Panini Vows Sweeping Changes to Distribution Procedures

Panini America officials headlined Monday’s first full day of the Sports Collectibles Industry Summit in Las Vegas by announcing sweeping, comprehensive changes to the company’s distribution network.

“These are things we’ve wanted to do for 10 years,” Panini VP Mike Anderson told a room that included more than 100 hobby shop owners. “We are no longer turning a blind eye to the problem that has been killing margins for hobby stores.”

Anderson and Panini hobby sales director Rodney Alsup outlined their plans – slated to launch in the fall – that strives to address one of retailers’ most pressing concerns: Online sellers’ negative impact on brick-and-mortar profit margins and key buyer relationships.

Among Panini’s pledges to an enthusiastic retailer audience at the Summit:

* Re-authorizing all brick-and-mortar hobby shops. Only authorized stores – and potentially, a handful of authorized show retailers – will be able to purchase and sell Panini product directly.

* A dramatically reduced wholesale distribution network.  Anderson noted that, currently, as many as 50 entities operate as quasi-wholesalers, through online services such as DealernetB2B, eBay, individual websites or through a sub-distribution sales force. Going forward, Panini will appoint and promote a select number of authorized distributors – perhaps as few as four nationally, Alsup said.

* A no-tolerance policy for distributors who sell to non-authorized retailers. “If people do not abide by the policy, we’re done with them,” Alsup said. “No warnings.”

* A no-tolerance policy for retailers who attempt to wholesale product, rather than selling directly to collectors. “Again, no warnings,’’ Alsup said. “They will be black-listed.”

* A clear distinction between wholesale and retail businesses. “You are one, or you are the other,” Anderson said. “And never the twain shall meet.”

The Panini executives credited CEO Mark Warsop for the company’s renewed commitment to integrity in distribution and admitted that, prior to Panini’s purchase of the former Donruss/Playoff LP in early 2009, the company made distribution choices that were not in its or the industry’s best long-term interests. Some of those choices included selling significant a volume of new issues and closeouts to online retailers, and allowing certain wholesale distributors to develop and operate online retail businesses.

“We turned a blind eye toward those things, because, honestly, we had to. Our ownership needed the money, and we perpetuated the industry’s problem,” Anderson said. “But under Panini ownership, we work for a CEO who is allowing us to do what should’ve been done 10 years ago.  We are well structured, well financed and committed to doing what is best for the brick-and-mortar stores who are the lifeblood of this hobby.”

An enthusiastic Industry Summit crowd of 114 brick-and-mortar store operators applauded repeatedly during the Panini presentation.

Jeff DeGraw, an Illinois-based retailer, said Panini’s presentation addressed his concerns so thoroughly “it was like they were listening in on our retailer welcome meeting [Sunday] night.  This was clearly our No. 1 issue, and they’re taking a stand in support of us.”

Said Mike Fruitman, a Colorado-based retailer: “I have just two words: ‘Thank you.’ ”

Among the other initiatives discussed during Panini’s Monday session:

* The company continues to destroy any returned NBA trading card product to protect collectibility.

* The company is willing to implement a MAP (minimum advertised price) program, but believes its authorized distributor and retailer qualifications may address the new-release pricing issue without a formal MAP initiative.

* Anderson and Alsup said more details regarding the distribution initiative will be announced this summer, including the formation of a brick-and-mortar standards committee.

* Panini is initiating an upgrade of its hobby ordering systems and schedules.

* The NBA Adrenalyn XL trading card game launch has been an unquestioned success, thanks to strong marketing support including a mobile tour. The company plans to extend the Adrenalyn brand to football and hockey as part of its investment in re-developing a youth collecting segment.

* The company will launch a new product tentatively called “The Vault,” which will feature compelling autographs and memorabilia swatches from sports, history and pop culture.  Alsup indicated the initial release may be available as early as December 2010.

“Salvation is not going to come in the form of some new whiz-bang, wow, big-hit product,” Anderson said. “It’s just good honest blocking and tackling, and that’s what we’re doing here.”