If you tried shopping for a new Tom Brady jersey this playoff season, you might have had a frustrating experience on Amazon or Walmart.com. Historically, both sites have only offered a limited and unpredictable selection of professional team merchandise, mainly because neither had significant deals with the largest licensers of professional sports apparel.
But a new partnership between Walmart.com and Fanatics, one of the largest makers and sellers of licensed sports apparel, is changing that. And in the process, the world’s biggest brick-and-mortar retailer has carved out a category of goods for itself that Amazon hasn’t devoured — yet.
Starting this week, Walmart.com is carrying a selection of hundreds of thousands of team and player jerseys, hats and other gear from the NFL, the NBA, Major League Baseball, NASCAR, and Major League Soccer. And Fanatics’ manufacturing arrangements with some of the leagues — and the on-demand production they allow — mean that Walmart.com can start hawking championship gear soon after a final game or quickly begin offering a little-known player’s jersey following a breakout performance.
The new arrangement — which will see Fanatics set up a branded storefront on Walmart.com in exchange for a commission on each sale — marks another attempt by the legacy retailer to create some advantages over Amazon through acquisitions and partnerships that allow it to carry merchandise that the e-commerce giant does not.
It has a lot of ground to make up: Amazon’s online stores generated $29 billion in the third quarter of 2018 alone. By comparison, Walmart has never posted that much online revenue in an entire year.
The caveat with this Fanatics-Walmart deal is that it’s not an exclusive one, meaning Fanatics is free to cut deals with other online shopping megastores across the globe. According to recent comments from Fanatics Executive Chair Michael Rubin, it sounds as though Fanatics plans to do just that.
“For Amazon or any marketplace, they’d have the ability to have this enormous assortment of merchandise to best service their fans and take a commission like in so many sales they make,” Rubin told me onstage at a recent industry conference when I asked him about the potential of Fanatics cutting a deal with Amazon. “So we think that is the right long-term strategy. We think we’ll do that with dozens of marketplaces around the world.”
Dozens. Translation: Walmart may be the first online partner to get access to the Fanatics online catalog of team gear, but it won’t be the last.
If you’re Walmart, though, you still do the deal for multiple reasons. For one thing, there is no guarantee that Amazon and Fanatics will ever come to an agreement, even if the commissioner of the NBA once seemed to think they would. One potential holdup: For best-selling items, Amazon typically likes to buy inventory from brands at wholesale prices and then act as the merchant that sells to the consumer; it’s unclear whether Fanatics would agree to an arrangement like that.
But even if Amazon does end up inking a deal with Fanatics, Walmart will be on equal footing in this one category — something it can claim only rarely. Plus, the global licensed sports apparel market is estimated at more than $30 billion, and Walmart gets paid a commission on the sale of each of these items, as it does with all third parties that sell through Walmart.com.
For Fanatics, the bet is on the upside of sales growth versus the downside of smaller profit margins. Until now, the company has sold merchandise online through the internet storefronts of the various sports leagues — such as NFLShop.com — as well as its own sites, with Fanatics.com being the largest.
That strategy has meant that if online shoppers wanted to browse the largest selection of team or player apparel in the US, they needed to visit one of the sites Fanatics operates. Now they can visit Walmart instead. And if fans are trained to shop through Walmart — or Amazon someday — they may never come back.
The positive way to look at the arrangement is that Fanatics sells mass-market merchandise that it needs to get in front of a mass audience. Walmart.com has that.
The downside is that every sale through Walmart comes with a commission, which presumably means a smaller profit margin for Fanatics than the goods it sells through its own sites or the leagues’.
Is the profitability hit worth the revenue growth? Fanatics management obviously thinks so.
This article originally appeared on Recode.net.