Fanatics, the official online retailer of licensed gear for every major U.S. sports league, will do $2.3 billion in sales this year. It scored a $1 billion investment from Softbank last year at a $4.5 billion valuation. And it has achieved all this success, founder and chairman Michael Rubin says, by approaching ecommerce differently from Amazon and Alibaba.
“Amazon and Alibaba are changing retail for everybody,” Rubin said on stage at the Yahoo Finance All Markets Summit on Sept. 20 in New York City. “These are two incredible companies… It’s really simple: If you do the same thing, if you sell products that are similar to what Amazon and Alibaba are selling, you’re dead. You’re not going to survive.”
Amazon and Alibaba mostly sell products made by third parties. Fanatics, in its early days, did the same. It was “essentially a Zappos of licensed sports,” Rubin says. “We sold everybody else’s products. Today, more than half of our revenue comes from our own products that we design, develop, and sell directly to the consumer. By 2020, it’s going to be over 70% of the business.”
What Fanatics does is commonly called vertical commerce. Put simply, it means being deep in one product category, rather than broad and shallow. For Fanatics, it means controlling the supply chain at every layer: If you buy an NFL jersey online, Fanatics is the licensee (it pays the NFL for the rights to sell the “official” jersey); manufacturer (it makes the jersey); and retailer (it sells you the jersey).
Fanatics is also a fast-fashion business like H&M or Uniqlo. When a player is traded to a new team, you can typically order the new jersey from Fanatics within hours of the news breaking.
“Being able to make sure we have exactly what the fan wants at any time, that’s what really drives our business,” Rubin says. “And having a supply chain that’s vertical, and can get that merchandise to the fan, is incredibly important.”
There’s just one problem with Rubin’s point that Amazon and Alibaba mostly sell third-party products: that’s changing. Amazon now has its own apparel labels, publishing imprints, furniture lines and household product brands.
But Amazon doesn’t have the official licensed jerseys of the major sports leagues. Fanatics owns those rights.
“Amazon is doing exactly what they should do” by selling more of its own products, Rubin says. “You just need to think about this top down. Does your business have a reason for being? If you’re a retailer, and you want to sell the same products that Amazon is selling, well, Amazon is going to have a better consumer experience. Better prices. You have no chance to be successful. If it’s not completely different, close up, go home, give up.”
Fanatics has a reason for being. And big recent moves, like the acquisition of Majestic and an unprecedented new deal with the NFL and Nike that starts in 2020, will only strengthen that reason for being.
In addition to selling more of its own brands, Amazon, the iconic ecommerce giant, has moved more into brick-and-mortar recently with its physical bookstores, cashless Amazon Go stores, and by buying Whole Foods. But Rubin has a bold take on digital giants dipping a toe into brick-and-mortar, and vice-versa: they can’t truly change their stripes.
“If we keep this real,” he says, “if you started as a brick-and-mortar company, that’s really who you are. And if you started as a digital company, that’s really who you are.”
To watch Michael Rubin’s full interview at the Yahoo Finance summit, click here.
Daniel Roberts is the sports business writer at Yahoo Finance. Follow him on Twitter at @readDanwrite.