• Japanese NBA player Yuta Watanabe outsells LeBron James in NBA Japan stores
• Acquisition of Majestic has helped develop relationships with Japanese baseball teams
• 10-year deal with SoftBank Hawks will help to promote capabilities in the region
Masanori Kawana, managing director, Fanatics Japan, came to prominence in October when he signed the company’s first vertical merchandising deal in Asia with Nippon Professional Baseball side the Fukuoka SoftBank Hawks.
Fanatics is aiming to take its ‘v-commerce’ (virtual-commerce) retail model – characterised by an agile on-demand supply chain – that has proved successful in the United States and replicate it overseas. Kawana is responsible for the firm’s capabilities in East Asia, the fastest growing e-commerce business outside of North America for the global licensed sports merchandise company, and oversees its e-commerce, apparel manufacturing and in-venue and stadium business in the region.
The company runs online and bricks and mortar retail operations for major league rights-holders like MLB, MLS, the NBA, NFL and NHL in East Asia, in addition to working with individual teams like Manchester United and Real Madrid.
Under Kawana’s leadership, Fanatics has opened a new fulfilment centre and new warehouses in the region and established offices in Japan and Hong Kong. Sales of officially-licensed MLB merchandise have grown by 39 per cent year on year in Asia across Fanatics’ platforms and by more than 40 per cent for the NBA during his tenure.
Here he speaks to SportBusiness about the challenges and opportunities in the region.
Are there any areas where the Asian sports market is as commercially sophisticated as the US?
Japan is probably the exception in Asia where domestic team sports or professional sports sides are of a decent standard. The audience is around two-to-three million for the big teams, then there are 72 to 144 games a year, so seventy-two home games per side. These are really comparable to the numbers for Major League Baseball in the United States. There is quite a decent-sized merchandising business and healthy ticketing and sponsorship businesses for baseball, followed by sizeable markets for football and basketball as well.
Where are the opportunities in the merchandising business in Japan?
If teams are doing e-commerce by themselves, which most of the baseball teams are, they offer five-to-10-day delivery from the time of your order. But it’s definitely not what you usually expect from Amazon or Rakuten, where you get your order the next day. With our new fulfilment centre we can definitely provide those regular e-commerce service levels, and next-day delivery.
How well is NBA merchandise performing in Japan?
MLB merchandise is the most popular merchandise in Japan, but the NBA is also relatively popular compared to the NFL and NHL – especially with one Japanese player who just made it to the roster for the Memphis Grizzlies, Yuta Watanabe [who has made two appearances for the Grizzlies, amounting to approximately 12 minutes on court. He is the second Japanese player to play in the NBA.] We have sold more Watanabe jerseys in our NBA store in Japan over the last 3 months [since they became available] than we have sold LeBron jerseys over the last year – our top seller before Watanabe.
While there’s Lebron James being traded to the LA Lakers – which is a massive thing for NBA fans – this guy is still more popular after appearing for five minutes, which tells you how important local players are [to sales in Asia].
What has the success of Japanese player Shohei Ohtani at the LA Angels done for the MLB’s merchandise sales in Japan?
We sold 2000 per cent more merchandise in Japan for Ohtani than any other Japanese MLB player across the course of one season in the history of the MLB. He’s been worth a couple of million pounds of sales. It’s been an exceptional case. You could probably look at generating around $200,000 worth of sales for any other local baseball or basketball player or even football player. In the 24 hours after he became Rookie of the Year, we were able to create bespoke Rookie of the Year products and we sold about four times more merchandise in Japan than all of the other MLB players combined in the previous month.
You have taken charge of Majestic Japan following Fanatics’ acquisition of the company in 2017. What did that acquisition do for you as a company?
Majestic Japan has been in the market for almost a decade serving customers with MLB products, and we [Fanatics] also share MLB as a licensee. Majestic also serves five of the 12 baseball teams as a technical partner for their kits, so we already had a good presence in baseball and we wanted to turn this into a pure, wholly-capable, vertically-capable Fanatics entity. This January, Majestic Japan turned into Fanatics Japan and now I’m building my e-commerce team and we set up our own fulfilment centre. We also set up what we call a made-to-order facility that can produce products in a rapid way. On top of that we’re building physical retail stores and we actually ran the merchandise for the MLB All-Star Game that happened in Tokyo recently.
You recently signed a 10-year deal with Nippon Professional Baseball side the Fukuoka SoftBank Hawks – your first vertical merchandising deal in Asia. How helpful was the fact that the side’s owner SoftBank is also an investor in Fanatics?
It definitely helped as a strategic relationship, but it’s not like they would just work with us because we’re SoftBank, too. The Hawks had their own merchandising setup already and we, as Majestic, had been a supplier for them, so we already had a kind of a partnership before the SoftBank investment even happened. That really helped, having a past track record of us being a good supplier, but we needed to convince them that we could deliver an e-commerce operation and physical stores for them. I feel the fact that we could sign a 10-year deal with the SoftBank Hawks is going to be a really good showcase for us, if we execute it right. So that’s what I’m really working on right now, to make sure this model is going to work in Asia.
Can you give more details about the commercial model for the Hawks deal? Is it based on revenue share?
It’s basically a revenue-share model where we are responsible for the whole merchandising operation, but especially with the Hawks deal we are going to be the exclusive product licensee for a range of soft goods, and apparel-type products. We’re going to be responsible for designing and producing apparel ourselves and then retailing it by ourselves as well. We are going to be providing the team with a royalty, a revenue share based on our performance.
So presumably you have to provide a guarantee and outperform their existing merchandising operation by quite some way for it to become profitable?
Our commitment is to grow their bottom line. We take the risks as well. The idea is to guarantee what they’re currently making, taking into account what the head count is and the risks that are associated to run this business. We’re guaranteeing the money for them and then we’re incentivised to increase that further because of the revenue-share model.
Do you have final say on Hawks merchandise designs once you get those rights or do the Hawks still have sign-off?
There’s a brand management piece and it’s definitely important for them to own that, and we’re happy to work with them together. The Hawks especially have been really good at creating hard goods themselves, so we will continue to work with their sourcing team or merchandising teams to source the products that they create and retail them. So it’s not like we’re just completely taking over their merchandising business; it’s going to be a joint effort with them to come up with products that are going to sell and then we are going to be the retailer offline and online.
What are the challenges for Fanatics of working in Asia?
We need to show our partners that we can operate our business in a correct, bottom-up way. We need to show them we have a long supply chain team, a local digital marketing team, a local person that can run retail in each region. Convincing rights-holders that we can run their merchandising in a very localised way is something that is thought to be a challenge but having the [SoftBank Hawks] deal done and then getting additional rights for the MLB All-Star Game will make that less of a challenge.
The NBA has made a success of licensing its brand to fashion brands in South Korea. Is that a side of the business that Fanatics is also interested in?
I look after Korea as well and Korean fashion-oriented wear is something really unique in our industry. Korean MLB and NBA licensees are definitely doing a really good job of presenting those brands as fashion-oriented ones. We want to learn from and replicate that to a certain extent because Korean fashion trends are also influential in countries like China or Taiwan. But in the immediate short- to medium-term, we want to service the MLB fans or NBA fans in South Korea who cannot get the more traditional kit that they want. If you go to MLB and NBA stores in Korea, physical stores in cities or department stores, all you see is pure fashion items. You don’t even see a jersey, you can’t even get a kit. I understand that fashion is a big thing, and they did a really good job, but there are unsatisfied fans who can’t even get a [Tottenham Hotspur footballer] Son Heung-min kit or can’t get an NBA player’s jersey.
What influence does the Asian office have over the merchandising deals that Fanatics signs with western clubs?
The development of partnerships with European clubs is primarily done from the UK. I do let them know when I think it would be great to sign a certain brand, especially when a team has signed a Japanese or Asian player – we’re desperate to have those rights. Just one player, two players can really make a difference. It’s not just about big clubs, it could be smaller clubs. I wished I had the Leicester City rights, when [Japanese player] Shinji Okazaki signed for them. These are things that we want and are really desperate about.
Fanatics have always held up Leicester City as an example of a missed opportunity because they won the league and you say they didn’t have the ability to service the increased demand for replica shirts. Are there any figures that you could put on how much you think they would have made if they had a nimbler supply chain at that time?
The thing about Leicester is that they would likely have had to put their order in with their kit supplier sixteen-to-eighteen months before they won the league. At that time, they would have been wondering if they would still be in the league the following season. When they put that order in, they would have probably based it on previous years’ sales, which is of course reasonable business practice. But the model that we run suggests that you just don’t have to do that – you put that order in, but instead of selling out you are able to put another one in two months, three months before you’re about to win the league, or as demand goes up.