The IPL tournament has caught the imagination of cricket fans in India, but team merchandise sales are yet to score.
Nineteen- year-old Shubh Shrivastava cut back on hanging out with friends from three times a week to once. Reason? He was saving up to buy his favourite soccer team’s jersey. Last week, he spent a steep Rs 2,500 and finally picked it up from a Connaught Place outlet in New Delhi. Needless to say, the Manchester United jersey is his prized possession.
Contrast this with sales of the host of merchandise available around the various Indian Premier League (IPL) teams. Though IPL fever has gripped the country — TV ratings for the matches in South Africa are higher than election coverage programmes — the contribution of merchandise to the IPL teams’ revenues is still in single digits, and this is also true for the companies that make and market them.
| ‘PRICED’ POSSESSIONS: COMPARATIVE COST OF MERCHANDISE | |||||
| Brand | Price (in Rs) | Brand | Price | ||
Source: Team websites
In the US or the UK, the average share can be as high as 35 per cent of a team’s revenues. Indeed, merchandise is such an integral part of a soccer or basketball team’s economic structure that players are often bought on the assumption that their costs will be recovered from the number of monogrammed T-shirts their fans will buy. David Beckham is particularly hot property on that score.
Part of the reason IPL merchandise sales are low in India is the fact that the IPL is only two tournaments old. “It’s a new concept and will take time to catch on in India,” said Rajiv Mehta, managing director, Puma.
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In fact, he said the response this year has been far better than it was expected. So how much will it contribute to revenues? Mehta is not so sure but thinks it will definitely be better than last year.
Linked to the newness of this concept is the fact that team jerseys — typically the highest selling item for any sports team globally — are relatively high-priced for the average Indian cricket fan. For instance, a KKR jersey at a Reebok outlet will cost you close to Rs 800. Similarly, a Rajasthan Royals jersey by Puma is available for Rs 699 or an Adidas’ Delhi Daredevils polo t-shirt is priced at Rs 1499 (see table for a rough price list).
For most sports teams globally, the mark-up is justified by the brand and it usually works when a team or one of its star players achieve cult status (just as, say, Manchester United or Liverpool charge significant premiums for what is little more than a red, embossed T-shirt, at the end of the day).
The actual cost price of an IPL T-shirt — made in the factories of Bangalore, Chennai and Tiruppur — is between 15 and 20 per cent of the final cost. Though none of the marketers were willing to discuss the revenue-sharing arrangement with the teams, a former sales manager at Reebok who requested anonymity, said teams get close to 20 per cent by way of royalty per jersey.
For instance, last year, KKR had launched a special “Khan” jersey in association with Reebok, priced at Rs 1,999, with actor and KKR owner Shahrukh Khan’s name on the back. Subtract cost price and royalty and Reebok’s margins are roughly 50 per cent.
Similarly for a regular jersey, which costs Rs 800, the margin would be somewhere close to Rs 350-400. Brands like Puma and Adidas are said to have a 50:50 sharing ratio with the teams, which means margins could be slightly lower.
For the second edition of IPL, franchisees have expanded the portfolios and introduced more categories to cash in on the IPL fever. Ranging from Rs 50 to 2,000 most of the teams also retail caps, key chains, mugs, badges and even flip flops, all bearing the insignia of the eight teams that participate in the IPL.
Still, for IPL merchandise to become a real rage so that fans don’t mind paying premiums, the teams have to market it to enthusiasts like Srivastava who consider it a prized possession rather than just another piece of clothing.