from the vantage point of a buyer for Walmart – the mousepad buyer. I won’t begin to pretend that I know anything of the complexities of the job, but I do know that if I’m Walmart’s mousepad buyer, I don’t even want to begin to figure out what NFL team mousepads to buy for each of my 5000+ stores – it’s far far far easier for me to ignore Kansas City Chiefs mousepads and Miami Dolphins mousepads and New Orleans Saints mousepads completely and buy mousepads that will sell in every store across America. Give me a mousepad with a dog on it. Or planets. Or the US flag. Anything generic that will have more or less equal appeal across the country. (I’ll say it once more – the exception to this are licensed jerseys and ballcaps, Walmart might carry a number of those nationally - but we’re not talking about jerseys and ballcaps right now.)

And it’s even worse than that, because if I was the Walmart mousepad buyer and I did stick my neck way out to purchase specific NFL team mousepads for each store (what a nightmare trying to figure out which store gets what), what happens if they don’t sell in some stores? I can’t just take them back into our central warehouse and ship them somewhere else to sell – I can only sell them in certain regional stores and I’ve already tried those stores, so now we’re going to be stuck with inventory that we’re going to have to discount. Big time.

Now stick with me - let’s look at buying NASCAR mousepads vs NFL team mousepads from the Walmart mousepad buyer’s perspective. At least in theory I will be able to ship the same “Top 5/10” NASCAR driver mousepads to every store across America, or at least every Walmart in the southeast US, and if they don’t sell out in a given store, I can ship the same mousepads to the stores that did sell out without having to bend my mind around trying to factor in regional markets as would be the case with the NFL’s 32 regional markets.

And it gets worse… Now let’s look at buying Disney mousepads vs NASCAR mousepads vs NFL team mousepads – and when I say Disney I mean Beauty and the Beast mousepads or Toy Story mousepads or Finding Nemo mousepads etc. All things being equal, surely I’m going to be more interested in buying Disney’s “one size fits all” mousepads vs NASCAR and certainly more than NFL team mousepads. And if I don’t like what Disney has to offer this time around, then I can go with Mattel (Spiderman) or Warner Brothers (Harry Potter) or Ferrari or LucasFilm (Star Wars) or a Sports Illustrated Swimsuit model and the effect is the same – it’s a whole lot easier and a infinitely less risky for me to buy those national lines than it is for me to buy any of the NFL’s 32 regional products.

Now before you jump off a tall building, this doesn’t mean NFL licensed products (or MLB, NBA, NHL licensed products) are doomed to failure.

What it does mean is that to sell NFL licensed products takes a lot of discipline and strategy – you have to really understand the retail market across the US. The REGIONAL retail market across the US. There isn’t much room for false bravado or unrealistic expectations or whistling in the dark – “Our product is different – our product will sell across the country” – believe that and you’ll go broke, and quickly. The simple fact of the matter is that NFL team products are regional in nature and you need a highly detailed, well planned sales strategy to succeed in the licensed sports business.

Partly because the sale of licensed sports products requires such a regional approach, you will see a lot licensees with multiple league licenses. If your sales force has gone to a lot of effort of identifying how best to sell Washington Redskins products in DC and the surrounding area, you might as well be offering the retailers Washington Nationals and Washington Capitals and Washington Wizards products at the same time. That’s Sales 101.

Which leads us to the topic of Strategy…

Here is a somewhat home-made list of Four Major Retail Categories and approximately 40 Categories of Retailers. I suggest that every potential new licensee, and even existing licensees, should identify what they believe to be their Top 10 Target Retail Categories from the list below (feel free to add your own categories of course) and then determine a strategy of how you are going to sell into each of those Top 10 Categories.

And as you compile your list of 10, if you truly understood what Scott the School Teacher was trying to say above, can you accept the fact that you may never sell to a major/mass retail chain? No Walmart. No Target. No K-Mart. No Kroger. No Home Depot. No Walgreens. No Sears. No Publix. No Macy’s. No JC Penney. You get the point – what’s your realistic strategy going to be and what 10 categories of retailers are you realistically going to sell to?

1. Local Retailers
Team Stores/Concessionaires
Independent Fan/Hobby Shops
Independent Gift/Novelty Shops
Independent Sporting Goods/Sports Specialty Shops
On + Off Campus Bookstores

2. Mid-Tier / Better Retailers
Better Regional Department Store Chains
Mid-Tier Regional Department Store Chains
Sporting Goods/Sports Specialty Chains
Specialty Store Chains
Gift/Novelty Store Chains
Airport Shops
Amusement Park/Tourist/Souvenir Shops
Hotel Shops
Museum Stores
Book Stores
Home Decor Stores
Liquor Stores
Jewelry and Accessories Stores
Art & Framing Stores

3. Mass Retailers
Better National Department Stores
Mid-Tier National Department Stores
Discount/Off-Price Stores
Wholesale Warehouse Clubs
Grocery Stores
Drug Stores
Convenience Stores
Gas Stations
Home Improvement Stores
Hardware Stores
Auto Parts Stores
Furniture Stores
Electronics Stores
Camera Stores
Office and Stationary Stores
Pet Stores

4. Direct Retailers
Internet E-tailers
Mail Order and Catalogs
Direct Response Retailers
Television Shopping

Once you have determined who you would like to sell to – your Top 10 Categories - the next step is to determine what your price-point strategy is going to be. Do you have a multi-tiered price point strategy for selling into these markets? What I mean by this is that most (all?) licensed sports companies have three, and generally four, wholesale price points for every product they sell. We called ours Tier 1, Tier 2, Tier 3 and Distributor Pricing. Others use their own terms. The point is – any well reasoned sales strategy will involve a multi-tiered pricing structure.

We’re past the halfway mark folks – congratulations for making it this far. Remember – the title of this Blog is “Selling Licensed Goods - Why it’s not as easy as it looks”, and it’s not easy. It’s tough sledding - so let’s press on a bit more.

Before I got into the business of licensed sports products, I had never really understood the word “Distributor”, and it is a very important concept to understand. In a licensed sports/retail/wholesale context, a distributor is a company that buys product from you, likely stores it in their warehouse, and then re-sells the product to retailers some time later. They are a middleman in the classic sense of the word. They buy from you. They mark up the price. They re-sell the product.

And you might feel that you don’t want to deal with distributors. Maybe you want to sell to all retailers directly, not through a middleman. Or maybe you don’t want to sell your product at a discounted distributor price. Whatever your reason, I get it – selling through a distributor feels a bit wrong, especially in this day and age of low margins and disappearing middlemen.

Let me tell you a bit more about distributors that may change your initial mind-set. Or perhaps not.

ABC Distributors buys products from various manufacturers, stores the product in their warehouse, and then sells those products to convenience stores. They buy our product for $10 (my “Distributor Price” as noted above), sell it to retailers for $14, and the retailer sells it to the public for $25. That same retailer could bypass the distributor (middleman) and come to me, the manufacturer, and buy the same product for our “Tier 1” price (our highest wholesale price) of $12.50. Then they could sell the same product in their store for $23.00. Why would a retailer ever buy from a distributor when they could buy directly from us? Any number of reasons: One-stop shopping for multiple products at once. Service. Convenience. Favorable payment terms. Loyalty. Familiarity. Any number of reasons.

Not to get too caught up in this, but the example above not only holds for hundreds of distributors currently doing business selling licensed sports products and many other items across America, but it is also the origin of Sam’s Club stores, whose slogan for 20+ years (until 2006) was “We are in business for small business”. Sam’s Club was a distributor which bought from manufacturers, stored the product in a warehouse, and re-sold the product to their members who were generally small businesses and retailers.

But here’s what I’m driving at. Let’s say you really want to sell your licensed sports product to a major retailer. Odd as it may sound, a distributor may actually be the best way to go.

Check out these two companies:
West Coast Novelty
and
SportsLine Distributors
(June 2016 note: SportsLine Distributors went out of business some time over the last 3 or 4 years so their link no longer works, but another example of an important distributor who sells to majors - especially Walmart in the US and Canada, and Canadian Tire in Canada), is Maurice Sporting Goods.)

(See also Part 12, Item #22, for a longer list of distributors.)

NEW INFO: Please also check out my easy-to-use, searchable Online Directory of 1500+ North American Licensed Sports Products Companies. In it you will find a list of Distributors and their contact information. The directory costs just $59 to use for three months. If you're not sure if this database would be worth the investment, check out this 3 minute video that gives you a sense of what to expect.

West Coast Novelty is a distributor of licensed sports products and yet they sell (or have sold) licensed sports products to 1000’s of retailers but also the following chains:
7-Eleven
Acme
Albertsons
Chevron Corp.
Cub Foods
Frys Foods Stores
Harris Teeter Inc.
Hastings Books & Music
HE Butt Grocery Company
Hudson Group
King Soopers
Kroger
Longs Drugs Store
Marsh Supermarkets Inc
Osco Drug Stores
Publix Super Markets
Queens Price Chopper
Raleys Corporate
Ralphs
Roundys
Save Mart
Scnucks Markets
Stop & Shop
Super Center Concepts
Tops Markets
Walmart

SportsLine Distributors, as their name attested, was also a distributor of licensed sports and entertainment products and they sold licensed sports products to hundreds of retailers but also the following chains:
7 Eleven
A&P
Circle K
Gulf
Jewel-Osco
Meijer
Rite Aid
Road Ranger
Safeway
Stop & Shop
Walgreens
Xtra Mart

One thing that these folks do (or did in the case of SportsLine), in addition to stocking products in their warehouse and selling products to 100’s of retailers, is that from time to time they will approach their blue chip majors and create for them a licensed products merchandiser with a variety of licensed products tailored for the location of EACH AND EVERY STORE. Do you get where I’m going? Remember our Walmart mousepad buyer and why they would shy away (or run in the other direction with their hair on fire might be a better description) from NFL team products? Well it’s West Coast Novelty to the rescue.

The great thing is that West Coast Novelty, and perhaps a handful of other licensed sports distributors (if you’re one of them, please let me know who you are via email and I’ll add you to this list), does all the heavy lifting for Walmart. Maurice figures out what should go in each and every store in a specially made/designed licensed sports product merchandiser that stocks multiple products from multiple companies. West Coast Novelty ships the merchandiser. West Coast probably even stocks/refreshes the merchandiser. And West Coast Novelty will take back the unsold product at the end of the campaign. All that is music to the Walmart buyer’s ears.

The only catch, and it’s a mammoth catch, is PRICE. Follow the logic if you can…

Remember that I said earlier that a distributor might buy my product for $10, sell it to a retailer for $14, and the retailer sells it to the public for $25. And I said that the same retailer could bypass the distributor (middleman) and come to me, the manufacturer, and buy the same product for our “Tier 1” price (our highest wholesale price) of $12.50.

Well if Walmart came knocking on my door, you can bet I’d be selling it for something far south of $10 – maybe $7. But if I work with a distributor on a major program to a chain like Walmart, or almost any of the chains mentioned above, you can be sure that I will have agreed with the distributor that I cannot sell the product directly to the retailer, so that isn’t really the point – the point is PRICE.

PRICE. Walmart wants to sell the product for less than anyone else (other than the wholesale clubs) and Walmart also wants the price to truly reflect the actual cost to make the product (they want the price to reflect true value to the consumer). So if I want to take part in my distributor’s special Walmart program, I am likely going to have to sell my product to the distributor for $6, they will sell it to Walmart for $9, and Walmart will sell it for $15. And Walmart won’t want any other retailer selling the product for less than $15, so I’d better not sell the product to anyone else – even my best retail customer - for anything less than $11, thus ensuring that they would likely sell it for $20 vs Walmart’s price of $15.

And the real question then becomes – can I make a decent buck selling the product to the distributor for $6 each, because if the margin is razor thin, then what the heck am I doing this for? And therein lies the dilemma. Price, price, price. And don’t forget that the NFL, and the other leagues to a lesser extent, realized that manufacturers sell to distributors at extremely low prices, so the NFL bumped the royalty rate on sales to distributors from 12% to 15% (see Part #8 of this Blog for more on royalty rates).

And all this goes back to my earlier points – if you want to get into the world of licensed sports products, you will need to:

A. Determine a strategy of how you are going to sell into each of your Top 10 Categories

and

B. Determine what your price-point strategy is going to be


That’s all for Part #6 of “An Insider’s Guide to the World of Licensed Sports Products: Selling Licensed Goods - Why it’s not as easy as it looks”.

Thanks for reading and all comments are welcome!

Scott


PS I don’t quite know where to put this point without interrupting the flow, so what better way than a final post-script.
As you worked your way through this Blog, you may have said to yourself – doesn’t old Sillcox realize that the world is going e-comm more and more each year, and doesn’t he realize that at some point in the future more products will be sold via the internet than through bricks and mortar stores? Yes I realize the trend, I hear about it every Christmas, but to ignore bricks and mortar retailers in 2012, 2018 or even 2023 would be madness. Bricks and mortar are going to be around a while longer, so ignore them at your peril.

That being said, online e-tailers are especially wonderful for licensed sports products. For instance, fans of the Dallas Cowboys who live in New England (there must be at least two) can easily order online whatever licensed Cowboys product they want and have it delivered right to their door, whereas no bricks and mortar store in New England would carry even a handful of Cowboys products (with the previously noted exception of jerseys and ballcaps, and no-one reading this blog is likely to be entering the world of licensed jerseys and ballcaps). E-tailers are an important part of the sales mix for licensed sports companies, there’s no doubt about it, but for the next handful of years at least, they are only part of a larger mix.


PPS from fall 2023: In case you weren't aware, I created and constantly maintain a searchable Online Directory of 2500+ North American Licensed Sports Products Companies – it can be found at www.LicensedSports.net and only costs $59 to use for three full months. This is a highly searchable directory of licensed sports products companies in North America, companies that have been licensed by various sports leagues (NFL, MLB, NBA, NHL, NCAA, NASCAR, MLS, etc.) as well as the various players’ associations (NFLPA, MLBPA, NBAP, NHLPA). There is nothing like it anywhere on the internet, and I update the database weekly, oftentimes daily.

Virtually all 2500+ company records have a contact name with title, phone number and email address. In many cases, I list up to six contacts within the company. What's more, many of the records have a Linkedin url so you can learn much more about that contact including if you know people in common.

So if you’re looking for all the licensed sports products companies based in Connecticut, or all of the NFL licensees which sell housewares, or all companies licensed by the NBA and the NHL and MLB for soft goods, check out this terrific and highly searchable resource at www. LicensedSports.net .


PPPS from fall 2023: I am a very active consultant to people looking to learn more about the licensed sports product industry - you can find the full detail here.  I spend almost every day in the licensed sports product field and I work with between 300 and 500 clients each year. There are three primary ways I work with people:

1. Hourly telephone consulting
2. Full day face-to-face meetings where I will go almost anywhere in North America to spend a full day with you and giving you a fire hose amount of information that is directly applicable to your circumstances.
3. I have a bundled package of services for those people who know that they want to work with an existing licensee.

So visit here for more detailed info and let me know how I can help you move your idea forward.