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Fanatics Founder: Differentiation Will Make or Break Retailers’ Futures

Differentiation is critical to retail success, says Michael Rubin, founder and executive chairman of Fanatics, the largest provider of licensed sports merchandise, and Rue Gilt Groupe, a leading off-price destination. If retailers can’t offer products or services that consumers won’t find on marketplaces like Amazon or Alibaba, they’ll struggle to stand out online. 

“We built one of the few companies that has a truly unique and differentiated product offering,” says Michael on today’s episode of Retail Uncharted. “When I bought Fanatics back from eBay in 2010, it was a $250 million business, and next year we’ll be in the $3.5 billion range. That’s because of differentiation.”

During the podcast, Michael shares the key lessons he has learned in his retail career, speaking with longtime friend and Sidecar CEO Andre Golsorkhi. They delve into the biggest mistakes and successes that shaped Rubin’s multiple retail businesses. They also look to the future of retail, predicting the long-term impacts of COVID-19 on the industry as well as the strategies retailers must embrace in order to thrive during the Amazon era.

During the podcast we ask Michael:

  • What are the biggest lessons you’ve learned in your retail career?
  • What led to the founding of GSI Commerce and its eventual sale to eBay?
  • What do you see as the biggest challenges retailers face today, particularly online?
  • Can Shopify challenge Amazon’s dominance?
  • How has COVID-19 changed the outlook of Fanatics and Rue Gilt Groupe?
  • What do you think retail CEOs’ top priorities should be in the year ahead?
  • What are your top priorities for Fanatics in 2021?
  • What is your biggest prediction for retail in the next five years?

Top Sound Bites

(edited for brevity and clarity)

On Michael Rubin’s path to founding GSI Commerce:

In 1998, I called the CEOs of the Big 5 sporting goods stores. I said, “What are you doing about this e-commerce thing?” And everyone said the same thing to me, which is, they knew it was a big opportunity but they didn’t know how to approach it. And that’s what led me to start what became GSI Commerce. And as soon as I did that, I realized, for the first time in my career I could be number one in something. I had a really big idea.

On the biggest mistake he made at GSI Commerce:

I made a giant mistake at GSI. I kept getting into new businesses. First we did all the digital marketing services like email marketing, affiliate management, paid search management, etc. But then we bought Rue La La, bought Fanatics, built Shoprunner. We had all these different products and services, but we weren’t great at most of them, and that was a giant fundamental mistake.

Had I made the right decision to build the best e-commerce technology products, I could have created tens of billions of dollars of value. But what we ended up with was a bunch of products that we were mediocre at.

On the importance of differentiation:

Amazon’s market share in the US is around 45%. If you ask me what I think their market share is going to be in another decade, it could be 65% or 70%. That is why it is so important to have a real point of differentiation. For Fanatics, we have a huge point of differentiation. We sell every type of sports license merchandise that’s generally not available at other online marketplaces like Alibaba or Amazon. If you’re a sports fan and you want to get that merchandise, it’s much better for you to get it from Fanatics or the stores we partner with like NFL Shop.

On Michael’s biggest prediction for the future of retail:

For brick and mortar retail, I think there will be one third less stores in 10 years. It can be a really healthy two-thirds that remain. Walmart’s thriving; Target’s thriving. There’s a lot of retailers that are going to thrive. E-commerce was 15 or 16% of revenue last year. I think in a decade it could be 35% of revenue, 40% of revenue. And for online retail, my biggest prediction is that the strong will get stronger, and there’s no in between.

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