One needs only to have witnessed the remarkable transformation of ESPN and its "Sports Center" domain during the past 25 years to understand the growing influence and appetite for sport by our society over the course of the past couple of decades. The ascension by ESPN has been astonishing; it evolved from a fledgling “not ready for prime time” cable outlet surviving to feed a largely weekend sports fan base into an unstoppable global and seemingly omnipresent media empire. Research suggests that each week, 94 million Americans consume ESPN and the tentacles it has spawned, which include three other sister cable stations, ESPN Radio and ESPN The Magazine. In terms of brand recognition, “resonance” studies indicate the ESPN name now ranks first among men, ahead of Coca-Cola and McDonald’s.
Sports now dominate the public conscience at levels unforeseen when ESPN emerged on the scene in 1979, and the affiliated industries of sport have benefited proportionately, with the apparel business being no exception. Capitalizing on the increasingly penetrating power of sports over the consumer market, many players in the sports apparel world have thrived.
According to statistics provided by The Licensing Letter, sales of licensed sports-related merchandise — which includes sales of all items licensed by all the major leagues, NASCAR, collegiate sports and the Olympics, as well as individual stars such as Michael Jordan — have exceeded $10 billion every year dating back to 1994. Sales in 2003 were estimated at $12.7 billion. (The figure is even more staggering when you consider that the annual revenue generated by an entire professional sports league, the NHL, is diminutive by comparison. The NHL’s overall sales were projected at $2.1 billion prior to hockey’s recent shutdown.)
Licensed apparel sales, particularly sports caps, T-shirts and jerseys, account for a hefty chunk of that $12 billion-plus pie. A team with a particularly large following can create a highly profitable side industry to supplement its sales in tickets and television revenue and other concessions; for instance, the National Football League’s Dallas Cowboys, often dubbed “America’s Team,” owns 20 retail outlets located outside its stadium.
Beyond the fan craze for team logo-splashed licensed clothing, the sports apparel realm extends into the sphere of athletic wear — clothing designed for those fitness enthusiasts who often participate in their favorite sports, as well as follow them. At its annual “Super Show” held this past January in Orlando, SGMA International, a major sports product industry association, estimated that wholesale shipments of all sports apparel in 2004 reached $24 billion, a 5 percent increase over 2003 and nearly double its figures from 10 years ago, when shipments were $13.2 billion. In compiling its numbers, SGMA defines sports apparel as any “apparel designed for, or that could be used in” active sports (which includes licensed as well as non-licensed apparel). SGMA figures state that revenue from sports apparel accounts for nearly half, or $52 billion, of all sales of products in the entire sporting goods industry.
What’s fueling the growth? The Under Armour revolution is clearly a key dynamic.
An overnight marketing sensation, pioneering Under Armour has written its own ESPN-type success story, developing the compression moisture management sportswear that has blazed a trail envied — and subsequently modeled — by the rest of the industry, as competitors such as Nike and Reebok scurry to keep pace and market similar lines. With estimated sales of $200 million in 2004, Under Armour reportedly captures a market share estimated at anywhere between 50 percent to 70 percent in its niche, according to various estimates.
The company was founded in the late ’90s by 32-year-old Kevin Plank, a former University of Maryland walk-on football player who sought and formulated a better-wicking garment to replace traditionally damp and sweaty cotton T-shirts. The company attributes its dramatic rise to brand authenticity.
While both segments of the sports apparel marketplace — the licensed merchandise as well as the athletic wear — have faced their share of marketplace difficulties, they now enjoy an upswing.“We’re starting to understand that there is a direct relationship between our industry and the state of the economy,” said SGMA president Tom Cove in his state-of-the-industry address at The Super Show. “Overall the forecast is good as long as the economy continues to grow.”
What the fans wear (increasingly fashion is a dictator)
Predictably, the licensed sports apparel industry has often been prey to the breaking developments that occur inside the stadiums and arenas where the pros and collegiate athletes showcase their talents. That reality was never more apparent than this past fall, when the Boston Red Sox franchise captured its first World Series title since 1918, perceived as a historical milestone in the sports world. Cash registers rung as the Red Sox “reversed the curse,” precipitating new records for licensed apparel sales. New Era, the licensed manufacturer of on-field caps for major leaguers and sports fans, reported that more than 150,000 Red Sox hats had been sold at World Series time.
During an SGMA forum on licensing at this year’s Super Show, David Baxter, senior vice president of the “OnField Apparel Group” division of Reebok, noted that on the pro basketball front, the turnaround success this year of the Phoenix Suns and the Miami Heat, teams that struggled on-the-court in previous seasons, has directly led to improved merchandise sales. “The parity in the NBA has stimulated a ripple effect,” said Baxter, named No. 15 on the Sporting News’ Power 100 list of top executives in 2002. “That’s why we need retailers and partners to support those businesses, both in good times and bad.”
Reebok signed a landmark 10-year exclusive agreement with the NFL in 2000 to outfit all NFL teams, beginning in the 2003 season, with game and practice uniforms, polo shirts and other team personnel apparel. A similar deal between Reebok and the NBA kicked in this season. The Reebok authentic merchandise is also distributed and sold briskly at the retail level. While other apparel companies (such as VF Imagewear, the sports licensing subsidiary of apparel giant VF Corp.) are still able to sell “non-authentic” apparel licensed by the leagues, the “what the pros wear” selling point is considered a huge advantage for Reebok in the competitive sector.
While a team’s good fortune can propel its merchandise sales, as the Red Sox, Suns and Heat have exemplified, it can also present tricky challenges, particularly in an era of sourcing and fast turnaround. “The Pittsburgh Steelers got hot this year, and it sparked demand for thousands of [Ben] Rothlisberger jerseys,” noted Mark Holtzman, senior vice president of consumer products for NFL Properties. Holtzman was referring to the unforeseen success of the rookie, who guided the Steelers to a 15-1 record, though he was not even projected to be the team’s starting quarterback prior to the season. “It creates a constant battle with retailers,” Holtzman said, “but in some cases there’s no way you can meet every stitch of demand.”
The licensed sports apparel business has been fueled in recent years by a fashion-inspired retro movement in which demand surged for nostalgic apparel such as a Brooklyn Dodgers baseball cap or a vintage Washington Bullets NBA jersey, but several observers at The Super Show, including Holtzman, said that trend has waned considerably.
License executives noted their respective sports associations have adapted diverse retail merchandising strategies, attempting to leverage the unique business conditions each entity faces. “We have established a footprint around the world with jerseys and apparel,” said Sal LaRoca, the NBA’s senior vice president for global merchandising. With a noteworthy international presence because of the participation of NBA players on various Olympic teams and the emergence of several foreign-born stars (including China’s Yao Ming of the Rockets), NBA apparel sales in Europe and Asia have spiked.
Collegiate Licensing Co., which handles licensing for more than 180 schools, cannot promote its athletes because they are amateurs, and so the company opts to market its school mascots and logos more prominently. “And [the licensing strategies] of every school vary,” said Pat Battle, president and COO. “While Notre Dame might decide to be more conservative, another university may take a more aggressive approach.”
Holtzman of NFL Properties said “we need to lessen our dependence on jerseys and headwear so we are not just subject to the cyclical vagaries of the business.” With the league’s dominating presence atop the sports world, its goal, he explained, is to sell on a less seasonal and more year-round basis.
Significantly, LaRoca, Battle and Holtzman all said their sights are set toward appealing to a more fashion-conscious consumer — with the obvious primary target becoming the growing female fan base.
LaRoca said the NBA’s sales of women’s merchandise improved after it launched an NBA for Her line in 2003. He indicated previous efforts during the past decade fell short because the merchandise was a unisex version of the men’s merchandise. Holtzman said the NFL’s efforts to appeal to a broader female market are exemplified by its sales of NFL team caps using non-team colors. “It’s why you’re starting to see Eagles caps in pink or a Rams cap in Carolina blue,” he said.
VF Imagewear recently unveiled a fast- growing array of NFL-licensed team pajamas specifically for women, on display prominently at the Super Show.
Revolutionary advances benefit the athletes in us While licensed apparel merchandisers profit from fan loyalties and highlight the team logos and athletes associated with a particular team, Under Armour adopted a different marketing tact in its rise. Although it has just recently utilized recognizable athletes in advertising campaigns (including Lavar Arrington of the NFL’s Washington Redskins and Texas Rangers’ star Alfonso Soriano, who is pictured on the cover), the company’s rapid expansion has been borne off the back of its original basic style (Plank started out with a single T-shirt, in three colors, black, white or navy), and the power of its own logo, motto (“We Must Protect This House”) and brand name.
Though it now sells about 300 products in various colors, from skullcaps to gloves for baseball and football, Under Armour has shined nearly all its attention on the merits of its product, eschewing the use of licensed logos of other professional teams.“We’ve had a very tight focus on what we’ve done as a company,” said Plank, speaking at the Super Show. “Innovation has been our outline … with us, it’s a matter of every product making sense.”
Recognizing the power of the brand, Plank created his first big break when he got his clothing placed in the 1999 football film “Any Given Sunday” (ensuring along the way that the “UA” logo was showcased). He then used much of Under Armour’s remaining cash at the time for an ESPN The Magazine ad, a move he says saved the company and triggered its first big orders.
In developing the company’s original prototype, Plank utilized Lycra spandex and stretch polyester and relied on a tailor to convert the material into a snug-fitting shirt. He has capitalized on recent developments in fabric along the way.
“Really 10 years ago, Lycra was the biggest technology out there, but it’s still very relevant and used in an incredibly broad range of products,” said Jenn Weede, an author and stylist specializing in fitness, outdoors and sports clothing. “More designs have come along in the past five years, and all these technologies that have evolved can now be combined into one garment that is literally engineered to work with the body in motion. Nike, for example, may have a tennis outfit that may have different biomappings than say a running suit.”
Along with Nike and Reebok, other leading entrants into the moisture-wicking, odor-eliminating compression apparel market include T3K, a company founded by NFL star Simeon Rice, and Everlast, the boxing equipment and apparel company, which has developed a line of antimicrobial clothing. In addition, Russell Athletic is marketing “Dri-Power Odor Eliminator” apparel that embeds silver ions in the polymer of the yarn to achieve dryness and anti-odor properties.
One newcomer to the performance apparel arena, ProTonic, is marketing undergarments that directly challenge the moisture-wicking movement. The firm bases its product development on research that shows that high-wicking fabrics can increase the risk of injury by not allowing sweat to effectively cool the body through evaporation. Its Textile Revolution (TR) Gear is designed to keep sweat on the surface of the skin to maintain the body’s natural body temperature.
Weede said all the new apparel technologies “often mean you can stay outside longer and do what you love longer, because you’re not wet, cold or miserable. In some cases, such as mountaineering, it can even be a life or death matter. For the person who works out and then goes to work for 10 hours and leaves their sweaty clothes in the trunk, there’s something for them too in terms of an anti-microbial benefit.”
A key factor driving the development of new performance apparel is the lower cost to incorporate the emerging technologies, concluded Weede. “They’ve come down to a point where there is a price difference, but it’s not significant,” she said. “A cotton T-shirt can be $20, while a dry-wick shirt might be $30. It’s starting to be much more comparable.”
It’s a point that did not elude Plank at the Super Show. “Our first goal was getting to $100 million [in sales],” he said. “That’s important to distribution, so you won’t go away. There’s always someone out there who is cheaper. That’s why [the] brand is so important.”
MICHAEL COLE is associate editor of Apparel and may be reached at [email protected].
For more information SGMA International www.sgma.com