How Michael Rubin Sold Fanatics to Ebay, Bought It Back & Turned It Into a $6 Billion Company
You are probably familiar with Fanatics, the online retailer of licensed sportswear and merchandise.
Fanatics was founded by brothers Alan and Mitch Trager in 1995 as a brick and mortar in Jacksonville, Florida selling local collegiate gear. The brothers had a strong focus on e-commerce and SEO through the 1900s and 2000s. During this period, the company had explosive growth through affiliate marketing, repeat customers and acquisitions.
In 2011, Fanatics was bought by Micheal Rubin’s company GSI Commerce for $277 million. This transaction was through a combination of cash and GSI stock. After Micheal Rubin purchased Fanatics, GSI Commerce was shortly acquired by Ebay for $2.4 billion.
Ebay did this transaction because they were only interested in GSI’s long-standing relationships with their current commerce customer list of brands. Ebay decided to divest it’s businesses that were not part of the long term growth strategy. They sold back the undervalued assets (Fanatics, ShopRunner, and Rue La La) to GSI’s Micheal Rubin under a new holding company. Ebay loaned Rubin’s new holding company $467 million while Rubin put in an additional $31 million.
Since the repurchase, Rubin has raised about $1.5 billion in funding and has secured exclusive merchandising deals with all major US professional sports leagues. Fanatics closed a $350 million investment round on Thursday which valued the company at $6.2 billion.
Fanatics is operating in the v-commerce space. Other companies that are using this strategy are the likes of Lululemon and Bonobos. These companies are using this strategy to compete with large online places like Amazon.
V-commerce is the ability for a company to own, produce, and control their own merchandise through an in-house end-to-end model. This strategy creates a strong moat for a company where their product cannot be commoditized by the internet. It provides online retailers with the ability to control their own destiny by owning their own merchandise, marketing it, and selling it directly to consumers.
Fanatics has positioned their business by strategically partnering with the NBA, MLB and other pro sports leagues that run until 2030.
If you’re thinking of competing with Fanatics, think again. Do you see any flaws with this business model? How would you compete?