A half-dozen stock cars sat angled along a stretch of sidewalk last week in the shadow of a Wal-Mart in Ormond Beach, Fla. Dozens of shoppers coming in and out of the store paused to check out the cars and snap photos. Inside the store, an area called “Race Shop” showcased hats, T-shirts and sweatshirts for NASCAR drivers ranging from Kyle Busch to Carl Edwards. And in the food section, a series of 18 2-by-4-foot signs featuring Budweiser and Coca-Cola logos hung from the rafters. They read “Welcome Race Fans.”
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| Wal-Mart has committed to heavily promoting NASCAR at its retail locations. |
All of it was the centerpiece of a landmark, multiyear retail and licensing partnership struck by Wal-Mart and NASCAR Team Properties, a centralized licensing trust. The agreement enables the world’s largest retailer to produce and sell apparel, home goods and other products bearing NASCAR driver and team imagery and marks.
In addition to paying a licensing royalty, Wal-Mart has committed to heavily promoting NASCAR at its retail locations. For two weeks this month, it is giving NASCAR industry partners marquee retail exposure in 1,500 stores nationwide. Then, throughout the season, it plans to host fan activities in the parking lots of select stores when races are in town.
That exposure is a game changer in the eyes of NASCAR Team Properties executives who put together the deal. It gives the entire NASCAR industry — teams, tracks and the sanctioning body — an asset to attract potential sponsors at a time when the sponsorship market remains tight.
“Licensing is a big part of it, but from my point of view, having Wal-Mart embrace our sport and having the opportunity to engage with the largest retailer in the world is the biggest upside,” said Joe Mattes, JR Motorsports vice president of marketing and licensing. “It’s a paradigm shift.”
The deal packs a series of firsts: It’s the first major deal between Wal-Mart and a sports property; it’s NASCAR’s first large-scale, direct retail licensing agreement; and it’s the first time in almost a decade that Wal-Mart will promote NASCAR at stores.
But those firsts didn’t come easy. The deal took nearly a year to complete and required everything from driver appearances to NASCAR 101 lessons before it was completed. It nearly was derailed when rumors swirled that Wal-Mart might sponsor Jeff Gordon, and it ultimately required developing promotional and licensing plans before final paperwork was approved.
“We wrestled with it,” said Blake Davidson, NASCAR’s vice president of licensing and consumer products. “But we thought it would be a good opportunity to put the NASCAR brand in front of millions and millions of people. It’s really changing the model.”
Wal-Mart declined to make its executives available for this story.
‘We’re all in’
Just days before the 2010 Daytona 500, Rick Hendrick e-mailed four of NASCAR’s biggest drivers. He asked Gordon, Jimmie Johnson, Dale Earnhardt Jr. and Danica Patrick to travel to Orlando in early March to speak at a Wal-Mart sales meeting.
Though there was obvious overlap between Wal-Mart’s customer base and NASCAR’s fan base, the retail behemoth and motorsports leader hadn’t had a formal relationship since the early 2000s. Hendrick and Marshall Carlson, president and COO of Hendrick Motorsports, hoped exposing Wal-Mart executives to today’s crop of top drivers would change that.
The drivers’ appearance at the Wal-Mart management meeting was a complete surprise. Wal-Mart associates buzzed as Gordon, Johnson, Patrick and Earnhardt talked about teamwork and taking risks on talent. Wal-Mart executives were struck by the associates’ excitement and expressed interest afterward in learning more about opportunities in the sport.
“That was the start of it right there,” said Mattes, who wasn’t in attendance. “That’s when [Hendrick and Carlson] pushed their chips in and said, ‘We’re all in.’”
Hendrick and Carlson enlisted NASCAR’s help to find a solution for Wal-Mart. The sport was in the process of developing NASCAR Team Properties, and that quickly became a vehicle for converting the driver appearance into something sustainable.
Between January and May, parties led by Paul Brooks, NASCAR senior vice president, and John Westling, Wal-Mart executive vice president of merchandise, talked about the type of partnership they could structure. But the licensing trust was still in its infancy and it was unclear what assets it could deliver.
Getting to the source
In an effort to learn more about the sport, Wal-Mart executives attended the 2010 Sprint All-Star Race in Charlotte. Many had never attended a race, and members of the trust took them around the track and provided a course in NASCAR 101.
Mattes took a group of Wal-Mart executives to meet a fan he knew named “Cousin Willy,” who had been attending races at Charlotte Motor Speedway for 30 years. When he introduced Willy to some of the executives from Wal-Mart, a woman from New Jersey who was at Willy’s campsite jumped in.
“I just went to Wal-Mart and spent $120,” she said. “I go before every race.”
A member of the Wal-Mart team asked what she bought, Mattes said, and she ticked off a list that included beer, ice, chips, soda, chicken and more.
“None of that was planned,” Mattes said. “It gave them firsthand what NASCAR Nation was — the passion and the loyalty.”
During a meeting at Hendrick Motor-sports that weekend, it became clear that Wal-Mart wanted to make a deal. Close to a dozen people representing each side threw out ideas about sourcing licensed products and retail promotions. Everyone scribbled notes.
The tone of the meeting was clear, said Mike Brown, director of licensing at Richard Childress Racing. “This was a partnership, not a traditional licensee-licensor relationship,” Brown said. “It gave us ownership of what we were doing.”
As the deal got legs, some members of the licensing trust questioned its value. They worried that a retail program at Wal-Mart would feature only official NASCAR partners and expressed concern that the deal would negatively affect other retailers sponsoring NASCAR teams like Bass Pro Shops, Target and Menards.
A report that Wal-Mart was exploring a partnership with Hendrick Motorsports and Gordon’s No. 24 car threatened to further the divide.
“It created a lot of stir, but teams quickly got over it,” Mattes said.
By last fall, Wal-Mart, which worked with The Marketing Arm’s Charlotte-based Millsport agency, and NASCAR Team Properties had agreed to the framework of a deal. The deal would give Wal-Mart the right to source NASCAR team and driver products and showcase NASCAR at retail. The parties went back and forth over terms of the deal all the way through last week.
Changing the business
NASCAR Team Properties officials believe that the deal has the potential to change the way the sport does business.
Because Wal-Mart plans its retail calendar almost a year in advance, Mattes believes NASCAR teams will have to work on the retailer’s timeline. That means teams will have to approve merchandise designs more quickly and develop paint schemes for the next season earlier.
“We have to grow up and play in the big leagues now,” Mattes said.
Brown believes Wal-Mart’s promotional efforts, like this week’s “Race Time” in Ormond Beach, will deliver added value to existing sponsors and help lure new ones.
The trust didn’t set a minimum investment that a sponsor must make in the sport in order to be showcased in Wal-Mart. It also turned over management of who is showcased and how to the retailer. As a result, competitors like Pepsi and Coca-Cola, and Budweiser and Coors Light will be featured alongside each other.
NASCAR didn’t respond to an inquiry about retailer pass-through rights.
The final benefit that NASCAR Team Properties executives expect to see is an increase in licensed sales and a deeper understanding of what licensed products customers want.
“Are we looking at a [licensing] return?” Brown asked. “Absolutely. But at the end of the day, there’s a lot more to it than selling a T-shirt or a toy. It was really the added value that made this deal worth pursuing.”
