The good old rumor of jersey sales

On almost every social network I came across at least one message that claimed to know how PSG or Manchester United have financed Messi’s or Ronaldo’s transfers through jersey sales within a few days/weeks/a month. Having had a lot of exposure to the business, I just wanted to write down some easy facts that should make it clear to everyone that there is no way that such huge amounts of money were earned through jersey sales only. There are three facts you need to keep in mind.

1) We are talking about incremental sales. It doesn’t help PSG much if a fan that planned to buy a Neymar jersey now switches to Messi. The club won’t make any additional money with such a decision. They make money with fans that buy a PSG jersey although they were not planning to do so before the transfer.

2) The club doesn’t keep all the money that the fans pay for a jersey. We need to take some assumptions here but they are all based on experience and/or publicly available data. Let’s assume that a jersey costs around 90€ at retail. Nobody publicly tells you how the deal between Jordan and Nike plays into the topic but let’s just ignore this for now. For every jersey Nike sells either directly to consumers or to retailers, PSG receives around 15% in royalties, which is industry standard (the final number is a well-kept secret). Retailers generally receive a discount around 40-50% depending on their negotiation power. Nike usually negotiates very hard and the discount is probably low but we assume 50% for all channels.

According to the table and this brief calculation, you can see that PSG and Nike must have sold around 1,5 mio jerseys in addition to the usual volumes. Without knowing any details, we can assume that the usual volumes might be around 1 to 2 mio jerseys a season. So the club would have to double volumes to compensate. We will see later what makes this so unrealistic.

What we haven’t included in our calculation above are any other costs that will occur. Media communicates Messi’s salary at around 35mio net. We haven’t factored in any additional costs to his employer to get to gross (insurances, taxes etc). There is also no cost to sales assumed (staff, handling cost, shipping, store etc) and in the end, Messi didn’t negotiate the deal himself. So cost for all lawyers and his management involved should also be taken into consideration, which we haven’t, therefore the real cost of the transfer will be much higher.

3) No retailer holds so much stock. This is probably the most important fact to keep in mind. Retailers place forecasts around nine months ahead of delivery and orders a few months before retail intro. To produce a new product in Asia, it takes around three to four months for it to arrive in Europe. And that needs production facilities and material to be just waiting for anyone to place an order, which is not reality. In reality, producers plan all production capacities months in advance and material is only purchased for the products planned to be produced. So in essence, there is just not sufficient product in the market to sell in addition. It takes months and a lot of operational flexibility and sleepless nights for the responsible persons to even be ready for the Christmas business. And by then, the initial hype is often not as strong anymore.

There was one prominent example that faced similar issues in the past. When Leicester City surprisingly won the Premier League, the club was sponsored by Puma. The whole campaign was a big success and the jerseys were sold out before the end of the season already. By the time, adidas was already confirmed the new kit supplier for the upcoming season. So at the moment of their biggest success, the club just didn’t have jerseys in the market anymore to really cash in.

Jersey sales are a complex topic and this article could also take up twenty pages to capture all aspects. Just keep in mind that

• The club only benefits from incremental sales
• In order to compensate costs around 35mio EUR, a club needs to sell around 1,5mio jerseys in addition
• There is no way that there is enough stock in the market to fulfill all additional needs of such a transfer

It all comes down to the point that we have to keep in mind so often nowadays: don’t believe everything you read on the internet. Excluding this article.