The Biggest Loser in the Fanatics Acquisition Could be Distributors

With Fanatics' DTC model, will distributors have a future?

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While Topps and Fanatics are singing Kumbaya together, there are still those in the hobby who are worried about their future.

Collectors should be OK. Cards will continue to be made and the market will adjust to whatever Fanatics ends up doing.

Fanatics CEO Michael Rubin has said all the right things when it comes to hobby shops (whether those comments hold true remains to be seen). Hobby shops are a huge part of the industry and card companies’ biggest cheerleaders. They build communities within the collecting world.

However, noticeably left out of the conversations has been distributors. They are the “middle men” of the hobby. Distributors buy product wholesale from companies like Topps, Panini and Upper Deck, and sell them to stores, breakers and flippers for a profit. For years, they’ve taken on extra inventory from the card companies and have helped them move product that may have sat dormant in a warehouse. While card companies have a set amount of stores they sell direct to, the distributors take the extra and divvy out the rest.

In return, card companies haven’t focused heavily on selling direct to customers and haven’t needed a robust infrastructure to do so.

Rubin said on CNBC last week: “In general, for the collectors certainly at our core we are a more direct-to-consumer company. You think about not only selling cards on a primary basis but as direct to consumer. The hobby shops are important to us. They will make this business. They will always be a vital part of the business.”

Fanatics doesn’t need a middle person.

And the funny thing is – other than the people who work for the distribution companies – I’m not sure who is going to miss them.

There were a lot of store owners who felt distributors played games with them, especially in recent years. They would allocate product, but also demand store owners buy product they didn’t need to guarantee they get the better-selling items (think Prizm or Bowman). These prices would vary wildly day-to-day too. You could order something on a Friday and by Monday regret not getting more.

Hobby stores were paying MSRP or close to market prices from distributors and, of course, those costs were passed on to the collectors. But the margins were minimal and the best they could hope for on a number of products was to break even. Yet it was something they had to do to keep in the good graces of the distributors.

Store owners will buy and buy hoping to keep the distributors happy in order to get their allocation for the better products, but the issue is no one knows exactly where the goal posts are for the shop owners. Many felt the goals were constantly moved and distributors were not clear on what it would actually take to maintain their numbers.

And different distributors had different rules.

I’m sure there are distributors who will read this and shake their fists at the screen. But distributors did exactly what capitalism says it could do. That doesn’t mean it was liked.

Of the principals in this industry, distributors aim to be the biggest losers with Fanatics entering the trading card world.

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Looking to read more about the Fanatics and Topps deal? Here are some interesting articles to keep you going.

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Sports Collectors Daily: Card Shop Owners Guarded Optimistic in Wake of Fanatics’ Acquisition of Topps

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Sports Card Uncensored: Breaking Down Fanatics’ Acquisition of Topps From All Sides

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