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Why are football kits becoming so expensive?

I was recently asked if I was available for an interview on BBC Radio 5 Live Breakfast to discuss the pricing of the new Nike England football kits.

Unfortunately, by the time I’d seen the request and replied to the producer, I was a little late and I’m guessing they found somebody else

However, this topical discussion point is an interesting one and no doubt one that has many people making the same assumptions and asking the same questions. I therefore felt it appropriate to use my notes to write this blog article with my understanding of the industry and what considerations go into the model of pricing.

“The new England shirt is £124.99” – A media headline writers dream! Whilst not incorrect, the necessity to focus on the highest available adult shirt price is the lazy approach to journalism that most looking for clicks and sensationalism will focus on, fueling the furore of the narrative.

This is, of course, the launch price point of the technical, on-pitch ‘authentic’ spec of the adult shirt. The ‘fan’ shirt, the variant which should be used in like-for-like comparisons, when looking at “then and now” pricing, is priced at £84.99 (some 32% less). This is the spec of shirt which has been sold going back years – the common ‘shirt’ before the introduction of a second, more premium, option.

If anything, there’s significantly more justification for the authentic shirt being priced at £124.99 than there is the de-spec’d fan shirt at £84.99. After all, this is a technical garment being produced for the world’s best athlete, created using more technical fabrics, more expensive embellishment techniques and the full bells & whistles. Retail sales of this particular variant of the shirt will likely be less than 1% of overall adult England shirt sales, but don’t let that spoil a good clickbait headline!

Where the real focus should be…

The narrative in the conversation should be on the ever increasing price of the fan ‘stadium’ shirt. The gap in pricing between this and the on-pitch shirt is decreasing annually, with its RRP steadily increasing year on year.

The most common questions asked are; Why is the price so high, and, How can Nike/Fanatics/The FA/England get away with the price being so high?

The short answer is that ultimately, demand is allowing all brands and clubs to continually increase the pricing of their kits. Whilst demand is there, pricing will remain high. So long as the market conditions allow for prices to stay high and continue to increase, brands and clubs will continue to maximise this best-selling category revenue. It will only be when launch and early season sales drop dramatically that things start to plateau and level off, never mind decrease.

The pricing make-up of a football shirt…

Whilst all brand and clubs will manufacture football shirts to different quality standard and specs, the overall number of factors which ultimately make up the pricing calculation remain largely the same. The more parties involved in the end-to-end supply chain, the more mouths there are to feed.

For example, the England shirt is manufactured by Nike, however they aren’t the predominant end-retailer (although they will shift a good number themselves). That means distribution to various retailers. Just like Nike, the retailers will want their slice of the pie too. Both brand and retailer will have their own margin targets to achieve. Let’s not forget the Football Association within this process either. In licensing the rights for their brand IP to be sold, they also want their split too – a licensed royalty on every shirt sold, as part of the brand rights that Nike own.

Throw in factory manufacturing labour costs and raw materials, a marketing budget to promote the new kits and sustained campaigns post-launch, shipping the kits around the world from factories to retailers and of course 20% VAT on all adult clothing and you’ve got a significant amount of parties in play.

Let’s have a look at how that likely plays out in terms of the ballpark breakdown of a shirt. For ease of arithmetic, let’s base it on an £80 shirt – a now not uncommon launch price of a top Premier League club shirt, and where these slices of the pie end up with the England kits.

Manufacturing | likely circa £8-£10 (roughly 10/12% of RRP). Direct cost ex-factory to Nike. Likely that Nike don’t own the factories producing the England kits, so factory owners will be making their own profit margin on each shirt too.

Marketing Budget | set by brand and applied across entire manufacturing run £2 – £3 (2.5/3.5%)

Shipping/Logistics & Distribution | global shipping & distribution £1 – £2 (1.5/2.5%). Direct cost to Nike, likely partially passed on to wholesale customer.

Brand markup/profit | (Nike) £22 – £24 (25/30%)

Retailer markup/profit | (Fanatics / High Street & Online Retailers) £24 – £26 (30/32.5%)

Club / Federation Licensing Royalty | (The FA) £4-£5 (5/6.5%)

VAT | £16 (20%)

As you can see, every party has their own revenue stream, target profit margins and share of the consumer purchase. With each wanting to retain this level, and strengthen when market conditions allow, it leaves the consumer facing a significant RRP.

What is driving costs higher?

There are a number of economic impacts which are compounding the pricing model, and the size of the share that each stakeholder is looking to achieve. Inflation has seen direct costs rise across manufacturing, logistics and distribution. There’s little that can be done to avoid these increases and with stakeholders unwilling to absorb these outright, that cost increase needs to be passed on elsewhere – in this instance, to the end consumer.

With brands and retailers seeing inflation squeeze profitability across their business, prices are increasing to regain margin where possible. This reflects in the wholesale distribution price charged to the retailers, which again will ultimately be passed on to the end consumer. The retailers are looking to maintain their sales margin, therefore is their cost of supply increases, their retail sales price will likely follow too.

Brands, in this case Nike, are also looking to recoup some of the huge investments they’ve made in partnership licensing deals for the rights they’ve invested.

Nike signed a 12-year contract extension to 2030, in 2018 (having had 3-years initially from 2015), worth £400m (baseline figure / performance related bonuses on top). At £33.3m / year, they will need to sell c.1,300,00 shirts a year to recoup this alone.

Pricing is set to allow for discounting and promotional periods to be applied too. At full price, if the retailer is achieving only 30% margin, they need to leave room for discounting once seasons come to an end or tournament exits happen! If the nightmare scenario of an early exit transpires, the retailer needs to have maximised full-price sales in order to not make a loss on the fire-sale clearance which follows.

The impact on purchasing behaviour…

Ultimately, the retailers must be confident that market demand still remains high enough for the continued price increases. Only time will tell on this one. At some point there will be a pivotal year where the demand dips so low to show that the tipping point has been reached and future price increases will not be tolerated by the consumer.

Those consumers that have already reached that point, are now fueling an increased demand for timeless classic retro styles. These cheaper alternatives have seen a resurgence in popularity over the last few major tournaments, likely helped by England’s strong performances too. Offering better value for money, many see these as an evergreen lifestyle apparel staple within their wardrobe, with an abundance of choice in styles available.

The other major benefactor at a time when disposable income is tight for most, but the desire to show support for the nation remains high, are counterfeit sellers. These popular eCommerce sites operated out of the Far East are the cheapest alternative to obtaining the ‘new kit’, albeit unofficial and of lesser quality manufacture.

The less said about the morality of purchasing from one of these sellers, the better. For those consumers that don’t care what the profits of these companies fund and that their shirt isn’t the ‘legit’ version , it’s by far the most affordable solution- especially if kitting out a full family. Naturally, operating within the industry we do, we’d not encourage this method of purchase, but can understand why some consumers gravitate towards it.

Will anything change?

At some point, you’d imagine so. Pricing can’t keep rising year on year at the rate it is. However, as you can see from above, it’s not quite as straight forward as just reducing the price at retail. It would take the whole supply chain to re-assess the cost of goods sold to evaluate where savings can be made in order for the consumer to see a saving in their pockets.

ps. Don’t get me started on the cost of replica kit shorts! 😡

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What to do about a problem like Wrexham AFC merchandising?

I’ve been following the Wrexham story since the mooted Hollywood takeover with interest, wearing my ‘merchandisers’ hat.

How would the investment into the club be managed?

How would the club handle Premier League level exposure?

How would the fans react?

Would the merchandising & licensing opportunity be capitalised upon?

Here I’ll try to give a rundown on the challenges identified and the strategic opportunity from my own insight into the industry.

The Impact

Let’s start by reflecting on the incredible impact the takeover and investment has had on the Club.

As of June 2023;
Social media following growth post-takeover had increased by 1,720% with the club adding;

426,211 Twitter (now X) followers

189,585 Meta Facebook page likes

774,018 Instagram followers

1,200,000 TikTok followers

84,300 YouTube subscribers

At the end of the 2022/23 season, the average attendance for home matches had grown 145% from the 2019/20 season (last pre-takeover season not affected by COVID), with most matches selling out. This was a major driver for the investment into redevelopment of the Kop Stand which will add a further 5,500 seats to the overall capacity (+35%) from 2024/25.

As of 2022/23 season, the Club (5th tier of English football) were selling between 30-35,000 replica shirts.That’s the equivalent of some lower-end EPL teams and certainly more than the majority of EFL Championship teams This has continued to grow, with manufacturing now closer to 50,000 shirts per season.

Due to the FX / Disney Plus Network documentary “Welcome To Wrexham” the club has rapidly developed a mass global appeal – specifically within USA, but also across many territories far and wide.

The Club’s database of registered fan accounts has swollen to record levels. The Club were data rich beyond their limits. This was clean data from an engaged audience – a marketers dream!

The Challenges

With all of this new found exposure and global demand came challenges – significant challenges. Let’s have a look at some of those…

The Club had overnight global demand for their replica kits and other branded product

The online club store creaked, and at one stage was showing 75%+ product catalogs SOLD OUT

Social media was awash with fans complaining as to the stock availability, fulfillment timescales for orders placed and a lack of communication

The existing retail team were clearly in ‘fire fighting’ mode , doing all they could with the limited resource they had against the tsunami of interest and demand

This fire fighting led to four main issues.

New product wasn’t finding its way to the online store as this took significant time to photograph and upload

In-store demand was significant enough to achieve sell-through on small product buys – lessening the desire & urgency to get products online

Buying & Merchandising was taking a hit, with a lack of time and resource to plan and forecast, to implement a substantial enough buying strategy, to stay on top of demand

A ‘hand to mouth’ strategy was in play, often only triggered by existing lines completely selling out before new product was ordered, leading to long periods of assortment gaps

This drove frustration within the new global fanbase who were struggling to access products, and where they could being hit with substantial shipping fees for overseas orders.

Other significant challenges which arose, some due to the lack of availability of official product, were:

Secondary markets (eg. eBay) thriving – fans capitalising on selling shirts from their personal collections and also ‘scalpers’ reselling volume of new kit for profits

Counterfeit products hitting the market – vast amounts of brand IP infringement

The Current Picture

So what’s happened? How does it look today?

It seems that things may have improved, but very slowly and still far from satisfying the huge demand for products, better fulfillment/communications and overseas shipping rates.

The club owners recently made light of the situation in a marketing campaign for club sponsor Vistaprint – albeit with a good cause (Wrexham Food Bank) benefiting from sales of “Wrexham Merch Merch” – on demand printed ‘Wrexham AFC hat on a hat’ and ‘Wrexham AFC shirt on a t-shirt’ products – a tongue-in-cheek reference alluding to their struggles to keep a regular supply of official merchandise.

This was quickly followed up by the release of a new ‘Exclusive Premium’ range of Macron supplied outerwear and lifestyle sweats and pants with price points ranging from £60 – £180. This raised eyebrows within the local fan base and many comments referring to “real fans” being priced out of buying.

Largely though, the availability of product issues still persist and the revenue lost in sales opportunities goes on.

So, what could be done? How would I approach this unique challenge?

Here’s a few strategic approaches that I’d be taking, plus a number of suggested opportunities I’d be exploring.

Strategic Approach

Full review of all retail operations, identifying immediate efficiency drivers

Define a clear retail & brand licensing strategy for the Club brand

Analyse & understand better the demand for retail and licensed merchandise, forecasting more accurately and agreeing revenue, margin & profit targets

Agree annual merchandising buying budget in line with forecasted revenue targets

Review eCommerce site performance & analyse growth acceleration potential via web store development

Review & implement international expansion opportunities

Agree retail marketing budget and plan detailed annual marketing plan

Opportunities To Explore

Increase white-label (Club branded ‘fanwear’) fashion apparel ranges and category mix (increase margin potential)

Establish branded headwear partnership (dual-branded exposure)

Integrate local community inspiration into collections (resonates with fanbase)

Introduce personalised product collection (high conversion, strong margin)

Setup USA / International product distribution (global accessibility)

Negotiate more competitive global shipping rates (increase global orders)

Develop a prominent retro category with regular new retro shirt releases (top selling category – eases issues around replica kit availability)

Identify and target suitable licensing opportunities (brand growth)

Develop a robust Kitbuilder functionality for the online store offering shirt printing (not currently offered), showing live preview and allowing add-on’s (drives AOV up)

Improve product images and product descriptions on online store (increases conversion)

Setup brand protection with partner agency (protects brand IP/reputation and shuts down counterfeit selling)

Identify suitable product range collaborations (target market growth)

Introduce a dedicated Welsh language collection (unique opportunity)

Introduce a dedicated “Welcome To Wrexham” range (new fan appeal)

Introduce a dedicated “Rob & Ryan” collection (capture wider appeal)

Explore a new women’s fashion range, curated by Blake Lively (increase sales/exposure)

Just a few ideas…

It remains to be seen if the Club will continue to operate their own retail, or outsource to one of the giants of sports merchandising?

Additionally, whether they will stick with Macron until the end/beyond the end of the current term?

Whispers are circulating, but I don’t speculate on rumours in public!

Dutch Publishing Media Giants

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It’s called doing things

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