At 6:03 p.m. on Sunday, March 12, Northwestern University’s men’s basketball team officially earned its first NCAA Tournament berth in the school’s history. At 6:07, Fanatics Inc., the world’s largest sports apparel retailer, posted its newest product, a purple Northwestern T-shirt that reads “Chicago Is Dancin’: The Road to the Final Four.”
That’s the speed at which licensed sports merchandise moves now: minutes and seconds, not hours and days. If you’ve gone online to buy a shirt, hat, or jersey for your favorite team, you’ve likely bought it from Fanatics—whether you knew it or not. In the past five years, Fanatics has crept into every facet of the sports apparel industry. “This is the biggest change to a single marketplace that we’ve seen in a decade or two,” says Marty Brochstein, a senior vice president at the International Licensing Industry Merchandisers’ Association.
That Northwestern shirt was an easy layup for the Fanatics team—the Wildcats were almost guaranteed a berth in this year’s tournament, and the design was approved on March 7—but what happens when Nowhere U. beats Duke University in the opening round? Those are the moments Fanatics really lives for.
The company has roughly a dozen rapid responders camped in its Jacksonville, Fla., and San Mateo, Calif., offices during tournament games. “That’s my Ferrari team,” says Raphael Peck, president of Fanatics’ branded apparel division. “They only go fast.” The war rooms look like man caves that have just hosted all-night hackathons: laptops litter tables, while pinboards lining the walls are full of layouts, notes, and templates. At one end of each room are a few flatscreen TVs, which on a normal day are used mostly for videoconferencing. During a major sports event, however, each will be tuned to a game and monitored intently. When the clock expires, it’s go time.
As an official NCAA partner, Fanatics has design books for each college that list approved logos, colors, and typefaces. Using those raw ingredients, it takes the rapid responders all of a few minutes to whip up a T-shirt reflecting the storyline, whether it’s a come-from-behind victory by an acclaimed powerhouse or a moment in the sun for an also-ran. From there, the design goes to the school’s licensing or athletic department for approval. Once that’s received—which can be almost immediately, if Fanatics has a long-standing relationship with the program, or take agonizing minutes with a school caught unawares—the shirt is listed on the Fanatics website. The whole process can take less than 15 minutes from final shot to first sale.
Peck is the architect of this part of Fanatics’ business; prior to his arrival, the company was almost entirely a retail outlet for other manufacturers’ merchandise. The shift occurred under the leadership of billionaire Michael Rubin, who bought Fanatics in 2011 and merged it with his e-commerce technology company, GSI Inc., which, among other things, handled online sales for the major U.S. sports leagues. Rubin sold GSI to EBay Inc. later that year but hung onto his league relationships, which he transferred to Fanatics, and then used proceeds from the sale to acquire Plantation, Fla.-based sports retailer Dreams Inc. The combined enterprise quickly grew into a merchandise juggernaut, with products ranging from apparel and jerseys to branded bobbleheads, lawn chairs, mugs, and grills. Fanatics won’t discuss financials, but it was valued at $3.1 billion when it raised capital in 2015.
Peck joined Fanatics in 2013 from Oakley Inc., where he’d been in charge of its global apparel and footwear business. Spend a few minutes talking to him, and it’s clear he loves speed: “Ferrari team” is a term of endearment; he sometimes calls them the Lamborghini team or the Porsche team, depending on how he’s feeling.
To fully show off its flexibility and speed, Fanatics needs narratives, and the three-week, 68-team NCAA basketball tournament is the autobahn of sporting events. It occurs at an otherwise slow time on the sports calendar, between the end of the NFL season and the beginning of the NBA playoffs, and it’s invariably full of unpredictable (i.e., highly marketable) moments.
Just ask the folks at Georgia State University. In 2015 the No. 14-seed Panthers pulled off a memorable upset, posting a 57-56 win over No. 3-seed Baylor University in the first round. The game-winning three-pointer was made by the coach’s son. Dad, who had torn his Achilles tendon celebrating their tournament berth, fell off his seat in shock as the shot sunk into the net.
The win stunned Georgia State’s athletic department almost as much as it did the rest of the country. Until that moment, merchandise was an afterthought and, in retrospect, a missed opportunity. Brian Kelly, who oversees the Panthers’ external affairs, calls it “the Baylor whiff.” “Don’t get me wrong, we made a lot of money, and it had an impact, but we could have had something much better if we were more prepared,” Kelly says. “It was an important lesson.” Fanatics helped compensate for some of that unpreparedness. Within 15 minutes, a shirt with the David-vs.-Goliath-esque slogan “This Was No Upset,” spelled out in Georgia State’s approved fonts and colors, had been approved and posted for sale on the Fanatics website.
Psychologically, that 15 minutes is critical. In today’s on-demand society, fleeting attention spans require instantaneous satisfaction. A student’s, parent’s, or alum’s passion peaks right at the end of a big game. “To fully monetize that opportunity, you want to be up and running as close as possible to that highest level of passion,” Peck says. “Speed is absolutely critical. As quick as that passion grows is as quick as it dissipates.” Fanatics’ licensing deals differ by school, but in general, colleges get 10 percent to 18 percent of the $20 to $30 retail price.
Not that long ago, the supply chain for sports gear took days. For events such as the Super Bowl, a lot of material had to be printed in advance, creating upfront risk for manufacturers and a lot of wasted product. Items surrounding less-predictable events were much harder to manage: Set the whole design, approval, print, package, and shipping process in motion, and the moment had likely passed by the time the product was available. That was most true in the NCAA Tournament, where a team can go from Cinderella to eliminated in 48 hours. (Again, see Georgia State, which lost in the second round to sixth-seeded Xavier University, 75-67.) Fanatics’ U.S.-based manufacturing process is nimble enough to keep up. If only 10 people want a shirt to commemorate that crazy upset, Fanatics will sell, and print, only 10.
Lately, the company has begun to expand and diversify its operations. It runs the online shops for MLB, Nascar, the NBA, NFL, and NHL, as well as for dozens of individual franchises and university athletic departments. Fanatics also runs the NBA’s flagship store in New York and has a rapidly growing memorabilia offshoot, signing stars including Stephen Curry, Ronda Rousey, and Peyton Manning for exclusive rights to their autographs and collectibles. Most important, under Peck’s guidance, Fanatics has begun taking on the exclusive rights to manufacture licensed gear, which allows the company to put its own brand on its goods (instead of, say, Nike’s), and hence in the public eye. When the New England Patriots won the Super Bowl this year, quarterback Tom Brady and his teammates celebrated in the locker room with Fanatics-branded shirts. Starting next season, the company will make all the replica jerseys for the NHL, plus on-ice Stanley Cup merchandise.
Of course, Fanatics is far from the only one in this space. Major sporting goods companies such as Nike, Adidas, and Under Armour remain major licensees, and retailers such as Wal-Mart, Target, and Dick’s Sporting Goods sell a lot of sports apparel. But no company is combining those two functions like Fanatics, let alone matching its speed.
To stay ahead, Fanatics is doubling down on manufacturing. It’s investing more than $100 million in technology and production, including a new platform for all its sites; apparel personalization capabilities; and communication between its main warehouses in Jacksonville and Frazeysburg, Ohio, and the one being built in Las Vegas. Also new this year is a special printing process, somewhere between slower, one-off digital printing and faster bulk screen printing. The middle ground will allow the company to meet production requirements for items with more than niche but less than wide interest. (Fanatics uses its own algorithms to determine likely demand.) It tested the system during the Super Bowl and World Series and will implement it fully during the NCAA Tournament.
There’s at least one area where Fanatics is deliberately slowing itself down. For major championships such as the Super Bowl, when there are two possible winners and lots of possible designs for each team that can be prepared ahead of time, the company doesn’t list all its products at once; it rolls them out in waves. The aim is to give fans a reason to check back and buy something new. Less than a minute after explaining that, though, Peck gets back on message. “We want to be at internet speed,” he says. “You can never be too fast.”