The merchandising concept started in the 19th century USA to bring awareness and commercialize the existing brands. It is mainly done by creating a distribution network and also by licensing.
It initially started with comic books and newspapers, and then took over the toys and the cartoon industry. Disney studios were amongst the first ones to use it extensively in the 1930s when they licensed Mickey Mouse products. Soon enough, the popular TV shows followed the suit, and the concept of merchandising caught up with the entire entertainment industry. The industry grew leaps and bounds with the success of Star Wars and Pink Panther.
Sports merchandising started to emerge during the 80s as some of the biggest football clubs in Europe realized the potential and started their expansion.
The big events like Olympics, FIFA World Cup, Rugby World Cup started licensing the events. It was the same time when the global sports broadcasting scene grew tremendously which meant the competition for acquiring the TV rights of a particular tournament got bigger.
Licensing, IP Rights and Royalty Fees
Sports licensing is a contract between a team/club, an individual athlete, and a merchandise producing company, which allows the company to use that particular team’s logo, name, and trademark on its products and services.
In the above situation, the sports team or the athlete is known as the licensor, and the company which is allowed its rights is called the licensee.
Licensing the products like official jerseys and team kits, scarves and other items such as keychains, mugs, caps have helped some of the top European football clubs like Manchester United and Real Madrid to develop a strong fan-base in Asia and the Middle-East countries.
Intellectual Property rights in the sports industry play a huge role in driving creativity and innovation and bringing huge economic value. They fall into four main categories namely:
Patent:
Required to drive the technological advancements in sports and protect their rights. VAR in football, Hawk-eye in Tennis, and Cricket are some of the newly introduced technologies that bring more accuracy and fairness.
Trademark:
Trademark is the identity of a particular product, a team, or their official merchandise that stops other people from stealing their designs and protects the product’s value. Sports shoes are a highly competitive segment where trademark plays an important role in maintaining the authenticity of the product.
Trade Secrets:
A trade secret is a specific set of information that makes that particular product/company unique and stand out amongst its competitors. Maintaining this information is essential to hold a competitive advantage in the market and hold off others from creating a similar product.
For example, imagine Adidas has a contract with some of the top athletes and teams as their kit sponsor. They introduce t-shirts and jerseys made from ocean plastic to stand against the pollution in the seas. The information or the process used in making these jerseys becomes the trade secret. It is going to give them a competitive edge over their rivals who probably won’t know or have the same material and that’s why protecting the trade secret is essential.
Copyrights:
Copyrights are used to protect the original works, such as ideas and creations like music, writing, and artwork in general. Copyright in sports is used to protect the logos, slogans, player images, etc., which helps the broadcasters maintain an event’s exclusivity.
The licensor (clubs/athletes in this situation) receives a certain amount as a royalty fee by the licensee (merch producing company who is given the licensing rights). On a general basis, the royalty fee is calculated in terms of percentages and that particular percentage remains fixed for the entire duration of the contract. Let’s say the number is set at 10%, then the company needs to pay 10% of the net gross revenue generated by using the licensed products.
Sports Merchandising in India
Any football fans here? Which European club do you support? How easy is it to buy their official merchandise in our country? Not easy right? In fact, apart from the official jerseys and to an extent caps and keychains, we don’t see other products being available in markets here.
We don’t have a huge network of stores like Target and Walmart and without an adequate number of stores, it’s hard to reach everyone and sell a large number of official merchandise. This is one of the reasons which stalls the sports merchandise industry from reaching its full potential in India.
The other reason is possibly the biggest hurdle and that is the pricing of the products. Official jerseys of top European teams, popular NBA teams, and the official tennis clothing gears of top brands like Nike and Adidas are priced above 2500 Rs. which does not appeal to the majority of the people.
This gives access to the counter-fitting industry, which creates similar-looking products and sells them at a much lower price, which is not legal, but many people still go for it since they can’t afford the original. With India’s huge population, it’s very difficult to keep such counter-fitting products in check.
Also, we as a country lack the fan culture here, and even though IPL and other franchise-based leagues have helped to a certain extent, their limited season duration means the national teams still hold an upper hand. But even the national teams, like even the Indian Cricket Team, do not have their own official merchandise apart from the jerseys and a few t-shirts.
Even now in India, many hardcore fans are ready to buy the official merchandise if available. The keyword here is hardcore and only those fans who are passionate and loyal enough do not hesitate to pour in the money and buy the official products. Creating such a culture over here is a slow and steady process and we are headed in the right direction. If work smartly keeping one eye on the future, teams and club owners will have an edge over others in the long run.
Job Opportunities in Sports Merchandising
If you can combine the love for sports, your creativity, and your sales and marketing skills, then sports merchandising is the career you would enjoy. Merchandising is essentially a part of the marketing of a particular brand, so if you fancy working in sales, then you’ll find several companies and opportunities to work with.
You can work in the purchasing department as a purchasing manager or by becoming a sports wholesaler, sports retailer. Sports retailing is a huge industry and can also result in good pay if you show enough credentials.
A visual merchandiser is another highly sought-after position in the sports retail and merchandising industry. The layout of a store plays a big role in affecting the buyer decisions and companies do not hesitate to spend big to bring a quality visual merchandiser on board.
There are also other entry-level jobs such as working in the inventory department or the logistics which play a crucial role in maintaining the supply-chain going.
There’s also another very important role that of an analyst to keep the track of the market trends, to analyze how particular product did before and the customer response, etc. Study of all these things plays a big role in determining shop’s plans and campaigns.
In a nutshell:
Merchandising and licensing usually represent between 5-30% of the total commercial incomes with some of the biggest clubs like Real Madrid, FC Barcelona, Manchester United are a few exceptions who go beyond 20% on occasions.
The bigger the player, the bigger bank you have to break to have them on board but it also gives you bigger rewards in the long run.
Some teams manage their merchandising by themselves called in-house merchandising. A famous example includes that of FC Barcelona who is partnered with Nike as their official jersey provider and started managing their Merchandising by themselves. They believe it gives them better economic profitability.
In the merchandising business, it’s not easy to operate with 100% precision as nobody gets access to actual market figures and other key information. A lot of it is based on assumptions made from the previous season’s selling window.
Having a meaningful name and logo, being connected with the local community/city and the culture, investing in maintaining relationships for the long run, reflecting your story and values in everything you do on and off the pitch and most importantly, the performance of your licensor’s (teams/players) in their respective sport plays a huge role in having a fair bit of success in the merchandising industry.