SBJ/February 8 - 14, 1999/No Topic Name
NBA product rides the bench
Published February 8, 1999
The NBA may be back in business, but those halcyon days of retailers enjoying steady increases in NBA licensed merchandise are long gone as the league's labor woes clobber the industry.
Consider that this past Christmas the ever-popular Bulls jerseys were selling for $9.99 at Sportmart stores in Chicago. A year ago, those same jerseys retailed for $49.
The rest of the industry isn't faring much better.
Retailers and manufacturers expect sales to be down 50 percent or more due to the lockout. Industry tracker Sporting Goods Business expects sales of total NBA licensed merchandise to plummet by a whopping $680 million, or 80 percent of overall sales from January to May this year. In 1998, Sporting Goods Business said total NBA licensed sales were $1.7 billion, compared to a little more than $2 billion in 1997.
"When leagues don't play, you don't have fans getting excited about the sport," said Ken Snyder, executive vice president of Denver-based Gart Sports Co., which operates 130 Sportmart and Gart Sports stores across the country. "Plain and simple, people aren't buying. What business there was to have was hard to come by and dramatically less than last year."
Snyder considers Gart Sports fortunate to be able to salvage at least some business by selling Bulls apparel at huge discounts while licensees cushioned the lockout's impact by pushing sales of NFL and other licensed sports merchandise.
Officials at Champion Products Inc., the No. 1 apparel licensee in the NBA and exclusive supplier of replica jerseys, said that as retailers ordered significantly less last fall in anticipation of the lockout's impact, they pushed NFL and Major League Baseball merchandise.
"Business was very tough," said Champion spokeswoman Nicole Blake, who refused to disclose how hard the company was hit. "Retailers bought very conservatively, but we won't know the full impact until the end of the season."
While retailers canceled or held orders in anticipation of the lockout, the impact of Michael Jordan's retirement also rippled through the industry.
"Things have been trending down hard for a couple of years, and we got killed by the lockout," said one West Coast NBA merchandise retailer. "And 40 to 50 percent of my business was directly Jordan-related and 70 percent was Bulls-related. Now that the Bulls are no longer the Bulls, we have none of it."
Things aren't expected to improve anytime soon, either. Snyder estimates it could take a few years for NBA sales to recover from the lockout. Other sellers, though, said things couldn't get much worse.
"This year is the bottom point," said a buyer for a large Midwestern retailer. "There is less than half of a season and the Bulls won't be winning a championship, so we expect our NBA sales to be the lowest in six years."
NBA Properties officials said the estimated 80 percent loss of licensed sales is inflated, but they readily acknowledge the damage.
"There's no question that the lockout hurt our business, but I don't know to what extent," said Sal LaRocca, vice president of apparel for NBA Properties. "Retailers, with history on their side, were a bit more cautious and conservative on what they brought in."
So what's the strategy to win back the business lost to the lockout during a period of decline in the overall sales of sports mer-chandise?
"The league recognized we have a lot of work to do, and the theme is that we will reconnect with the fans," LaRocca said. "We aren't going to be arrogant about it. We have to go directly to them."
NBA Properties has 140 worldwide licensee deals and has no plans to increase the number. If anything, the league wants to cut the number of licensees to avoid saturation as sports merchandise sales trend downward.
"We've recognized that the overall sports landscape has changed dramatically with supply outdistancing demand," LaRocca said. "We have to streamline."
While the league looks to reduce the number of licensees, it is banking on an exclusive two-year deal with designer FUBU to sell more merchandise to a greater urban contemporary market.
"We have solidified the fashion component and we are always enhancing our off-court side of the business," LaRocca said. "All our retailers and licensees have told us that it's critical that we come out of [the lockout] with something. We are not going to sit back and see where the business takes us."
As for the loss of merchandise sales due to Jordan's retirement and the subsequent breakup of the six-time champion Bulls, the league can only hope some other team emerges to pick up at least some of the slack. Bulls merchandise made up about 50 percent of the league's apparel sales, retailers and manufacturers say.
"They're the most successful team in any sport, and the Bulls were a significant portion of our business," LaRocca said. "There will be a short-term impact, but it remains to be seen what the increase will be in other local markets compared to the Bulls' business."