Fanatics: The Rise from One Store to $18 Billion in Valuation
While the NBA, the MLB, and the NFL had to cancel games amid the pandemic, Fanatics, which makes fan gear for the leagues saw its valuation rise to over $18 billion.
Here’s the story behind the success of Fanatics.
The Early Days
Fanatics was started by Alan and Mitch Trager in 1995 as a storefront in Florida selling Jacksonville Jaguars merchandise. The brothers realized the value of the internet early on. They focused on affiliate marketing and partnering with websites with quality content.
By 2006, Fanatics had made its first acquisition. A sports websites company that accounted for 25% of the referrals to its website.
The Trager brothers had found the secret recipe. Through the combination of affiliate marketing and acquisitions, the valuation of the company rose to over $200 million by 2011!
💰Acquired x 2
In February 2011, Fanatics was acquired by GSI Commerce for $277 million in cash and stocks.
Just a month later, GSI got acquired by eBay for $2.4 Billion! eBay needed GSI’s relationships with major retailers including Dicks Sporting Goods and Toys R Us in order to compete with Amazon.
What didn’t eBay need? A fan merch seller.
So they sold Fanatics back to GSI’s founder and CEO Michael Rubin with other brands that weren’t core to Ebay’s long-term strategy.
🐐Michael Rubin
The main driver behind Fanatics’s success is the grind of its CEO Michael Rubin.
Michael isn’t a big fan of slow and steady. He prefers putting the business on steroids.
When he was only 12, he started his first business, a ski tuning shop, in his parents’ basement.
2 years later he opened his first shop.
By the age of 16, he was broke and $ 120,000 in debt.
His father agreed to pay $37,000 to settle his debt under one condition. Michael had to attend college. And attend college he did. Well, only for a semester.
A lucrative deal put Michael back in business. He bought $200,000 of overstock equipment for $17,000 and resold them for $75,000.
Using the proceeds from that deal, he started KPR sports and the rest is history.
Now Back to Fanatics.
🔮Predicting the Future
In the old days, retailers had to predict demand before a season even started based on the popularity of the teams and players.
Fanatics estimates the demand for merch while a game is ongoing by analyzing game data and social media insights.
When Khalil Mack scored a touchdown in his first game with the Chicago Bears, Jerseys with his name were ready for sale by halftime. In one hour, his Jersey sold more than Tom Brady’s did all that day!
Fanatics even has access to the teams’ e-commerce websites. It can change the page layouts and add items based on the anticipated demand.
📈Today
Fanatics currently has partnerships with NFL, MLB, NBA, NHL, NASCAR, MLS, and PGA.
In September 2017, SoftBank lead a $1 billion funding round in Fanatics at a $4.5 Billion valuation.
In August of this year, the company raised $325 million at an $18 billion valuation.
Fanatics was able to hit a home run by adopting the following strategy:
V-commerce: the company focuses on one vertical and controls the entire value chain including manufacturing, distribution, and marketing.
Omnichannel distribution: Fanatics sells through online stores, mobile apps, in-stadium operations, and brick and mortar stores.
Global Expansion: the company expanded into China and is looking to launch in new markets.
Last August, Fanatics struck a deal with unions representing players from the MLB, NBA, and NFL to have the exclusive rights to sell their trading cards under a new venture called Fanatics Trading Cards.
A month later, Fanatics Trading Cards reached a $10.4 Billion valuation!
Fanatics is clearly aiming to dominate the fan merch space and through its partnerships and the brilliance of its CEO, it is well-positioned to achieve its goal.