Liverpool and Nike’s future plans after record-breaking sale and investment deal
It has been two years to the day since Liverpool reached a deal which was seen as a change for them.
The Reds’ owners, Fenway Sports Group, had been looking for some time to partner with Nike, the US sportswear giant, a global powerhouse, giving them the kind of retail opportunities that their partnership with New Balance. , like FSG a Bostonian company, just could not. match.
The FSG were so determined to strike a deal with Nike that they were ready to go to the High Court in an attempt to evade the New Balance deal, with New Balance, which has been a Liverpool kit partner since 2015, arguing that they could match a deal with Nike, something that would have activated a clause to continue their partnership with the Reds beyond 2020.
But with Nike paying around Â£ 15million less than the Â£ 45million New Balance paid in guaranteed fees to Liverpool, it was the potential opportunity to boost revenue through a 20% cut for the Reds on the sale of all Liverpool branded Nike products which was the real sweetener, with the potential of the deal, given Liverpool’s global appeal and Nike’s global reach, which is expected to reach Â£ 70million per year that Manchester United receives from Adidas. This sum is a guaranteed annual fee.
The High Court has ruled in favor of the deal between the Reds and Nike, with the partnership starting after the 2020/21 Premier League season ends. The date the deal was due to start came before the end of this victorious season due to the hiatus and the late end that followed due to the impact of the pandemic, with an agreement reached that the New Balance kits would be worn for the rest of this particular campaign.
The Reds are now in a second cycle of Nike kits, with the latest editions, especially the cream away offering, registering record sales figures.
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For Liverpool, a club whose business model sees them operate on a more sustainable financial basis where success must be supported by the financial strength of the company and vice versa, the Nike deal has enabled them to improve their business activity despite the impact of the pandemic on retail.
Before the pandemic, Nike had already taken the step towards eliminating the middleman through its direct consumer acceleration program, a key element of its digital strategy.
It was a decision that paid off and Nike posted its best results in North America in the fourth quarter of last year.
Fourth-quarter revenue rose 96% to 8.9 billion pounds sterling ($ 12.3 billion), while annual revenue soared 196% in the past year as people spend more money for sportswear by spending more time at home and trying to continue an active lifestyle during lockdowns across the world.
This traditional retail pivot to focus on their online offering has come at the right time to benefit the relationship between Nike and Liverpool and give it the best chance of achieving strong results in an extremely difficult time for the retailer. detail.
âAs the outlets were close, Nike did a great job shifting towards its direct-to-consumer proposition,â Liverpool sales director Matt Scammell said in an interview with ECHO.
âI’m happy to say that last year was a phenomenal result in terms of sales of first team kits. We are currently at the start of the season, but sales of kits from the Away Kit, for example, have reached peaks.
“We continue to change the way we do things, pivot and find the right opportunity to continue to thrive as a club.”
The relationship between Nike and Liverpool developed over the two years following its announcement.
Three months after announcing the deal with Nike, RedBird Capital Partners acquired 11% of FSG for $ 750 million, an agreement that sought to provide capital to FSG to continue investing in infrastructure and acquisitions despite the considerable financial impact caused by the pandemic.
The relationship between basketball icon and entrepreneur LeBron James already existed with Liverpool thanks to his 2% stake in the club from 2011. But after the RedBird deal came to fruition, that turned. in 1% of FSG’s overall operations, with James and his business partners. Maverick Carter and Paul Wachter both joined the group as FSG partners.
And in October, a deal was struck where FSG, Nike and RedBird all invested in James and Carter’s SpringHill Entertainment business, with the company ready to help digital storytelling for clubs in the FSG empire, especially Liverpool. , in the near future.
James’ status as a sports icon with global appeal across demographics has also been important in bringing the Liverpool and Nike partnership to new audiences, with James rarely losing an opportunity to don Liverpool and Nike merchandise in front of the cameras. . James is Nike’s most valuable customer with a billion-dollar lifetime deal with the company, while his name has been placed above Nike’s new innovation center at the Oregon headquarters .
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The simpatico nature of the relationship between Liverpool, FSG and Nike is evident, and harnessing this kind of star power is key to growing the partnership and realizing its full potential.
Liverpool and Nike have already teamed up on bespoke products, the most recent being the Reds-inspired Huarache. And more should follow.
Liverpool, James and Nike have specific plans ahead, according to Reds chairman and FSG chief Tom Werner.
Speaking to the Boston Globe, Werner said: âWe are creating a product line with LeBron and Liverpool.
âNike is creating seven or eight products that connect LeBron with football. I don’t know the details yet, but they will be creating seven or eight products that rival Michael Jordan’s connection with Nike.â
And that kind of relationship is exactly why Liverpool wanted to work with Nike. Their ability to reach out to different demographics that may not even be interested in Liverpool or football has been key to the deal’s growth. The James lines in the United States would open up the Reds to a whole new market, as has happened with Paris Saint-Germain and their association with Air Jordan, a sister company of Nike that continues to capitalize on the iconic status of the basketball legend Michael Jordan. .
Liverpool will publish their accounts for the 2020/21 season in the coming months. With a full season of games played behind closed doors to factor in, heavy losses are expected. But one needle that should be heading in the right direction is commercial revenue, with the first impact of the Nike deal to be seen, although it’s only in the next round of accounts for 2021/22 that we’ll get a more complete picture.
“The Nike relationship has already been a great relationship”, Mike Cox, Liverpool senior vice president of merchandising said FC Business Magazine in November.
âIt’s still the start – a year – and during Covid, which hasn’t helped matters, as there have been challenges for physical retailing around the world.
âThat said, going forward, the physical retail opportunities with Nike are clear to all. Despite Covid, we had record global sales last season, compared to the past six years, and sales this season. should be higher than we were finally season.
“Last season came to win the Premier League which was a big factor in increasing the numbers. It was a huge boost and a step in the right direction.”
The challenges have been significant, but two years after the deal was announced, the club are optimistic about the potential of the partnership.
âThe impact of COVID cannot be underestimated, having said that I think Nike is going to put us in a great position for a number of different reasons,â added Scammell.
âIt has accelerated its direct-to-consumer side of the business and a brand the size of Nike is in a great position to do it. Likewise, as we start to come out of COVID, having these retail capabilities in the world that Nike has is going to be huge for us.
âI had a conversation with Mike Cox who heads our retail and merchandising offering. They have had record global sales over the previous six years. record sales while working with Nike.
âThey’re finding ways to engage with the global fan base that we’ve never done before. If you look at our growth, a lot of that with Nike is coming from regions outside of EMEA (Europe, Middle East & Africa). ).
âI don’t want to go into too much detail in an area that is not within my remit, but I have a feeling that this will be an opportunity that Nike will be particularly strong in responding to the desires of fans in new markets.
âWe are a global club, our fans are everywhere and they want the Liverpool product to be in their hands. Having a brand like Nike involved that has this global distribution experience to market this product to the world will be extremely important for us to as the partnership progresses. “