The Shack: A New Chapter in Sponsorship
The entry of Radio Shack into the world of professional cycling is an unusual and historic move for cycling sponsorship in America. They are hardly the first American company to sponsor a European-focused cycling team. But they are certainly the first to view the value of sponsorship strictly through its impact on an American audience.
Many of the companies that sponsor cycling teams are wholly unfamiliar to non-European audiences. Quick Step makes laminate flooring. Lampre makes pre-coated steels. Rabobank is a Dutch banking company whose cycling team gained recognition before the bank expanded into the United States. Caisse d’Epargne is a French bank. Liquigas makes gas-operated barbecues, space heaters, generators and more.
Each of these companies faces stiff competition in the market in Europe; anything they can do to raise awareness or improve the company’s image is considered helpful. Historically, many company owners have been rabid cycling fans who sponsored teams for reasons more emotional than rational. Mapei’s Giorgio Squinzi was famous for his devotion to the team that bore his company’s name.
People wonder why more American companies don’t sponsor cycling teams. In many instances, such advertising is hardly necessary. Coca-Cola is easily the best selling soft drink in Europe. Microsoft? What else do computers run on in Europe?
When the 7-Eleven cycling team went to Europe, the Southland Corporation, which owned the chain of convenience stores, had zero European interests. The marketing payoff for the team’s European campaign could only be realized with cyclists and at races back home.
When the U.S. Postal Service Cycling Team was announced, one of the team’s stated goals was to increase recognition and exposure for its international mail services. Certainly its greatest success came at home with American consumers, but the USPS team could at least claim to have international recognition among its goals.
Discovery Channel may be an American company, but with 1.5 billion subscribers watching more than 100 networks in 170 countries worldwide, its interests were anything but provincial. One of its largest challenges was making sure that its many networks, such as Animal Planet, were associated with the parent company.
Radio Shack, or “The Shack,” as they plan to be known going forward, is the first American company without significant international interests to sponsor a cycling team whose primary racing schedule and strategic goals are international in nature.
It’s an odd marriage. An American company is going abroad to market its business to Americans via an international collection of bike racers racing mostly in Europe.
Come again?
Radio Shack has some 4,400 retail locations. Roughly 200 of them—less than 5 percent—are located in Mexico; the rest are located in the United States, populating strip malls in markets of half a million or more residents.
Lance Armstrong and the cycling team aren’t going this alone; he and they are but one part of a large advertising effort. Radio Shack has devoted $200 million to the re-branding effort, and 10 percent of that—an estimated $20 million—will go to owners Capital Sports and Entertainment, giving it the biggest budget ever for a cycling team.
What sort of exposure will the Shack get for the investment? They can reasonably expect plenty of coverage in the cycling media, on Versus and Universal Sports; that’s not a lot of eyeballs. Further, coverage on the French network 23 means nothing.
The scenario would be laughable was it not for one simple factor: the Lance Factor. Everywhere he goes he makes news. He doesn’t even have to win the Tour de France to be the event’s biggest personality, biggest news generator. Hate him if you want, but, objectively, cycling has never had a personality who generated headlines in so many countries. You could multiply Eddy Merckx by Bernard Hinault and I don’t think we’d hit the media impact Armstrong has.
Bike companies, particularly those that have sponsored Armstrong’s teams, noticed a bump in sales with each of Armstrong’s successive Tour de France wins. The bump became known as “The Lance Effect.” Even companies like Cannondale (with no relationship to the athlete or team) would record a rise in sales as Armstrong’s success brought a rising tide for the bike industry.
But can Armstrong save a chain that is believed by most analysts to be on the skids? Radio Shack was once the clubhouse for electronics geeks; its survival depends on it developing a mainstream clientele to purchase its mainstreamed product line. Stories on the name change to the Shack have focused on how difficult recovery will be considering the competition it faces from chains like Best Buy and now Wal-Mart, which is growing its range of electronics offerings.
Somewhere, someone has a Venn diagram showing the crossover between electronics geeks and cyclists. I’m sure those two sets have a lot of crossover.
History has proven that cyclists will throw support to companies that sponsor cycling. That John Tesh found a market for his Tour de France soundtrack and the U.S. Postal Service sold out every product commemorating the cycling team is proof enough that skinny guys with hairless legs will shop at the Shack. The sort of recovery the Shack needs is greater than American cycling fans can provide, though. The gambit then (and this sponsorship smells like a hail-Mary pass) is whether Lance Armstrong can be the multiplier to channel America’s inner geek into a strip mall shack.
The success—or failure—of the Shack over the next five years is likely to determine how likely American corporations with largely American interests are to enter bicycle racing sponsorship. A Chapter 11 filing would kill any chance of sponsorship from a company without significant European interests. If the Shack succeeds with its turnaround—and if they succeed, they will be the turnaround of the decade—cycling will see some copycat dollars from companies that equate two wheels with success.
Image: John Pierce, Photosport International
