#65. Rep the Squad lets passionate sports fans rent any jersey they want, giving them access to an infinitely-expanding collection. We talk with co-founder and CEO Brian Watkins about how Rep the Squad is joining the rental economy in a path pioneered by Rent the Runway, democratizing the pride and notoriety that comes from sporting your favorite teams’ colors. The Loose Threads Podcast features in-depth discussions with leaders across the rapidly changing consumer economy.

Check out the full transcript below.

Richie: [00:00:07] Welcome to the 65th episode of the Loose Threads Podcast, a show about the rapidly changing consumer economy. This episode is brought to you by Loose Threads Membership, which gives you actionable analysis, insights and events that drive growth, and Loose Threads Espresso, your energizing and high-pressure filter for consumer news—in context. We also have a newsletter that features the latest open letters to CEOs, podcasts with industry leaders and news from Loose Threads. Check it all out at LooseThreads.com.

Richie: [00:00:35] Joining me today is Brian Watkins, the co-founder and CEO of Rep the Squad—a company that lets passionate sports fans rent any jersey they want, giving them access to an infinitely expanding jersey collection. As Rent the Runway pioneered the rental economy for women’s clothing, Rep the Squad follows in that path, democratizing the pride and notoriety that comes from sporting your favorite team’s colors.

Brian: [00:00:57] You can’t think about it as a $150 price point. You have to think about as a $50,000 jersey collection that you get to walk in and use for $20 a month.

Richie: [00:01:04] When I first heard this idea, I was skeptical. But upon further examination and after talking to Brian, it’s one of the most interesting concepts I’ve seen in a while. Here’s my talk with Brian Watkins.

Richie: [00:01:16] So why don’t we start. Just talk a bit about your background and then we can work our way up to Rep the Squad existing.

Brian: [00:01:24] My background started at, really, Bain & Company, the management consulting firm. So I did private equity and consumer brand work for about five years, which was just a great analytical foundation. Knew the co-founders of Blue Nile, [the] online jewelry store, and that was really my introduction into ecommerce and retail, back in the late 90s, early 2000s. Had a great experience at Blue Nile. Was there for about eight years running diamond merchandising, corporate planning from [an] early-stage startup all the way [to] it going public. After I left Blue Nile, I kind of moved around a little bit. I was at Nordstrom for a brief while working on the integration of their online and offline capabilities. So this is right when you started getting “buy online,” pickup in store, same-day deliveries, items of how to utilize those assets around the nation to really compete against what was happening online, which I think kicked off a whole new realm of omnichannel commerce. And so, with that, I ended up leaving Nordstrom and founded a company called Ritani.com. Ritani is an omnichannel jewelry store. It was a national brand that had the capability of manufacturing one-of-a kind pieces. We were integrated with 250 local, independent retailers and so, that, we saw, was the next evolution. So, from listing everything online at Blue Nile, integrating the store and now, really, Rep the Squad, I think, is this next thing of access versus ownership.

Richie: [00:02:39] Was that like a private-label Farfetch combo meal somehow?

Brian: [00:02:43] At Ritani?

Richie: [00:02:43] Yeah.

Brian: [00:02:44] No, Ritani—it’s actually a true, national brand, but then we’d showcase around it other jewelry brands as well.

Richie: [00:02:49] Gotcha.

Brian: [00:02:50] So Ritani and the engagement ring were marketed as a known manufacturer. And then we would have the Roberto Coin and items like that to help accentuate the brand.

Richie: [00:02:58] And so, walk us through what was the first inkling of Rep the Squad existing and how the company formed, when it was [founded], and so forth.

Brian: [00:03:05] I’m the business model guy. I was watching ecommerce evolve, where you take a look at—it started with Netflix or car2go and then we got into these subscription models that were trial. So Birchbox, SnackBox, all of those, you know, BarkBox. But then I saw, over time, there was a real shift and we went into, instead of trial, it was one-time usage items. And I guess we’ve always had rentals like that. You could rent a car. You could rent a barbecue. But when we saw Rent the Runway start doing it with apparel, when we saw The Black Tux doing it, Eleven James in New York doing high-end watches—that became super interesting. And so, I really feel like there’s a real shift, with this upcoming generation, around this sort of purchasing behavior. At the same time, my co-founder—he’s the sport nut. So he’s the one that has the jerseys in the closet. And we were going through different iterations of the model and, lucky enough, Madrona Labs, which is an accelerator out of Seattle, was actually experimenting with jerseys and with this concept. And so it was kind of this perfect coming together of all the minds and saying, “Hey, this could really work.”

Richie: [00:04:07] Talk more about that shift, in terms of—why do you think it was happening and why was it happening now? And how seismic was that shift?

Brian: [00:04:13] Each thing has to progress at its own pace. So, if you would have introduced this five years ago, I don’t think anything would’ve happened. It’s when is our economy and when is that user base ready for it? It reminds me back like, RealNetworks—they launched RealJukebox and it never went anywhere. Five years later, Apple shows up with iTunes and redefines everything. And it’s just, “Hey, is technology ready? Is the user ready? Is the consumer ready?” The real sign was like, “Hey, we got into usage, specifically, with women’s apparel.” And so, the question was, we had everyday usage happening for men and women segments. We had apparel happening with women. So we still had that one unopened box which is, “Hey, who’s doing apparel for men?” And it turns out guys are pretty funky when it comes to apparel and what they want to wear and what they don’t want to wear. And so, you’re not going to rent people a white shirt. That’s just not what someone’s going to subscribe to but I’m sure it could be done in suits or it can be done in work bags and it’s, obviously, being done in jewelry. So, the question is, what’s unique within this space that a guy could really resonate with and obtain value? And that’s really Rep the Squad.

Richie: [00:05:13] What do you think was the tipping point, maybe from the customer side, of—like do you think it was an economic tipping point? Do you think it was a value tipping point? What actually changed in that equation? Because, basically forever, everyone has just bought stuff once and that has been the business model that all of these companies are predicated on. And then, Rent the Runway and Le Tote and a few others started to really change this—and Rep the Squad is very much part of that canon—but it existed for so long the other way. And so, mechanically or formulaically, what do you think did change recently?

Brian: [00:05:43] I think it’s really around that consumer. People are getting, I think, more comfortable with the idea of not having to own something and you see that, I think, across multiple different verticals and apparel is still out there and I think we’re just seeing it now. I guess leading indicators, not even just Rent the Runway or Le Tote, even Nike is now doing it with kids shoes, where you can have a monthly rental subscription. You send the shoes back and they’re going to send you another pair of shoes. So it’s just like all these signs started to point that, “Hey, there’s something there.” And then it did come back to doing a fair amount of research because, I think one of the questions I had was, “Hey, the value ratio is really hard to explain on this one.” There’s one thing when you rent a $5,000 gown for—

Richie: [00:06:24] For $120 bucks.

Brian: [00:06:24] For $120 bucks. Okay, that’s a multiple of value versus, when you’re talking about professional sports jerseys, you’re at $100, $350 price point. They are accessible. But, when you start talking to passionate fans, when you start talking about parents of kids, it’s actually a much wider equation because you’re no longer now talking about a single item. What you’re talking about is an unlimited closet of jerseys. And so you can change every day, every week, every month. And so, you can’t think about it as a $150 price point. You have to think about it as a $50,000 jersey collection that you get to walk in and use for $20 a month.

Richie: [00:06:59] So you met your co-founder. You found that this other incubator was working on something.

Brian: [00:07:03] Yep.

Richie: [00:07:03] When was this and, then, what happened from there?

Brian: [00:07:05] Yeah, so that happened at the beginning of 2017.

Richie: [00:07:08] Okay.

Brian: [00:07:08] The co-founder and I, Alex Berg, we’ve known each other for almost 20 years and so we’ve done multiple startups together. We’re very familiar. We work great together. And so, our conversations are going along and then I’m actually meeting at Madrona Ventures around, “Hey, I’m convinced this is a model that works. I don’t know what to put in it.” And that’s when they said, “Hey, you should walk down to Madrona Labs. They’ve been testing something within jerseys.” And so they’d actually ran a kind of alpha test where they had done some research. They thought it was an interesting idea. They actually built a prototype website and they rented 20 jerseys and they just wanted to see, operationally, does it work? Is there a demand there? What’s the cost to acquire that customer? I came in there and started to go through all the data and my first conclusion, actually, was “bad idea.”

Richie: [00:07:51] Why?

Brian: [00:07:51] Because I couldn’t get the value proposition right. And so it was, both the cost of the jersey, and then, also, what I thought would be the cost to acquire a customer. And you’ve got to get those economics really good because this a capital-forward company. And so we have to buy the inventory while I make sure we maximize it. But when you get into the details about the acquisition cost, when you start thinking about passionate sports fans, one of the best things that happens is we know where there’s, like, one to two million sports fans, every single Sunday during football season. And so there is, actually, a great way to target these people. I think a lot of other industries struggle, finding how [to] communicate with a user. I’ll use engagement rings because that’s where I’m from. Couples don’t all go to the same place, at the same time, when they’re thinking about getting engaged.

Richie: [00:08:36] There’s no single channel to find them.

Brian: [00:08:37] There’s no single channel, right. Versus, I think with women’s apparel, you do have fashion magazines. You do have “Outfit of the Day.” So you have these places to go to. And so, for sports fans, you actually do. You have sports talk radio. You have the arenas. You have the coliseums. You have these touch points so they’re very easy to locate and communicate that value proposition.

Richie: [00:08:56] Right. So, I’m curious—what was the V1 value prop that you struggled with?

Brian: [00:09:01] I came in with the idea that this would work better for a fair-weather fan.

Richie: [00:09:05] And what does that mean?

Brian: [00:09:06] So, a fair-weather fan is someone who is like, “Hey, I go to one game a year.”

Richie: [00:09:09] The casual—

Brian: [00:09:10] The casual, you know, “Yeah, we’ve got a team in town. I go there. I have a beer with a friend and then, when I’m done, I’m done. I don’t ever want to buy a jersey.” And, what clicked is actually, no. It’s passionate sports fans. It’s the people [who] already own jerseys [who] want more of this. It’s people [who] are already going to the games because a lot of people already have their hometown jersey. They have a throwback jersey. But what they’re saying is, “No, no. I want to be the team. I want to show that I’m a true fan.” So when this running back has a breakout game or when when this pitcher has a great time on the mound, they want to be able to show that jersey the next day. They want to show up the next week and say, “Hey I’m into this. I know exactly what’s going on.”

Brian: [00:09:49] And then, quite frankly, the jersey market has also created a variety. Back in the day, we all knew there was a home and away jersey. Every single league, now, has four to five jerseys out there. And so, even if you’re a fan of Stephen Curry, are you really going to have all five different versions of the Stephen Curry jersey he’s wearing this year? Probably not. And so we can help facilitate that or grow that experience.

Richie: [00:10:13] Talk about that jersey expansion in terms of why did that happen? Or how has the aesthetics and the utility of jerseys evolved? And then, I’m curious if there are any kinds of macro statistics about how many people buy jerseys and how do you understand that part of it as well?

Brian: [00:10:27] Yeah. So I think the industry, over time, is trying to create more variety. So creating a higher sense of demand. So, limited additions, one-of-a-kind. Thursday Night Football is really interesting for the NFL because it opened up a whole other night of football, whole other set of advertising. But they threw in something else too—brand new uniforms. You have to have the Color Rush jerseys on Thursday night and that just creates an incremental market. It’s not nearly as big as the standard home and away jerseys but it is unique. It is special. It’s every year. And so, I think, the leagues right now are really trying to work within the retail sales about creating opportunities and more reasons to buy.

Brian: [00:11:03] One of the things I’m fascinated about—we just entered Major League Baseball with a few teams, and a lot of consumers just buy the clubhouse jersey. There’s no name on the back. There’s no number. And our proposition is like, “No, no, no, no.” We want to come in and have you represent a player. This player represents who you are, the value, your support of the team, your feelings of the community. And so there is a real shift that I think some of the leagues are really excited about because it’s changing the behavior of consumption. I think that’s a trend that’s also very helpful for us because, as you have all these jerseys out there, the ability to buy every single combination gets harder and harder versus when we can come in and say, “No, no. For every player, we’re going to carry three or four different jersey styles, across five to six different sizes. So, as your child grows, they can change into different jerseys, or if you want to wear the home jerseys when your team’s away and the away jersey when your team’s at home, we can take care of that for you.”

Richie: [00:11:54] And then, maybe it makes more sense to ask this by league but, with football for example, do you have any sense of how many jerseys are sold a year or how many people buy? Or what are those macro-level stats?

Brian: [00:12:03] Licensed sports apparel, in the United States, is $18 billion across the four leagues plus NCAA.

Richie: [00:12:10] And that’s football—

Brian: [00:12:11] Yeah, sorry. It’s football, basketball, baseball and hockey.

Richie: [00:12:14] Okay.

Brian: [00:12:14] And, when we break that down, we estimate about $3-4 billion a year are jersey sales. So about 20-ish percent of the market goes that way. And we’ve done that through a couple of different things. A lot of the leagues will publish the most popular jersey sales. You can take a look at store data and kinda get your hands around it and that’s been validated over time. But Fanatics is in the marketplace and they’re very outspoken because they run a lot of the licensing and manufacturing. So we have a pretty good sense of where that’s at. The other thing that happens, which is also unique to what we’re doing, is there’s a huge shadow market and I don’t think people talk about it enough. But when we were first testing this idea, we actually had counters out in front of stadiums and we’d count the number of people walking around with a counterfeit jersey.

Richie: [00:12:53] Because you can kind of tell, right?

Brian: [00:12:55] You can tell. There’s some great counterfeits out there, which I’m sure we couldn’t tell. But there’s a lot of them that just jump out at you.

Richie: [00:12:59] The thinner fonts or they fit a little smaller or—

Brian: [00:13:02] They fit smaller. The logos are wrong. The colors are sometimes horribly wrong. And so, we estimate about 25% of the people walking to the stadium had a counterfeit jersey. And so, you’re sitting there going like, “Wow. That’s close to a billion dollars of potential lost sales.” And so, we actually pulled about a hundred people aside and had that awkward conversation of like, “Hey, you know you wearing a counterfeit, right?” And the good news is everyone was like, “Yeah, I know.” So it wasn’t like someone got duped.

Richie: [00:13:26] Right.

Brian: [00:13:28] But then you asked them, “So, why?” And it comes back to the exact same premise of the business, which is there’s an affordability, for sure, but then there’s a second trend, which is accessibility. And so, within each sports team, you only have certain core players that get jerseys made that are sold to the public. You can custom-make something and go through all that behavior but if you really want the third wide receiver on your team or if you want an offensive lineman, that jersey is not going to be available. And so we actually address both of those things by bringing the price point down and then also creating this accessibility piece. What we found is about 50% of the users who were wearing counterfeits said, “I’d really like that because that would put me into an authentic replica or a throwback jersey, which is what I want. I just can’t get it.”

Richie: [00:14:08] Very cool. Okay. So, going back to the timeline, running these tests, you start to realize the value prop is not the casual but, really, the obsessed fan and then where does it go from there?

Brian: [00:14:18] It tests really well with youth. So we got a lot of parents saying, “I want that for my child,” which I relate to because I’m the dad that says—every year I take my son, I’m like, “Hey, I’m gonna buy you a jersey this year. I’m going to buy you a jersey.” I walk in and I’m like, “Wow, that’s expensive. Let’s get a hat. You can wear a hat every single day. You can’t wear the jersey every single day.” Right? So youth had tested well. We have the shadow market, the counterfeits had tested well. So then we started to build this up we said, “Hey, is this a large enough market to make sense?” We surveyed close to 5,000 people. We then went out and did in-person interviews [with] hundreds of people and we got these segments down. We got the proposition down. We understood their buying behaviors and we said, “Yeah, I think this makes sense.”

Brian: [00:14:54] So then, what we did is, we actually created a one-page website that basically talked about the value proposition and we actually start testing ads. So we went out on Facebook, primarily, and social and we could understand the click-through rate to email sign-up, which means that we could then extrapolate, based on previous experiences, roughly, what this should cost us. And when those numbers started coming at a pretty favorable rate, we said “Hey, we can make this work.”

Brian: [00:15:19] So, from there, we basically put together a deck. We went out. We talked to some VCs and we raised $2.5 million for our seed round. And the premise was: We’ve done the research. We’ve built the financial model. We’ve talked to the users. We think this works but we’re not going to know unless we go out and do it. And so, basically, we raised this initial slug of money to really go out and test X number of markets. And we wanted to learn a couple of things. Could we actually acquire the customer for the cost we thought? What happens when the NFL football season ends? Will people naturally transition to the NBA or what sort of retention rate are you going to face when that happens? Operational economics look positive but what happens when you start doing 100 jerseys a day? [Are] there scale advantages or [are] there unforeseen damages or consequences based on that? And so we basically said, “Hey, we’re going to walk through. We’re going to launch in multiple markets. We’re going to go across multiple leagues and we’re gonna understand acquisition, retention, profitability. And, as we have enough data to really prove this is a viable investment, then let’s go out and raise another amount of money so we can take this, nationally, across every single team.”

Richie: [00:16:22] Talk through just the last six months of learnings, on that front, and then I have a range of questions to go from there.

Brian: [00:16:27] This is, by far, probably the fastest fundraising to launch we’ve been on. I think we closed and we had about six weeks to, basically, build a website, acquire the inventory, find a warehouse, move in and and get going. And so there’s some pretty funny stories about us running around. We actually found a warehouse, [but[ couldn’t move in the day we launched. We’re using WiFi pucks and cell phones to run the business for the first two weeks because we didn’t have connectivity. Basically, we started live in Seattle, San Francisco [with the 49ers] and Detroit [with the Lions]. We were very fortunate on the PR front. Darren Rovell, from ESPN, broke the story on the first day. It was kind of funny. We thought we’d have a really quiet launch the first day. Not everything had been fully tested. We had been moving pretty [quickly]. So it was like, “Great. We’ll launch. Probably have a couple of friends and family sign up. We’re gonna see how this thing works.” And it just blew up at six in the morning. And it was a good test for us. Things worked out great.

Brian: [00:17:21] I think it’s one of those things, having one of these outstanding teams. I mentioned my co-founder and I have known each other for almost 20 years. Everyone on our team, except for I think one person, has previously worked with someone else on our team at a different startup. And so it’s super interesting because, that morning, by the time I got to the office, everyone had changed roles. And there was no question about role authority. It’s a traditional startup. Our content writer is now customer service. Our developer is now working in operations. The day was just “get the packages out and let’s make it right.” Early success and great validation within the market.

Brian: [00:17:55] We then expanded. We added the Oakland Raiders and the Denver Broncos. We like the Bay Area because it has multiple sports teams, across multiple leagues. We like Denver because it only has four teams, one team within each of the leagues. The same with Detroit. And so we’re testing these markets along the way. Seattle is unique because, right now, we don’t have an NBA team. We still have some throwback SuperSonics but we want to talk about what happens when you launch an NFL and there’s not an NBA team? What happens to your retention rate?

Richie: [00:18:22] Right—because you would assume density, from a league perspective, is better.

Brian: [00:18:25] Yeah, and we see that in the data. When people can see that we have multiple leagues within their market, they tend to retain longer and utilize across all those leagues. And so we’ve just been testing that out. We also launched the Los Angeles Lakers and that was more like, “Hey, we’re not going to lead with football. We’re leading with basketball. What does that look like? And how do you deal with brands like Lakers which has a national and international component versus the Denver Broncos, which is much more of a localized market and just trying to understand those dynamics?”

Richie: [00:18:54] So, talk a bit about how it works to launch these markets. Do you need the league’s permission? Are you buying inventory at retail price? How does that all work, because the elephant in the room [is the question of] the leagues in all this, right? So I want to talk more about that, over time, as well.

Brian: [00:19:09] We are walking, I think, a fine line. One, we’ve been very open, [reaching out] to the leagues. So we’ve had conversations with both the leagues and the players’ associations and the manufacturers and license holders saying, “Hey, we’re coming in,” but we’re not fully authorized at this point. The leagues have authorization criteria and applications. So, what we do is we use something called “the first sales doctrine,” and this is the same doctrine as when you walk into Costco and they’re selling a Rolex watch. Costco is not authorized to sell that Rolex watch. What they’ve done is they’ve actually purchased that watch from an authorized retailer—not at retail prices, but they’ve got access which then allows them to resell it. And we’re doing the same thing.

Brian: [00:19:48] So we’re actually purchasing all of our jerseys from authorized retailers that we know are authorized through the leagues. We, obviously, get a pretty good discount because we’re not buying one at a time. We’re buying hundreds at a time.

Richie: [00:19:57] Right.

Brian: [00:19:57] And then that gives us the rights to be able to rent and to resell those jerseys at the end of that jersey lifecycle. At the same time, though, we want to be very respectful. The leagues and the teams all have trademarks associated with this stuff. As long as we use those marks, within photography, that is all legally accepted. And we try to make sure we don’t imply endorsement of the league within our website because we note that in our footers, we make that pretty clear and, hopefully, we walk that line in a very positive way. Because, at the end of the day, if we are successful at increasing fan engagement and growing the total jersey market—we believe both of those things are true—I think the leagues are going to be very welcoming to us because those are the two things the leagues want to have.

Brian: [00:20:43] If we’re disenfranchising fans—which I don’t know how that could happen—but, more importantly, if we were to shrink the size of the market, then this would not work out long term. But to date, the data shows a very different path because what we see are things like, when we’re renting, the home quarterback jersey is not our top-rented item but, you look at the sales data: It’s, by far, always the number-one sold item. People aren’t renting that. They’re still buying that and that behavior is not changing. What is changing is now—we talked about Color Rush jerseys for NFL. They are now being able to actually get access to support that and wear that and fill a stadium full of that. And I think that’s where it becomes pretty exciting.

Richie: [00:21:23] Have any of the leagues invested or thought of investing?

Brian: [00:21:26] We have a great partnership with the NFL Players Association. So we work with them, what’s called “the one team collective.” And, basically, what the players realized, over time, was that they carry a unique asset that could really help brand. Obviously, we see that on a national brand level, but what the one team collective said is, “Hey, let’s open this up to a range of startups. So, when Uber is starting out or something like that, we want to be able to give player licensing rights over them in exchange for equity to help promote that.” And so, we have the same sort of relationship and it’s been fantastic because, what it does is, it opens up a door to a lot of athletes—some wickedly smart athletes, by the way—that have strong opinions and understanding of their consumer base. And so it really opens up a dialogue and really helps us, I think, create a foundation to build off of.

Richie: [00:22:13] Gotcha. So, some athletes are actually owners in the company.

Brian: [00:22:15] Absolutely. So it was a key thing for us that we wanted to bring in, not only a professional investor, but also athletes as well. So people like Russell Okung playing for the Chargers, Lance Moore, Edgar Martínez, who plays for the Mariners. All these people have contributed, are investors and then they also are advisers, quite frankly, as we grow this proposition.

Richie: [00:22:34] Very cool. So you talked about the first day and then has it scaled? I guess, where does it sit today is probably the question?

Brian: [00:22:39] I’ll give you a dark period too. So things went great during the football season. We’re still up. We now have five teams. We’re still learning. And then I’m coming from a retail background where holidays is always an incredibly busy time. December has always been nonstop. In this business, it just stopped.

Richie: [00:22:58] As in churn and no sign-ups?

Brian: [00:23:01] Sorry—as in no new subscribers. People were still exchanging their jerseys and using the service but we flatlined for a little bit and it was kind of like, “What?” And, upon reflection, it kind of makes sense now. So, we’ve built a story around it—we’ve asked a lot of people and we’ve learned—which is a lot of people don’t sign up for subscription services for themselves in the month of December. They’re too busy trying to do other things. Plus, you have the NFL season winding down.

Richie: [00:23:25] Right. So the pool of possible things to wear is tiny.

Brian: [00:23:28] It’s tiny. And then—NBA, if you talk to a lot of people, a lot of people don’t think about the NBA season until Christmas Day. NBA on NBC, right? That doesn’t really start to come true until week 16 and 17 of the football season. And so you hit this period that goes quiet. Now, upon reflection, it’s actually great for us for two [reasons]. One is, we can sell gift subscriptions, which bring in new people. It’s acquisition-positive and it really helps to promote what we’re doing. The other thing is advertising rates in December go through the roof.

Richie: [00:23:58] Right.

Brian: [00:23:58] And so, if we don’t have to compete in that market, because it’s not really a viable option for us anyways, we actually get to store up and then we come out in January. And that’s when, now, you have playoffs [with] football, you have the NBA getting going and then you have pitchers and catchers coming at late February. It actually becomes a pretty unique time. And so, the business went flatline. We thought we did something wrong. So we’re going through all of our codebase and our advertising.

Richie: [00:24:22] Is checkout working?

Brian: [00:24:23] Yeah, yeah. How many test orders can you do in a day? But it just turns out—no, it’s just a completely different consumer demand than we were used to.

Richie: [00:24:30] Yeah. Do you believe this is a seasonal business? Or do you think you can mitigate that given how all the leagues work year-round?

Brian: [00:24:37] There is some seasonality but not much. And I think, part of it, is the leaks have made it a year-round business. Like, if you think about the NFL, we’re now in the Combines and then we’re gonna have draft day. We have free agency and then you have summer camps and then you go right into the season. So they’ve created, almost, an event every single month, after the Super Bowl. And then, if you take Major League Baseball, it’s an eight- or nine-month season. NBA’s an eight- or nine-month season by the time you get to the finals. So, really, you’ve gotten these franchises, now, becoming year-round businesses. So, there’s not really a significant amount of downtime for consumer demand or desire not to have a jersey.

Richie: [00:25:12] So just, briefly, describe the model and the cost, just as it sits today, of what one gets.

Brian: [00:25:17] Subscribers sign up for $19.95 a month and they get access to any set of jerseys we have. We always say, “Think about old-school Netflix.” You sign up. You queue up your movies and then, basically, we pick the first jersey available. Typically, it’s your first one but it’s usually your top three. Package it up. We send it to you and then you can wear it for as long as you want—a day, a week, a month. We really don’t care. When you’re ready, you send it back in a prepaid envelope. We commercially clean it and then we send you the next one your list. And so it’s a very simple process. We use USPS, which was very important because then you can actually put it in your mailbox outside. You don’t have to go someplace special to ship it. We’re trying to break down every single barrier to make this super simple for our users to interact with our brand.

Richie: [00:25:59] On the cleaning side, does that get messy? Because sports fans like to drink and can get a little out of hand sometimes.

Brian: [00:26:06] Yeah, we don’t want to share too many stories because we don’t encourage the behavior.

Richie: [00:26:10] No, no, of course.

Brian: [00:26:11] No, it turns out jerseys are great for this. And this is one where—I’ve been fortunate to get to know the founders of Le Tote—and this is really a point of jealousy for them because, it turns out a silk dress is a lot harder to clean than a Jersey. Jersey is made to be worn. It’s made to be washed. We have a great stain-busting crew. We come in. The jerseys come out looking brand new. We’ve had a couple things for damage and we give the fans the benefit of the doubt. So, if someone comes back and has damaged the jersey, we usually say, “Hey, it looks like you had a great time this week with your jersey. Unfortunately, we can’t reuse it. So, hey, next time can you be a little more thoughtful about it?” And we leave it at that because, at the end of the day, we want our product to be out there. We want our fans engaging and using it. And so there’s going to be some damage over time.

Richie: [00:26:54] Just on a pure economic perspective, if a jersey is, let’s say $120 bucks or whatever the average price point is, do you have any sense what it actually cost to make it, how much a league gets? Do you know what the breakdown of that $120 is?

Brian: [00:27:05] I don’t specifically know. I think what people don’t understand, though, is that there’s actually a lot of risk in these, as well. So, I can’t tell you if you go down and look at how many Tony Romo jerseys are still available two years later. And those aren’t 50% margin. Now those are all going to be taken at a loss.

Richie: [00:27:22] Right.

Brian: [00:27:22] And same with Kaepernick jerseys and everything else. So there’s—.

Richie: [00:27:25] There’s like a sunk cost to it.

Brian: [00:27:27] It’s almost like when you think about normal retail. When you walk into a Nordstrom, full-price goods are… Yeah, I’m sure they are 50%, 60% margin goods. But, at the end of the day, when you actually look at the financials, you’re running a 7% business, 8% business because there are markdowns, there are losses, there are damages and the same thing happens with this product.

Richie: [00:27:43] And does that then reflect in your business as well? If a player gets traded or gets hurt or something, do you basically have to clear that inventory out?

Brian: [00:27:50] Yep, absolutely. Actually, right now is an interesting time because we’re coming up to trade deadlines and draft day’s coming up. But this was actually one of the things—we would go back to saying, “I didn’t like the model, originally.” I’ve always heard that top level, the average tenure within football is 18 months or two years or something like that. I was like, “Wow, two years. How can you make this work?” But, when you actually take a look at the top 100, 200, 400 players, in terms of jersey sales, their tenure is much longer. It’s about six to seven years because it’s quarterbacks. It’s wide receivers. There’s some running backs in there. These are positions that typically have a much longer tenure within a team.

Brian: [00:28:30] And so, what we started to compute was end-of-jersey life experience. And so, the example here is that, when [NaVorro] Bowman gets traded from San Francisco 49ers or, actually got dropped, and then the Oakland Raiders picked him up, it turns out the Bowman jersey is no longer very valuable with San Francisco colors. And so that, to us, is an end-of-jersey experience. And so what we do is we use a fair amount of analytics to try to predict when players are going to make a move or when they might be retiring and then we, basically, rate these players as high-potential, low-potential and then we use degrees of risk on top of that. That does not preclude when there is a blockbuster trade, unannounced trade. We’re like everyone else. We have a stack of jerseys, afterwards, that we work through.

Richie: [00:29:09] One of the interesting things about this is, if you look at Rent the Runway, Le Tote, they’re working with hundreds of brands, likely, that have different products, different sizing, so forth. You move over to this—yes, there are individual brands on the team level but the real brand is the league so, maybe there are only, you know, three, four of them, sizing standardized, it would seem. There are a lot of interesting differences. Are those better for the business or are they worse? Is it both? You kind of work with one brand as well as many? But it’s kind of one still.

Brian: [00:29:37] It’s still one and I feel lucky in that capacity. Unlike a Le Tote or Rent the Runway, I don’t have to guess next year’s colors. The jerseys are jersey. That’s a positive. The second thing is all of our sizing is standardized. So people typically know the size of their jersey. If not, they know it by the second time they get one. So we’re not shipping two jerseys at a time to make sure fits right. Those complexities are completely removed from the business. Now, the flipside is, there are other risks that happen. For instance, this year for the NBA, NBA moved from Adidas jerseys to Nike jerseys and when they moved to a Nike jersey, they redid every single jersey for all 30 teams. That’s an issue if you’re carrying 30 teams worth of Adidas uniforms and you want to be current. What we’ll do is we’ll say, “Hey, that’s the 2017 jersey. So if you ever want that throwback jersey style, we’re going to have that. Here’s the 2018.” But there is risk. Teams do make changes to their jerseys. They do make logo changes and so we have to stay on top of that, in terms of inventory mitigation.

Richie: [00:30:38] I’m curious to talk more about the secondary market archive piece in terms of, yes, it would seem that these jerseys, in the short term, are a liability, but you also could stash them away and pull them out five years later and you have this vintage piece. How interesting is that to the business? How have you thought about that and is there a corollary on eBay or in the more third-party platform or marketplaces to learn from?

Brian: [00:31:01] We’re still early stage on that. So what we do is, when a player gets traded, for instance, we will keep a reserve of their jerseys.

Richie: [00:31:08] Like a winery, almost.

Brian: [00:31:09] Yeah, right. And we make them available if people want them and we think they’ll come back in style over time and we’re too young to really predict that. But we are really interested in the secondary market because, if you’re an authorized retailer, there’s actually restrictions saying you can’t sell or liquidate your inventory on eBay or Etsy or Amazon, specifically, written in their distribution agreements. And the reason why is to ensure that you have an authorized product within these secondary markets. How do you validate what’s authentic and not authentic? And so we look at models like The RealReal and how they are creating an authenticated, secondary marketplace and we look at ourselves saying, “Hey, we probably own more used jerseys than anyone in the nation right now. Maybe we should be the foundation to start to build a secondary marketplace that ensures that only authorized jerseys come into this, that we can validate that and we can present something unique to the users.” And I think that will develop over time.

Brian: [00:32:06] Right now, I think we’re hands down like, “Hey, subscriptions are great.” We have some loss in the back end that we do work through, either through liquidation or we’ve been trying something called upcycling, where we now have people disassembling some of our jerseys and then reassembling that material into the insides of wallets and backpacks and sweatshirts. And so, the idea is that jersey can have a second life.

Richie: [00:32:26] Have any teams or players not liked this?

Brian: [00:32:29] I haven’t come across any players. From the players I’ve talked to, they actually love it when a fan’s wearing their jersey. They like that touch point and that connection with the community. So I haven’t seen any sort of pushback. Also, quite frankly, the players are compensated for their own personal jersey sales. So, obviously, I don’t think anyone’s retiring off of that royalty agreement, but it’s obviously a nice sort of bonus for them.

Brian: [00:32:53] The only time we get pushback is when there is a concern that we might shrink the total jersey sales and we have had conversation with teams there said, “Hey, we don’t feel comfortable until you can truly validate that this is not happening.” And we made the decision, at that point, to agree and say, “Hey, we’ll wait and we’re going to have data here soon and we’ll come back and present to you.” Because, once again, we don’t want to disrupt anything within this league community to make it work.

Richie: [00:33:18] Yeah, I mean, one of the first things I thought of was, “Where do the stadiums play into this as your retail footprint, basically?”

Brian: [00:33:24] I can see one of two ways which is some stadiums say, “Hey, we have a store. We sell full-price merchandise and that’s all we’re ever going to do.” Whereas, I say, “Hey, people are not changing their purchasing behavior jerseys and, it turns out, your store has a lot of other items. Wouldn’t this be super interesting to actually have a Rep the Squad exchange at the back of your store?” And so you could bring in a host, hundreds and hundreds of people who are exchanging their jerseys. But, at the same time, they have to walk through all the scarves, all the hats all the jackets, all this other stuff.” So, if stores look at this as a way to attract a highly qualified customer, to surround them with merchandise, it’s interesting.

Brian: [00:34:03] The second thing is, we have a very different data set so we can come into a store and say, “Hey, look. We see that these are the players that are being rented. This is the depth. This is interesting. We actually want to support you in bringing in these three next players.”

Richie: [00:34:15] Right, from like a merchandising—

Brian: [00:34:17] Yeah, merchandise. Like we could actually risk mitigate to a store and say, “Paul Richardson’s a wide receiver in Seattle. People don’t carry his jersey. But it’s like, “Hey, we’d be willing to take a bet with you because we actually think there’s enough demand that we could preserve it.” Or how about another thing, like when jerseys are returned to the store after someone didn’t like it, it didn’t fit and it’s not maybe set up to be sold as new again.

Richie: [00:34:40] Right, “Give it to us.”

Brian: [00:34:40] Yeah, “Why don’t you give it to us? It’s an instant way to liquidate your back and inventory, in a way that makes the ecosystem work better.” So I think it’s those sorts of conversations that are super interesting.

Richie: [00:34:50] Yeah. Have any stores bit at that yet or it’s in progress?

Brian: [00:34:52] In progress.

Richie: [00:34:53] Yeah.

Brian: [00:34:53] I think there [are] a lot of conversations because, usually, one person is in charge of retail for every single team and they are compensated and bonused based on one number.

Richie: [00:35:02] Right.

Brian: [00:35:02] And innovation is not that number. And so you really have to have a holistic conversation about services and fan engagement and what sort of trials do you want to do to see if there’s a real impact because change is scary. But, the flip side is, they can pass on that opportunity, but what’s not going to change is this access versus ownership—the idea that this is going to be accessible. So they can embrace that and work with it or they can kind of pull away from it. And I think people are going to work that out over time.

Richie: [00:35:28] The teams can do their own merch, individually, right? Or is it all through a license, league approval process.

Brian: [00:35:34] Both.

Richie: [00:35:35] Both. Okay.

Brian: [00:35:35] As far as I know. It’s a fairly complicated situation. For most leagues, you have a master license holder that runs all licensing. But then some of the team stores are owned by the teams and some of them are, actually, owned by the leagues or by these license holders. And so every single situation is different.

Richie: [00:35:51] Do you think that apparatus is slowing everything down?

Brian: [00:35:54] I think by having verticalized manufacturing, licensing, within the league, there’s actually some really big positives because you’re able, I think to make more global decisions that make sense. But I also think—

Richie: [00:36:08] Right, such as standard sizing.

Brian: [00:36:10] Standard sizing or how things are tracked or anything like that. But I also think, as you get more verticalized like that, the idea of innovation and disruption becomes harder. It’s not just a league issue. I think you see this all through apparel, in general. As stores or departments even become more verticalized, it’s harder and harder for them to try the next new thing. And so, those who are willing to open that up, I think, become more effective and survive longer.

Richie: [00:36:36] Will this go beyond jerseys for you?

Brian: [00:36:38] Maybe. You know, we’re intrigued by two different parallel opportunities. There’s one which says, “Access versus ownership beyond jerseys makes sense.” And so things that jump out at me are winter apparel. There’s a lot of high end jackets with league information or with professional license information on it. There’s actually handbags. The question is, “Are there price points at $100-plus that could make sense into this model?” And there is product out there that, I think, has appeal that we’d want to test into.

Brian: [00:37:08] Now, the flip side is I do watch a company, like a Stitch Fix, where we have, over time, a unique set of data that no one else has. We know a single fan, not only where they live, but what teams they follow, what players they follow, their interaction behaviors. I would like to think we can use regular commerce capability and retail capabilities to say, “Hey, let me throw in this hat. Let me throw in this scarf.” Because, if we’ve done this right, we are really the foundation of their fandom and, if we can do that, then we should be able to insert ourselves into helping them make that statement over time, across either direct sales or through other rentals.

Richie: [00:37:48] Where does Amazon fit into all of this? Because you can buy a bunch of stuff on Amazon. I don’t know if it’s authorized or not.

Brian: [00:37:52] So, coming into this, one of the criteria when I start a new company—I had to think Amazon would not be in this market 24 months later. That’s easy to say and then they buy Whole Foods the next day also. So I’m not saying the logic is perfect or we can fully understand what Amazon does. But Amazon is a fantastic place for conversion and retail and repetitive nature. When you start talking about returning—so I think if Amazon ran a subscription service, sort of like BarkBox where it’s sending stuff out all the time, I bet you they’d be awesome at it. But when you say, “No, you’ve actually got to take the jerseys back. You’re going to professionally clean them, repackage them, send them out again.” That has, historically, not been what Amazon has focused on. So I like to think that we are outside of their focus and wheelhouse today, which I think is also just what’s unique about apparel industries.

Brian: [00:38:45] Coming from the world of fashion, Amazon going into fashion and into apparel has been incredibly disruptive. When I was at Nordstrom, Amazon [was] a mile away from the home offices and it does make waves when they show up. And, at first, it’s pretty easy. You say, “You know, it’s hard to buy apparel online. Fit’s not going to be right. Touch isn’t going to be right.” But then you fast forward and you’re like, “Hey, it’s super convenient to be shopping on my phone and, yeah, not everything fits great but it’s free returns and it’s seamless and it’s super easy.” I think, now, when I walk into a store, retail has to be theatre. There has to be something else there that’s interactive, that’s unique, that’s one of a kind, that’s an experience that I can’t get elsewhere. Because the straight utility of buying a new pair of shoes, it’s going to be really hard to compete against the Amazons of the world. And so, when you look at subscription services like this, I think it’s the same way. It’s something that’s unique. It engages people in a different way. I do think it could be very complimentary to what Amazon does and so it’ll be interesting, I think, to see how things evolve over time.

Richie: [00:39:47] What’s been the cheapest and most expensive lesson you’ve learned building this company?

Brian: [00:39:50] Very tactically, one of the most expensive lessons for us has been certain jerseys—when they actually say on the label “Do not put in dryer,” they really meant that. So, early on, some of our jerseys—and it’s mostly retro and throwback jerseys—they actually have a rubber component on the jersey. And if you hit a certain heat, the rubber begins to melt and then that rubber actually ends up on all the jerseys in that dryer load. And so there have been some days where we’ve taken some pretty significant losses based on not following the care instructions that are properly attached.

Brian: [00:40:25] One thing—I don’t know if it’s completely cheap but I think it’s the presentation of the brand was very important to us. So we could actually send these things out in plastic mailers and get them all wadded up and folded. We really took time to say, “Hey, we’re going to spend an extra dollar and put everything in a really nice box, have really nice packaging. We’re going to put tissue paper around it because we want to have this feeling of you getting a gift every single week or month. And this is the first company I’ve ever been at where people post videos of themselves opening our boxes.

Richie: [00:40:57] Which normally comes from the beauty and other parts of this industry.

Brian: [00:41:00] Right, right.

Richie: [00:41:01] It’s not sports, normally.

Brian: [00:41:02] Not sports, normally. So it’s super cool because we get videos sent all the time or we see it on Twitter, we see it on Facebook where people are like, “I’m opening up my box and this is what it looks like and this is who I’m reppin this week.” That, to me, has been awesome. And I think that’s been—over time, I guess, the number of boxes we buy gets expensive but saying, “Hey, we’re going to put a little bit more into the brand and a little bit more into that interaction, once again, to have that touchpoint.” Because we don’t get to touch our consumers anywhere else. They get to touch our product and they get to touch our box. We think that small investment, on a per subscriber basis, has completely paid off.

Richie: [00:41:35] So there is an inherent newness that you’ve created with this model. How do you capitalize on that, from both a marketing and a media perspective? In terms of, I don’t know if it’s incentivizing or encouraging moments like that to happen repeatedly that, obviously, go a really long way toward however many followers these people have. They’re probably all similar sports fans. And how does that whole word-of-mouth piece go?

Brian: [00:41:55] The word-of-mouth is key and social is a big component of this business. So, one, we try to interact and reach out to people. So, as they’ve done something that’s great, it’s typically send them kind of a high five, digitally. We have not done a tremendous amount in terms of incentivizing people. This is all truly an organic behavior. We have had, in PR, where people have unveiled boxes and I think it’s great. Because when Gee Scott, from ESPN Radio, unwraps his Cliff Avril jersey, after Cliff got injured last year, and said, “You know, I’m repping my man Cliff. He’s injured this week but I wanna show my support.” That’s huge. Mostly, we just try to be good brand ambassadors and we congratulate people and we support them. I think one of the premises we said, going in, is we wanted to make sure our brand and our voice was always going to be positive. So it wasn’t going to be about “so-and-so completely missed that catch.”

Richie: [00:42:46] “I’m dumping their jersey.”

Brian: [00:42:49] Yeah, “I’m dumping their jersey. Let’s go burn jerseys.” It was going to be about who made the catch and how awesome that was. And so we said, “Hey, we’re going to celebrate accomplishments.” And we mean that within our fanbase, within our player base and everything else. We really want to have this positive connotation of what it’s like to be a fan. And so when people are unwrapping and unveiling the stuff, I think it’s fantastic. It’s a huge motivator for us.

Brian: [00:43:12] The other really funny thing is, we’re based in Seattle, and we’ve had people come by. Great stories. First, someone finally knocked on our door and [asked if we] could they change the jersey right there. Coming from an ecommerce background, we’re like “Whoa, whoa. We don’t often talk with people.” But we’ve had people come into our warehouse. They’ve actually tried on jerseys. It’s like kid in a candy store. And now we literally have some customers that come by and we’ve had dozens of doughnuts brought to us. I don’t know [if there are] very many other companies and retailers out there where their consumer actually brings them a gift to say thank you. So all that’s really worked out in a really positive way.

Richie: [00:43:44] Very cool. And then talk a bit about the warehouse infrastructure piece. Rent the Runway and other companies have done it so you didn’t have to, theoretically, trailblaze how to run a big dry-cleaning business. But what were some of the learning curves there? Because do you fully own and operate that warehouse?

Brian: [00:43:58] Yeah, we operate the entire process. At first, I was a little nervous. When Rent the Runway says, “We have the nation’s largest dry-cleaning business,” I’m like, “Congratulations. I guess that’s a huge barrier to entry but I don’t think I’d pride myself on that.” But it’s pretty amazing what they do and the stain removal and the care they take in their product and it’s the same thing for us. And so, what’s great is, the process of our warehouse is very straightforward. We have incoming items. They’re received. They’re inspected. They’re flagged. They go through a whole cleaning process. We then re-bag everything. So we actually then fold and bag everything so it looks almost brand new again. And then they’re stored until they’re ready to be picked, packed and shipped. So there’s nothing overly complicated. It’s just having a great workflow and a great space and having people interact. And I think there’s a lot of opportunities, over time, to innovate and scale that up. And one of the benefits, once again, goes back to having a jersey versus a dress, is we can fold these things up. And, if you think about stacking ten jerseys, and the amount of space that takes, versus ten dresses, we can run a far more dense operation, within a single location.

Richie: [00:45:03] Where do you think you could be wrong on the business and/or what do you see as the greatest risk to it?

Brian: [00:45:07] The place where we could be wrong is does this trend continue? And is it as large as we think it is? I guess that’s called risk. There have been some amazing subscription models out there that hit a point where their churn equals their growth. And they just flat line. I think that’s more apparent in the, sort of, trial subscription services because, what happens over time is—I love Birchbox for Men. It’s a great product. But when I unsubscribe, the ability to reactivate me is incredibly hard because I’ve done the experience. I’m done with it. Versus, within our model, what I want to believe is, we actually have a lot of people that end a season and want to churn out and the question is will they come back? And so, the points that get me excited about that sort of concern or risk is, we started something called off-season mode. So, if you’d only rented a football jersey and you only have football jerseys in your locker—you never adopted an NBA, never adopted MLB—and you get to the end of the season and you try to hit our cancel button, we first come up and say, “Hey, we have off-season mode. We’ve kind of figured out you’re a football fan only. For $2.99 a month, you can keep the jersey you have right now. You can wear it for the whole offseason and then we’ll go back to full price in August or, if you send it back to us, we’re gonna keep your locker in order and we’re gonna send you your next jersey, at full price, starting in August.” When we launched that, over 50% of our customers went to off-season pricing.

Richie: [00:46:35] As opposed to, ideally, churning.

Brian: [00:46:37] Just canceling outright. Okay. That’s huge for us because that does validate that people want to be involved. They want to stay connected. That’s how they’re going to operate. As jerseys get more interactive, as leagues continue to make more style changes, as player movement continues to increase, I think our value proposition for these fans and for the youth will continue to be successful.

Richie: [00:46:58] And then, as you look forward, what’s on the horizon? What are you most excited about and where does it all go?

Brian: [00:47:03] The last six months of last year was launching something, proving it and making sure it works. The first six months of this year is to prove that, now that we’re established, we have a brand, that the financials work and we’re really pleased where that’s going. When the financials successfully show up on the Excel spreadsheet as working, then we want to go to a national rollout. So we want to have every single NFL, NBA, MLB, NHL team out there and then we want to expand into MLS and WNBA. There’s a ton of stuff just within the U.S. And then I think this model works for international, as well. Initially, it might be—

Richie: [00:47:40] Soccer.

Brian: [00:47:41] Oh my gosh. Like European Premier League. Come on, they change their kit every single year. And I think there’s real dynamics, both just offering them the U.S. Like if you think about the number of World Cup jerseys people wear in the U.S.

Richie: [00:47:52] Or how many people wake up at like 5:00am to watch games.

Brian: [00:47:55] Exactly, right. Yeah, that passionate base. And/or then you could actually extend this abroad and there’s a tremendous market out there. So I think there’s—when I say there’s a ton of opportunity, our big thing is, “Hey, let’s make sure the model works in a way that it’s financially viable and then we can scale up from there.”

Richie: [00:48:10] Awesome. Thanks so much for talking.

Brian: [00:48:11] Yeah, thank you very much.

Richie: [00:48:19] Thanks for listening to the Loose Threads Podcast. You can read the full transcript of the podcast and join the newsletter at LooseThreads.com. Also feel free to leave a review on iTunes—we always appreciate it. Thanks to George Drake Jr. for editing this episode. We have a great roster of upcoming guests including Brian Schechter of SelfMade, Sarah Nakintu of Kintu and Fran Dunaway of TomboyX. Thanks for listening and talk to you soon.