The JJB deal cannot be easily considered without a degree of stripping down, allowing an analysis of its individual components to begin with and then a more educated opinion of the worth to the club once the facts have been pondered.
Financial
Of the initial £18m payment, £3.5m was spent on 'winding down' actions by the club on its 18 stores. This included redundancy packages for the near 200 staff members who were affected by the deal. Through various accounting procedures the balance of the up-front payment was banked, with the cash being leaked into the profit/loss accounts over the 10 year period in instalments of £1.45m. There was a further £955K in closure costs in the following year, so in total £4.8m was used from the initial payment. The remaining £14.5m will have taken a large dent out of the debt, and one easily over-looked fact is that the interest saved on this money will have been very significant. This £14.5million also allowed Rangers a certain flexibility in cash terms that had previously not been in evidence.
it is worth noting that at the end of this deal (if another of similar nature is not agreed) Rangers will have all the costs involved in re-instating a retail arm and potentially in an uncertain market.
The £3m per year payment, without adding the £1.45m from the up-front payment that appears on the books annually, represents a pure profit from our merchandise. According to the best analysis of the accounts, which on occasion do not show profitability, Rangers had only once made a greater profit in a single year from this department in the previous 10 years. The £3m represents a stable and cost free yearly cash injection at absolutely no risk to the club, and furthermore one that is not worth less in cash terms than that which Rangers had previously received when operations were controlled by the club.
To add further balance it is useful at this point to muse on Rangers' pre JJB performance in the retail area. As noted, accounts from this time are difficult to interpret, often not including profit totals, but while then director Nick Peel was heading a new movement within the club, namely the control and manufacturing of our own brand products, there were at the very least good indications that our overall retail profitability was beginning to show signs of improvement. I do not feel able to put too much weight on this idea, simply because we will now never know how Rangers would have fared in the fullness of time if this undoubtable talented 'salesman' was given the leeway to continue the very real improvements he had begun to put in place, but it is certainly worth considering that although profit had, at best analysis, not reached the levels of cash Rangers receive from JJB, there is a real possibility that in time they would have. This alone does not dictate that should profits have risen to levels eclipsing the JJB deal we would be better off: our marketing almost certainly would have been better run, but there were some very significant quality issues, and with the significant downturn in the retail sector, that increased profitability could have been lost in the space of a few bad months.
The deal includes a 'bonus' scheme which dictates that should JJB's Rangers related turnover breach a certain level, additional payments, based on a percentage over the stated targets, will be payable to the club. The fact that in a year where Rangers reached the UEFA cup final (and presumably sales were as high as they are likely to ever be), the payment was not triggered indicates that either the target is unrealistically high and unlikely ever to be met or retailing and distribution was handled so badly as to preclude any 'cashing in' on the success of that season.
There is a global recession, retail outlets the world over are struggling and many are going out of business entirely. Rangers as a brand has a captive market, but that market is not immune to the conditions prevalent across the whole sector. With that in mind, and allied to the freedom the initial payment afforded us and the guaranteed cash season on season, I firmly believe that despite the seeming failure of the bonus set up, the deal is an extremely good one financially for the club.
The personal argument must in today's climate be balanced with the financial realities that face not only Rangers but every club in Scotland. The aforementioned recession is a stark and chilling problem for retailers, and the fact we do not need to contend with a shrinking market at a time when we ourselves are faced with financial problems is of considerable benefit to the club. We earn more from the JJB agreement than we could realistically earn under our own stewardship and with a crippling debt, fewer viable cash generating avenues, and a product that is being shown in a deteriorating SPL, the annual fee and the up-front payment are of a significance that is hard to over-state.
Marketing and the Rangers brand
Prior to the deal Rangers had 18 retail outlets over and above the Ibrox-based megastore. The majority of these were based in the west of Scotland, and significantly included a retail outlet at Glasgow international airport. These shops alone will have helped to raise awareness of the club's brand to transient shoppers and tourists, and the airport shop will have been quite literally the first port of call for many visitors to Glasgow - as well as allowing last minute gifts with the Rangers crest to be sold to travelling people.
The nature of the deal dictates that whether a single shirt is sold or a thousand shirts are sold, JJB have to pay the same figure every year. This could understandably lead anyone to believe that pushing the Rangers brand in order to maximize their own profits (or indeed minimize their own losses) would be high on the JJB priority list. This does not appear to be the case.
The airport shop was closed by Rangers as part of the deal and no replacement was forthcoming, so a shop that served a dual purpose in raising money and raising profile was lost. There also appears to be a distinct lack of will from JJB to push the brand over others with regards the in-store marketing. Tales of a lack of shop space, or even a complete lack of Rangers branded goods, are all too common and tales of our fiercest rivals merchandise being given priority are also not unheard of.
There can be little doubt that the Rangers brand is being criminally undersold and while the responsibilty lies with JJB it has to be questioned whether adequate sanctions were put in place by the people who brokered the deal on Rangers' behalf. As said, it makes little sense for JJB to be short-selling a product they are paying for handsomely and up front when all evidence would point towards them needing to sell as much produce as possible. It has to be hoped that in the fullness of time, once the deal has run its course, no lasting damage has been done to the Rangers brand.
Human costs and the fans
200 people were directly affected by the deal upon its commencement with the closure of 18 Rangers shops. Redundancies happen in all walks of life, and while nobody wishes to see anybody lose their job far bigger losses have been recorded by far bigger companies in the recent past. If the deal had not gone ahead there is no guarantee that a large proportion of these jobs would not anyway have been lost.
Companies restructure on all levels at different times and Rangers is no different; the job losses are obviously regrettable, but for me they should not be held against the club in this instance.
The disadvantages the fans have faced over the deal are less severe than losing a job, but collectively could conceivably be seen as a bigger issue. On paper the deal is a good one for fans in the UK away from the west of Scotland. In theory a supporter in London, or Portsmouth or even Northampton, would have been able to walk into their local branch of JJB and be able to select from a range of Rangers branded goods. The reality has proven to be far from this ideal, with this summer's shirt release providing the single biggest incident of supporter inconvenience witnessed. It can be argued that far from increasing the average UK fan's ability to purchase goods away from Ibrox, the deal has made it worse, and it can further be added that without the improving on-line sales route, many fans would be unable to purchase any Rangers related products at all. This situation is in direct oposition to an exerpt taken from the annual report in 2006 (CEO)
"The structure of the agreement will allow the Club to safeguard lucrative retail revenue in a challenging market whilst offering the fanbase greater choice and opportunity to purchase through increased availability in the UK and internationally"
The fans of any club are its beating heart and as such should be at the front of anybody's thoughts while considering topics of this nature. We, as Rangers fans are badly let down by this deal, it has seen our family name weakened in the marketplace and left many with fewer options when considering purchases. We are fiercely proud of our loyalty, and I am firmly of the belief that JJB have exploited this fact - secure in the knowledge that they will reach certain targets without having to make any real form of commitment to the brand. They know that most will still buy the shirts regardless of any inconvenience and that certain levels of income are possible for little or no cash outlay. This attitude has undoubtedly weakened the Rangers name and as noted earlier, we have to seriously hope that once the deal has ran its course, we are not left in a position of extreme weakness in the marketplace.
Conclusion
Ultimately each supporter will have his or her personal verdict on the JJB deal. Some of the more financially minded people might be able to over-look the cost to the fan because of the obvious benefit on the balance sheet. Others will point out that if we were running the whole game in-house, profits might be smaller but the people who have paid untold thousands into the club would be better catered for. I am, as is often the case, somewhere in the middle. We can't afford to turn down the kind of money that is being presented to the club, we couldn't afford to turn down the initial £18m, and we will struggle to afford the costs that are involved in re-instating the retail arm at this time. The costs to the fans is unacceptable, but when the alternatives are considered, we may be in a position of needing to accept them.
If there was a way to force Rangers into forcing JJB into performing to a much higher standard then the whole deal could become a superb one on all levels. Sadly though, there appears to be a stark lack of will, or indeed ability, from JJB to improve; or from Rangers into forcing the hand of the retail group. I hope that one day in the not too distant future we will begin to see JJB utilise the giant potential of the Rangers name to fullest effect, benefitting themselves, and us, in the process. While the powers that be within Ibrox seem content to collect the annual payment, that possibility is a slim one.
(I would like to add at this point that all the numbers here have been researched using the Internet and cross-referenced as many times as possible. There remains a possibility that some of the contained numbers may be wrong, but if they are it is because of nothing more sinister than inadequate reporting in our country's media. I have tried to leave as much personal opinion out of the meat of the piece as possible in order to let any reader draw their own conclusions, while at the same time providing a summary of my thoughts at relevant points.)