ESPN’s Darren Rovell shared an enlightening article today about the gambles taken by the sports merchandise store Modell’s in New York. Between “betting big” on Linsanity by ordering a slew of Jeremy Lin jerseys and merchandise and having it manufactured overseas to investing in Jets backup quarterback Tim Tebow with his jerseys too, Modell’s has gotten burned.
Breaking it down, first there was Jeremy Lin. He broke onto the New York scene in the middle of the last NBA season, and Modell’s took a chance on Linsanity continuing to grow by leaps and bounds by ordering lots of his jerseys and other items. The Lin merchandise was manufactured offshore and would arrive with a long lead time. By the time the merchandise arrived most of Modell’s competitors had caught up with Linsanity and stuffed their shelves with similar merchandise…then Jeremy Lin was injured and lost for the season, and never played for the Knicks again. Modell’s had to heavily discount all of the Jeremy Lin merchandise extremely heavily.
Cut now to Tim Tebow, one of the most popular players in the NFL today. The New York Jets traded for quarterback Tebow in the offseason to back up starter Mark Sanchez. With his intense popularity and unstable support beneath Sanchez, Modell’s built up jersey inventory for Tebow and sales were strong for a while. While the Jets season has floundered to another miss of the playoffs, Tebow Time never got off the ground and he rarely saw playing time. While his jersey sold well it didn’t sell nearly well enough and now Modell’s is slashing prices on Jets merchandise (in addition to Tebow merchandise). Today it was stated that the Jets will look to cut Tim Tebow in the offseason, rendering any sold Tebow jerseys accurate for just one season.
I have harped over and over (and over and over) how excess inventory and large batch orders manufactured overseas can seem financially wise but in turn is the exact opposite. Because of the long lead times and poor timing of Jeremy Lin’s injury, Mitchell Modell elected to slash prices on Jeremy Lin inventory to the point that he felt it worthwhile to instead use some Linsanity t-shirts as kindling in his fireplace.
The true costs of long lead times is not very simple to quantify because it’s difficult to pinpoint exactly how much lost revenue is built into missed sales. Make no mistake – the costs are higher than even the smartest CEO’s realize.
Don’t get caught up in the need to order from overseas. Build where you use the merchandise, manufacture close to your distribution point. Low lead times means great flexibility. Take advantage of it.