Has Ferrari Merchandising Reached Saturation in The US?

There are the "cheaply" made items that just won't sell well to a real Ferrari enthusiast. If you own a Ferrari do you want something that says Ferrari but is made in China?

 

There was a thread on here a while back that Ferrari was reducing their SWAG stores:

https://www.ferrarichat.com/forum/threads/disappearing-ferrari-stores.476439/

 

Assuming the merchandise is not counterfeit, all retailers at times have to dispose of items which either didn't sell well, or sold well but they simply ordered too much of it.

 

During the late 90s I had a high-quality black Ferrari t-shirt with the Ferrari name [discretely sized] embroidered with white thread. Wish I had another now. No flashy "fanware" for me please.

 

I had a really nice t-shir also the just the Ferrari crest on it. Small on the right upper side. Wore it all the time. Good quality, and stayed fresh after many washes. Wish I could find another like it..

 

Unfortunately, their Polo shirts (golf shirts now) look horrible after only two or three washes.

 

I would say so - but as an aspirational brand, Ferrari has to have trinkets like soccer balls and teddy bears to sell to the broader market. They HAVE to saturate the market with this junk to keep the brand name elevated - and to allow non-owners the ability to 'own a slice' of the company. Remember when Ferrari did the IPO for RACE stock? Every enthusiast and their brother was grabbing a share just to have it.

In regards to the merchandising stuff - these China-made items typically will be picked up by a tourist at a Ferrari Store location when the shopper can't swallow $120 for a polo shirt or $3000 for a used F1 titanium lug nut. But they WILL buy something when they visit - whether to document the experience, or just to have something tied to the brand.

By the time these trinkets make it to the discount arena, Ferrari likely has already broken even on the deal; having sold a portion of the inventory at full retail (likely having bought the soccer ball from a vendor in China for $2.21, and selling those for $30-$40 in the stores). Any remaining stale inventory is closed out to Tuesday Morning.

And as stated above, the over-ordered/undersold merchandise will be closed out to retailers in that channel. The last company that I worked for had to do this ALL THE TIME because the fashion trends that they chased stopped being a trend by the time the products came to market. A narrow portion of the 'edgier' product always was guaranteed to be sold through this channel, typically at a loss, or barely break-even.

The hard part with this 'game' is finding the right balance between market demand and market saturation. While Ferrari cars are scarce, the scarcity model is nowhere to be found on the merchandising end of Ferrari's business.

 

I once read that they make more on licensing for merchandise than they did on selling cars. Don't know if that was true or not.

It always makes me laugh though, even on some of the nicer items like the watches. "It's a Ferrari watch." "No, it's a watch with a Ferrari logo on it. Ferrari had nothing to do with manufacturing that watch."

 

Ferrari has a very unique business model. One almost no one else can duplicate. They make a very limited amount of high cost, small margin (in a relative sense) items (Their cars) and spend a fortune in a non income producing activity (Their F1 racing) in order to generate an image that people want to be part of. They then make almost all of their money selling high volume, very low cost, very high margin products like T-shirts, etc (or sell the rights to others) to the public.

 

Ferrari is a public company. This information is public. You should do your research before making broad statements.

In 2017, total revenue was 3.4B euros. Ferrari made 497M euros from brand and sponsorships activities. About 97M euro from investment activities. The rest are cars, engines, and car related activities and that amounts to 2.8B euros or 83% of revenues. Sales of cars and engines is where they make their money, much more so than branding activities such as T-shirts.

As for small margins high cost items (Their cars), cost of sales was 48.3% giving a gross margin of 51.7%. That, in comparison to BMW gross margin of 10%, is not exactly slim margins by any means. It is this very high margins that pushed the stock price from $28 per share after going public to $140 per share today. They have a very unique business model, yes. They successfully sell their cars at very high profit margins, 5x higher than the next best company from Germany.

Don't you wish to have bought the stock at IPO price of $40, and just left them alone?

 

I got my shares for free.

I bought Fiat/Chrysler and after awhile a bunch of Ferrari stock just landed in my lap. Sat there in my account ever since. Even has the original price tag still affixed.

Funny is, it never happened again.

 

The stock took a hit this week because Trump proposed 20% tariff on Euro cars. Hope you're doing well Mitch! Cheers

 

You dont have the Ferrari aftershave, don't bother its dreadful even with 60% discount

 

That's why you give it away as an impressive gift!

 

Went to the museum bought a 50 euro hat. Got back to Canada and noticed the tag Made in China had a good laugh

 

Hey, if you find the copper colored Ferrari decaled Flashlights there grab me a few please!

 

I would say the market is saturated with Ferrari-branded merchandise. A couple of years ago, our local Costco had a short-term "special" on Ferrari-branded clothing, mostly hats and rain jackets, black or red only. They normally don't carry such products. The Vancouver Ferrari store shut down several years ago. Overstock appear to carry a lot of Ferrari merchandise. I don't see a lot of Ferrari clothing being worn in Vancouver - I see more Ferrari sightings on the street than Ferrari clothing - of course, the cars are more noticeable. As for me, one T-shirt (decent quality but made in China, bought from a Ferrari dealer) - which I only wear to car events - kind of embarrassing otherwise.

 

I have a Ferrari baseball cap my wife bought at a Challenge event because I did not have a hat, $50, damn. I wear it around the garage or when I drive with my spider top down.

 

Me, personally, I don't see why someone would pay good money to buy something that is simply advertising for someone else.

If ferrari wants me to advertise they should be footing the bill, not me.

 

I never could accept that the majority of revenue for Ferrari came from licensing, argued that many times. Now that they are public it was the first thing I looked into. The rumor has been dispelled.

 

Delving slightly in P&R, Mitch brings up a good point I've contemplated myself. Brands, of course, can serve many purposes. It could be to exude quality/fashion (i.e. 'Armani' suit) -- it could serve as a reinforcement of expectations (Levi's) It could be hugely conspicuous, ala Nike Swoosh.

As for Ferrari, I've often felt that it is unparalleled in modern organizations. That is, it is a product, a mark of quality, a sports team, a fashion, and a public company. I myself shy away from any Ferrari apparel (with the exception of perhaps at an F1 event), but I don't mind others proudly sporting the brand.

As an owner of the product, a shareholder of the company, enthusiast of the space, and supporter of the team - the more exposure the better for me, literally to my 'bottom line.' The more successful Ferrari is, the more money I make.

Other large caps, of course, are in similar structures, it's just Google jackets and Apple Hats are few and far between outside uber-fans and employees. Also, not much fun rooting for say Google/Apple at a hack-a-thon.

Ferrari finds itself in a very rare situation. The closest parallel would be a season ticket holder to a successful sports franchise team, and with cracking down on the resale market, this paradigm may go away.

This would leave Ferrari the one unique structure I am aware of its kind, and one I feel very fortunate to participate in.

 

A thought experiment would be how much of that merchandising cross serves as product maraketing? My kids love Tesla more, yet are first to acknowledge Ferrari apparel is a dime a dozen compared to the lauded Tesla 'T.' How many youngster's first toy car will be a 488 vs a Model S?

The seeds are planted early, and the LTV for that Chinese made hunk of plastic may end up being far more then the $1 Marennello booked for licensing fees today. It very well may translate into much more years down the line as that former kid walks into a Ferrari dealership for the first time.