Thank god the ‘90s are cool again
Fila is a bit of a mysterious brand. Everybody knows it, but nobody really knows where it’s coming from, what their story is, or why it virtually disappeared from the stores during the first 15 years of the 21st century. They were huge in the ‘90s, then went bust in the 2000s, and they are now making a huge comeback, seemingly out of nowhere.
Because Fila has been navigating the market through ups and downs, sometimes being there, sometimes not, people forget how big they used to be. There was a time when Fila was the second-largest basketball shoe retailer in the world, behind only Nike. They were also the third-largest athletic shoe retailer in the world in 1996.
So what happened? Where were they coming from in the ‘90s anyway? What happened in the 2000s? Why are they back now?
Well, Fila has been doing things both terrifically right and terribly wrong for most of its life, sort of like a bad kid that’s good at heart. It’s been paying off, costing money, and it’s mostly been an interesting rollercoaster. Let’s take a closer look at their story.
Ownership and markets
Today, Fila operates in 70 countries through licensing deals. Retailers purchase the right to sell Fila goods and agree on what percentage of their sales they’re taking home, and the goods hit the shelves. In Europe for instance, Fila products are not actually sold by the Fila brand, but by a subsidiary of the Deichmann group, a gigantic footwear retailer in Germany. In Russia, sales are taken care of by SportMaster. It’s a very common business model, but you don’t often see it with popular clothing brands. It’s somehow working for Fila, at least for now.
In terms of market, Fila has basically been everywhere. Their biggest market has been their birthplace of Italy, then the U.S., then back to Europe in general, then South Korea. Recently, they’ve had a huge push in the U.S. again. It’s literally been all over the place.
History
The brand is over 100 years old and originated in Italy. It was founded in 1911 by the Fila brothers, and they used to make stuff you’d wear under your clothes. Not the best for brand recognition. Flash forward to 1974, where they started focusing on athletic clothing with the vision to become an upper scale sportswear brand. Think Polo or Lacoste. They wanted to establish the brand in sports like tennis, golf, and skiing.
With that in mind, they signed the most famous tennis player of all time: Björn Borg. The deal was inked in 1975, and for the next 15 years, Fila became a high-priced brand for fancy tennis players. It was lightyears away from selling streetwear.
That was until 1988 when Fila was acquired by a parent company called Gemina. Whether this acquisition is what initiated a turning point for Fila is not clear, but the story goes as follows. The brand had a major inventory glitch that year, leading to its products being sold on the U.S. market at a discount.
Their brand perception took a big toll from that. But instead of trying to go back to their old pricing model, they decided to embrace the opportunity and they shifted their focus to a more general target population. That turned out to be the best decision the brand ever made.
Following the inventory hick-up in 1988, the brand started getting a lot of popularity in the urban community and among causal basketball players. Fila didn’t know this demographic, but they decided to go with the flow and to get to know their audience.
They did it successfully. Throughout the first half of the ‘90s, they completely shifted their brand perception from an elite, European tennis brand to an American, casual streetwear sports brand. That image from the ‘90s is what stuck with people up to this day, which is why Fila is often believed to be an original American company.
If you’re into basketball, you know your number one most important piece of equipment is the shoes (after the ball). Fila figured that out pretty quickly. They started focusing on footwear, which ended up accounting for over half of their sales. Revenue skyrocketed 15x in the second half of the ‘90s. Fila became the second-largest basketball shoe manufacturer. They were on top of the world.
In 1994, they signed Grant Hill. In 1995, Hill won the rookie of the year award, increasing the brand awareness and sales even more. Fila released the Grant Hill 2 basketball shoe, a huge commercial success.
Fila started signing other international stars in other sports. They started doing women’s fashion and acquired a French company to work on that. In 1997, they had their highest sales number in the history of the brand. They kept getting into more and more far-fetched markets. They ended up losing their main focus: basketball, shoes, and basketball shoes. That’s when things started going south.
Fila is a classic example of diversification gone wrong. They started investing their freshly-earned money in every somewhat related market. But they were going too fast, and they didn’t wait to recoup any of their investments before venturing into something else. They started bleeding money.
Unable to focus on 100 things at the same time, they paid the high price. In 1998, sales dropped almost 50%, a nightmare for any retailer. They closed stores, fired employees, went back to European markets, tennis, and high prices. It was back to square one.
The missed opportunity
If you were a clothing brand in the ‘90s, you had the opportunity of a lifetime. The demand for athletic clothing was huge, so much so that for a while there weren’t enough companies to fill that demand. Consequently, people were willing to try different things, to give a shot at different brands.
No brand was a big player yet, no brand was established in that field. People didn’t care about your name yet, and there was room to get a leeway. The margin for error was comfortable, and all you had to do as a brand was to find your audience, your market, and focus on that. That’s where Fila failed because they went around investing in everything and anything at the same time.
We all know who won the ‘90s: Nike. They played their cards right. Unlike Fila, they focused on what was working for them: basketball, the NBA, Michael Jordan. Granted, Fila got a bit unlucky when their number one athlete, Grant Hill, got a bad injury at the end of the ‘90s and never really recovered. That was three years after he had signed a seven-year contract extension with the brand for $80 million. At the time, this was the largest shoe contract in history, ahead of Nike. It wasn’t helpful to have their main guy on the sidelines at every game, but it would have been manageable by focusing on one market, more players.
After 2000, Fila was done. Nike and Adidas were on their way to intergalactic sales figures, and Fila was more than left behind. In 1997, they had been selling $1.4 billion worth of goods. In 2003, they were down to $792 million. Meanwhile, Nike recorded $10.6 billion in sales that same year. Adidas, $4.9 billion. Could Fila come back? If so, how were they going to do it? Well, like they had been doing since the beginning: by riding the unstable wave of trend with the unreliable board of luck.
Since 2007, Fila has been owned by Fila Korea. They bought the company in shambles for $400 million. This might seem like a lot of money, but when you look at how much companies like Nike or Adidas are worth (much above $10 billion), $400 million was literally a bargain. Especially if you knew a way to turn the company around. As it turned out, they did. Fila filed for IPO and entered the stock market in October 2010. The stock is up 136% since then. So what happened?
That ‘90s vibe
Even though Fila is over 100 years old, people still associate it with the ‘90s. And that’s good for them because everything from the ‘90s is coming back. Knee socks, bandanas, video games, bucket hats… And just like Fila almost accidentally switched from high-end tennis equipment to streetwear and basketball shoes in the ‘90s, they are now riding the throwback vibe. How? Out of luck. Why? Because it’s happening.
Grant Hill
Remember him? Fila signed Hill for a lifetime deal in 2018. Not only is Hill a ‘90s icon (although less than Jordan), lifetime brand deals are almost a trend now. By inking this deal, Fila positions itself as “that kind of brand that’s big enough to sign lifetime deals with athletes.” It reinforces their brand perception as a big player in the field of basketball, and more generally, streetwear.
Fashion
Not only has Fila made a successful comeback as a streetwear/athletic brand, but it has also managed to climb up the fashion ladder too. They’ve had partnerships with brands like Fendi and Miansai. They signed a deal with famed Russian designer Gosha Rubchinskiy. Rihanna, Kendall Jenner, and Emily Ratajkowski have all been spotted wearing Fila, and these are influential trendsetters. Fila is now walking the runways of major fashion events too. They made a sensation at the 2019 Milan Fashion Week.
New CEO
A change of ownership in 2007 and a new CEO in 2018 — that seems to be the winning hand for Fila. Yoon Geun-chang has been with the company since 1991, and he’s been crushing it so much that he was offered the pole position 27 years later.
Following the ‘90s trend, he’s the one who reintroduced the Disruptor 2 shoe model in 2017. Fila sold more than 10 million pairs following the move.
Beginning in 2011, Yoon built a majority stake in the parent company of Titleist, which makes golf equipment and apparel. 61% of Fila’s revenue came from that deal in 2018. Yoon and his family own 20% of Fila, and thanks to his successful turnaround, he’s worth over $800 million.
All in all, Fila seems to be back on track. But for how long?
The biggest learning from Fila is this: Focus on one thing, and learn to do it well. Another big one is this: Don’t just go with the flow and rely on luck. Do your own thing.
Throughout most of its life as a company, Fila has followed trends out of luck without making strong, conscious decisions about where they were going. In the ‘90s, they switched from tennis to basketball shoes following an inventory glitch. Then at the end of the ‘90s, they went back to tennis because things were not looking good. Then the ‘90s throwback vibe came around, and so Fila just went with it.
Fila wouldn’t be where they are today without the lucky ‘90s shot. Nike would still be here without it. So would Adidas. Because these companies focus on only a few things at the same time and don’t go around investing in everything. You would never think of Nike or Adidas coming up with luxury products. Fila tried to do that at some point, and it didn’t go well.
Fila posted a new sales record in 2018: $2.6 billion. From 2016 to 2018 alone, their sales increased 205%. So have they learned their lesson? It’s hard to tell.
In March 2019, they came up with a throwback tennis outfit fashion line, which seemed unnecessary. This year, they’re trying it again, and there’s no reason why it would work better. Why try to bring back tennis again?
Then there’s golf. Yoon’s move to buy Titleist was smart from a business standpoint. Titleist sales brought in an extra $1.5 billion to Fila’s finances. But from a marketing standpoint, the move doesn’t make a lot of sense. How do you convey a clear message to your audience when you’re selling streetwear and basketball shoes on one side and high-end golf equipment on the other?
Finally, the licensing business model of Fila could definitely use some straightening. Fila is everywhere and nowhere at the same time, both in terms of markets and brand story. For instance, nobody knows that Fila is Italian or that it’s a 100-year old brand. Internal communication is most definitely the place to start here.
Only time will tell if Fila will make it through the next years. But the story of this brand is a great example of what happens when you ride the wave of trend with the board of luck: waves, bumps, and a couple of total wipeouts.
