RYU formally announced that it is no longer a sponsor of the UFC. In its recent Form 10K (page 5) filed this April, it stated that it no longer will cater to the MMA Marketplace.
Despite an initial positive outlook for the company, it failed to find an adequate financial return on its investment in the sport of MMA.
RYUentered the MMA landscape at the beginning of 2012 as an official sponsor and was a part of UFC broadcasts and PPV. It also opened a store and training facility in Las Vegas. It boasted several former Nike executives which brought an instant credibility to the brand. The brand received good PR including glowing articles about the prospects of the brand.
RYU sponsored fighters with former UFC vet Jon Fitch as its main fighter. RYU aspired to be a lifestyle clothing brand for MMA fans however it did not pan out. As noted in a July 2012 Sports Business Journal article (via MMA Payout), the success depended on the consumers:
While RYU is getting some good buzz, SBJ notes that its success will depend on how well the products sell. A selling point for the brand is that the clothing uses natural materials as it prides itself on being “95% sustainable” and stresses the newest performance technology. Compared with the likes of Nike and TapouT, RYU clothing is much more expensive than it competitors. The question is whether consumers would be willing to spend more on this new brand.
It turns out, consumers did not.
A director resigned although the release did not state that it was related to the financial results of the company. It has moved its headquarters from Las Vegas back to Portland, Oregon where it originally had offices.
On page 9 of its Form 10K, RYU noted a gross loss of $1,115,157 which it attributed to its product development and a write off. It also showed a bigger net loss related to selling and marketing expenses, production creations costs and administrative costs which amounted to $9,868,603.
The company notes that the company will “need to raise substantial additional equity” in 2013 in order to continue RYU as planned.
It goes on to state that 2012 sales fell short of expectations and management cites its UFC partnership in which it tried to position the brand as a “premium performance apparel brand.” The company suffered losses as a result of lower than expected sales from its sponsorship of the UFC.
RYU is undergoing a rebranding strategy which will appeal to a broader base of consumers according to its filing.
Payout Perspective:
RYU’s demise in MMA might be attributed to an assortment of factors. It did go into the endeavor with both feet as it became an official sponsor, opened up a training facility in Las Vegas and sponsored fighters. However, it failed to sell its product as it had envisioned. This could be attributed to the higher price point on its apparel. As we indicated early on, the question was going to be whether consumers would buy a hoodie that was priced $10-$20 higher than a competing brand. Further, the Jon Fitch sponsorship did not work out as Fitch lost his first bout as a RYU sponsored fighter in seconds to Johny Hendricks.
We will see if the RYU brand will continue on without MMA. But, RYU’s story in MMA reflects the fact that despite the best plans, it all depends on the consumers.
It seems to me if you are selling something so much more expensive you have to approach it a little different than they did. Fashion trends are not created by the lowest people in society but the highest levels of society. You don’t get Rosanne Barr to be your runway model. That’s an exaggeration and I don’t mean to put down Fitch by putting it that way. But if you are coming out with a “Luxury” item you need to send that message by going after the big money fighters. Chuck Liddell at his peak sent that message. GSP today sends that message. Sponsoring Fitch who is always been known as a Blue Color fighter didn’t make any sense. Especially when they are burning up money in training centers. Not only did they go after a fighter who is blue color and has blue color type fan base. They come off as cheap getting a mid level celeb fighter rather than a superstar. You cant expect the consumer to spend carelessly when the company themselves was coming off as Froogle. A Chuck Liddell Fan base lives for the moment and spends. A GSP fan base is high class and high maintenance and wants high quality and has it to spend. Fitch fan base responsible, realistic, and spends out of necessity. That just never made sense. Look at how many Affliction shirts were sold of Chuck and GSP at $55-$60. While lower level stars were discounted at $30-$35 and still not popular. Didn’t make sense to me. But im sure that wasn’t the only problem. I have seen that name a 1000 times and never knew what they were. Its a weird name and wasn’t sure how to pronounce it. It certainly didn’t suggest clothing. I didn’t know they sold clothing until this article. It takes more than a name on a fighter to reach people. Maybe rather than just RYU on shirts. Maybe they could have started out with RYU clothing or something to send the message what they are. They seems to not get their message out and what they did get out was aimed at the wrong demographic.
MTV’s The Jersey Shore sold more Affliction and Tapout shirts than MMA ever did. Old methods of advertising don’t work in this modern world. Expecting shirt sales to go through the roof because CB Dollaway wears something for 60 seconds on the main card is an old style of advertising that won’t cut it these days. This is not the 80s…
You guys are missing the point… it takes two clicks to figure out what RYU’s problem was… Their sales model was flawed and they had crap distribution. Not to mention, with limited distribution, no point of sale for everyday consumers (i.e. Dick’s, Academy, heck… even Macy’s), and pissing away what one with a brain and understanding of sponsorships can assume is mid six figures to a league and another mid six figures to a smattering of athletes with no actual call to action… Not smart.
Cart before the horse.
Similar to every other brand someone is trying to sell out of their mom’s basement… minus the fact these guys actually had a quality product, “supposedly” knew what they were doing being Nike execs, and had a bigger bank role… still with no real business plan, all that means is burning through that much money… that much faster…
No…because the UFC is not effective in bringing in sales……