AC Milan’s commercial revenues have grown a substantial amount since the arrival of American ownership, but there are plans to increase them even further and find more of a balance in certain areas.
This morning’s edition of La Gazzetta dello Sport talks about the different areas of Milan’s merchandising. There is of course the historic shirt with the iconic sponsor, on the other hand the new Rafael Leao surfing waves sweatshirt, and fashion shirts with a baseball-esque font.
Every item that Milan release has its own reason within a strategy that aims to broaden the customer base, capture new fans – or even more casual supporters – and satisfy their tastes.
There is no order of priority: the 50-year-old who is nostalgic and faithful to tradition is ‘worth’ as much as the kid who can’t keep his eyes glued to the screen for the 90 minutes of the match. But it is clear that the future is there, and Milan are one of the top clubs most oriented towards the future.
In Gerry Cardinale’s project, competitiveness must go hand in hand with sustainability, and sustainability at higher levels (i.e. the ability to generate more cash than today and, therefore, to be able to afford more stars) cannot ignore an increase in revenues.
With TV rights brokered by UEFA and the League and the stadium project obstructed by political vetoes, it is the commercial segment where the club can have greater control. A sector that has already seen a growth in turnover up to €127m in 2022-23.
With that there is the merchandising/licensing area, in short, the sale of products. There were €6m in proceeds in 2017-18, at the time of Yonghong Li and his amazing commercial plans to conquer Asia. That became €30m in 2022-23 and it is growing by double digits this season.
The challenge is ambitious: Cardinale aims to exceed €90m in five years. At Casa Milan, where they think American-style given the origin of ownership, the number of $100m is circulating.
A start-up with 17 people
For almost five years, Valerio Rocchetti (Milan’s Retail, Licensing and E-commerce Director) has been at the head of the sector.
First with Elliott, then with RedBird, this branch of the company developed as if it were a start-up: from 3 to 17 people, average age 27 years and experience acquired mostly outside football, from fashion to large-scale retail trade.
It is the fresh, innovative point of view, a little outside the old patterns of the company structure. A crucial step in 2022 was the internalisation of e-commerce which in the first month of activity generated a turnover of €2m, as many as it had done in the previous 12 months.
“Today Milan manages the main part of the value chain by outsourcing the low added value phases and this allows us to be flexible and take the best possible care of the fan-consumer,” Rocchetti explains.
“Habits have now changed: 50% of customers who order in the province of Milan choose to purchase online and collect the goods in the store. We must be able to satisfy all needs.”
The number of stores has also increased, from two to five. A store was added at Malpensa airport where the takings have been encouraging, and a sixth shop – in the centre of Milan – will be inaugurated in the coming months.
Last season revenues came almost equally from the two sales channels (€14m online, €16m physical stores). In the future the Rossoneri will focus more and more on foreign markets, supporting the club’s following on a global scale. One idea would be to open franchising stores.
On the other hand, the volume of sales outside the border is already consistent: 45% against the domestic 55%, compared to a greater imbalance towards the national territory for the other Italian teams.
The No.10 partnership
The arrival of RedBird, with its sports business expertise, accelerated everything. The reference models, in terms of merchandising, are Bayern Munich, Liverpool and Barcelona, who gross over €100m.
“Our ambition is for a unique positioning in the sector, also by virtue of the brand we have,” adds Rocchetti. Especially if the Milan brand is associated with other fashion, music and entertainment brands, creating a multiplier effect and intercepting a different audience.
The partnerships with the New York Yankees, Off-White, New Era, Warner Bros go in this direction. Then there are collaborations with players currently in the squad, who are building brands that fans want to represent.
After the Theo Hernandez ‘TH19’ collection, it is now the turn of Rafael Leao who developed the ACM x RL10 range with the club, a capsule collection launched today.
There is a jersey inspired by the world of American football, oversized t-shirts with long and short sleeves (also available for the little ones), classic sweatshirts, all with references to the Portuguese’s passions, within a streetwear style that appeals to the younger generations.
The objective is clear: to position Milan at the intersection of sport, lifestyle, fashion and culture, anchoring itself in Milano, the fashion capital and yet also opening up to globalisation. The fourth kits were released as limited edition and sold out very quickly, demonstrating the ‘scarcity’ marketing strategy.
The 2023-24 fourth shirt – created with PUMA and the Los Angeles brand Pleasures – doubled the pre-orders of the previous year, with 60% of buyers in the 20-29 age group and California as the second overall region, behind Lombardy.
The importance of control
Offering products on the market that go beyond the match shirts has other advantages. First of all, it allows the fans’ attentions to be kept high at all times of the season (February sales, thanks to the fourth shirt, were higher than those at Christmas).
Then there is an economic aspect. The match shirt is licensed to PUMA who pass on the royalties to Milan, which means that the directly managed products generate greater margins for the club.
At the moment 65% of sales revenue comes from match kits and 35% from the rest, for a total of over half a million pieces sold per year. The goal is to reach 50%-50%.
Of course, the new stadium would also be a driving force for merchandising. Milan currently collect around €3m per year from San Siro sales. The management have made the following projections: with a new home, merchandising linked to the stadium would make five times as much, therefore at least €15m.
Finally some proper merch management. What aggravated me during Kaka’s time was the abysmal marketing and branding (outside of Italy that is) for such top players.