Merchandise is everywhere. From t-shirts to coffee cups, to coffins: yes, coffins. So, how did selling merchandise skyrocket into a multi-billion-dollar industry?
Merchandise, or “merch” for short, is a word that dates back to the 13th and 14th century with the first merch craze beginning in the 1940s, over the voice himself: Frank Sinatra. Fans would write his name on their clothing to express love – and obsession. And so, the band t-shirt was born.
This trend quickly picked up steam with an Elvis fan club reportedly creating the first tee exclusively for a concert. But wearing a tee didn’t just mean showing love for the band, it was a way for young people to express who they were, whether that meant fitting in or sticking out.
It wasn’t until the 1970s with the popularity of stadium rock that merch really started to take off. Notable rock historian, Glenn A. Baker, claimed that AC/DC was one of the first bands ever to make more money off merchandise than concert ticket sales. And with artists like KISS selling everything from bobbleheads to diaper bags, the merchandise industry was booming. They even went as far as creating coffins for their die-hard fans by the early 2000s.
Who else besides the mainstage heartthrobs are cashing in on merchandise?
People have always wanted to do more than just listen to their favourite musicians. And today, artists like Kanye West and Travis Scott have reinvigorated the merch industry by collaborating with top fashion designers.
It used to be bands were interesed in t-shirts, maybe a wristband or a tote bag, nothing too exaggerated. And really in that past 5-year mark, bands now want mini lines, clothing brands, they are like mini empires.
For a more in-depth look, there’s licensing, which generates more than $270 billion globally in retail sales.
To understand licensing, you have to get familiar with 3 professions in the business. licensor.
They represent the artist and grant permission for someone to use their brand on merch like t-shirts.
They’re the ones granted a license to create and sell the merch.
They’re the middlemen putting together the deals between the licensees and licensors – basically the matchmaker.
Deals are, in almost every case, a licensing deal in the music business. And by the way, we are talking about merchandising. In most cases, the licensing deals are going to be based on a royalty which is based on the wholesale price of the item.
But let’s say an artist’s merits a 10% royalty rate, and we’re talking about a $10 wholesale t-shirt. That t-shirt is probably going to retail for $20. But the royalty will be 10% based on the $10 so that means for every one of those $20 t-shirts the artist would get a $1. That means there’s a huge opportunity for others beyond heartthrobs to cash in.
Licensing and royalties have become even more critical with the arrival of music streaming services which have contributed to the decline in album sales.
It used to be that a tour was mounted to support a record release. Now it’s pretty much the opposite where music is issued to support the tour, and the tour is the real revenue driver. This has caused a lot of artists to really look at other revenue streams, and licensing has become one of them.
10-35% of an artists revenue on tour can be attributed to merch sales. With some even pulling in $300,000 to $400,000 per show. It has also led musicians to find new creative ways to not only increase their bank roll but also connect with their fans.
Enter the pop-up shop. These retail stores allow entertainers to sell exclusive pieces available in select locations for a limited time. A few are even taking in a profit well over 6 figures.
How to make money without having a popular brand?
Today with e-commerce, you don’t have to follow a band on tour selling merchandise to make money. Fanjoy founder, Chris Vaccarino, realized after going on the road with his brother’s band that he could make more selling merchandise online instead of solely at their shows. But he didn’t stop there.
“But really we saw an opportunity when we came across one of our clients now, who is a social media star who had never signed a merch-deal, never sold merchandise before and I cold-emailed him and said, Hey, we have this platform. We want to do merchandise and do business with you, would you want to talk?” he says.
Since 2017, Fanjoy has shipped over 1.5 million items and has generated over 60 million dollars in sales. You’d think social media influencers would be making big bucks from getting millions of views, but that’s not always the case.
So, just like musicians, they turn to merchandise. Top influencers like Lilly Singh, who alone is estimated to be worth $16 million, have own online merchandise shop selling everything from tees and hoodies to backpacks and jewellery.
The future of merch looks bright. Whether it’s the birth of a new celeb or local indie artists, merchandise continues to flourish on all fronts. And you don’t necessarily have to take centre stage to take-home profits.
Muammer is a Marketing Analytics Manager at Turkcell. His mission is to empower entrepreneurs and to help them achieve their goals. He also has a passion for illustration.