Issues With Merchandising
In the previous article, we have already studied what merchandising is. We now know why it is an important source of revenue for the sports team. We also know how the business of merchandising is conducted and what are the benefits of the same. However, it needs to be understood that there are a lot of issues which are related to merchandising as well.
In this article, we will have a closer look at some of the issues which impact merchandising. The common issues have been identified and listed below:
- Linked to the Team’s Performance: Firstly, it is important to realize that the business of merchandising is generally driven by the feelings of the fans. Hence, if the recent performance of the team is good and the fans feel euphoric, then it is likely that the sales will be high in that particular season.
However, if the team is not performing well, then the fans may not have positive feelings towards the team. As a result, they may not purchase products related to the team. Hence, it can be said that when it comes to sports merchandising, the sale of sporting products is not directly related to the quality of the sporting goods or some other innate attribute of the product.
Instead, the product derives its value from the external performance of a team or an individual player. This makes the sales of the product very unpredictable and hence makes merchandising unpredictable as a source of revenue.
- Counterfeiting: Another important point to consider is the fact that the royalties that need to be paid to sporting teams can sometimes be excessive. As a result, the prices of official merchandise can go up significantly. As a result, a market scenario emerges wherein customers are compelled to buy unofficial merchandise i.e., counterfeit merchandise. This happens because counterfeit merchandise of a similar or even better quality is often available for a fraction of the price of the official merchandise.
The end result is that counterfeit products start to cannibalize the sales of the original products. Counterfeiting of sports merchandise is a big problem, especially in developing countries. This is because the gap between official and counterfeit merchandising is quite large in such countries.
Hence, a large number of fans end up buying these knockoffs since they make more economic sense. Sports leagues need to ensure that the selling price of their merchandise is in line with the income of the fan base after taking the purchasing power theory into consideration.
- Duration of the League: The duration of the league also has a huge impact on the decision of the fans to spend money on merchandise. This is because of the fact that if fans are likely to spend more time pursuing activities related to sports and the sports club, then they are more likely to spend money on the same.
For example, many soccer leagues go on for more than six months in the year and fans can wear their merchandise to an event every few days, they are likely to spend money to buy it. On the other hand, the World Cup lasts for a couple of months and happens only once in four years.
As a result, fans are less likely to spend money buying merchandise related to the World Cup. The merchandise purchased now is likely to become outdated by the next World Cup.
- Lack of Distribution: Merchandising involves the production and selling of fast-moving items. The availability of a wide distribution network is one of the main factors that influences the ability to sell such fast-moving products. However, most licensors who acquire the rights to sell such products do not have an extensive distribution network. They may have some depth in their network when it comes to urban areas.
However, when it comes to semi-urban and rural areas, fans might find it difficult to buy sports merchandise even if they want to. The end result is that the licensor focuses on selling these goods online. This is because it is not economically viable for the licensor to establish a physical distribution network given the high cost. However, there are problems associated with online selling.
- Firstly, when people buy online, they end up visiting websites such as Amazon where they get the option to buy cheaper counterfeit goods as well.
- Secondly, online selling only targets a certain affluent demographic when it comes to developing countries and hence the mass market is ignored.
- Ethical Issues: Last but not least, the issue of merchandising has certain negative connotations as well. This is because large companies such as Nike and Adidas have been in the news for using sweatshop labor from third-world countries.
Some of the people who work in the factories where the goods are produced work in really deplorable conditions. Earlier companies would try to distance themselves from these sweatshops by saying that they are external contractors. However, over time, these companies faced tremendous blowback from activists as well as consumer groups.
Hence, sports leagues need to be aware that the products that they are licensing for sale should not be manufactured by taking advantage of laborers. These ethical issues have caused many sports leagues to stay away from merchandising as a whole.
The fact of the matter is that there are several issues which are associated with merchandising. Also, the percentage of revenue generated from merchandising has been going down each year while newer revenue streams have been opening for sports leagues across the world. This is the reason that the importance of merchandising has been reduced.
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