Hats On Cap stores are making headway in the $208 million sports hat industry.

Next time you're at an amusement park, sporting event,parade or other outdoor event, take a look around and notice howmany people are wearing baseball hats. If it looks to you likeevery man, woman and child as far as the eye can see is sportingsuch a cap, you're not far from the truth. According to theNational Sporting Goods Association, in 1997, Americans spent $208million on caps and hats emblazoned with sport logos, a16 percentincrease over 1995 figures. And this number doesn't eveninclude the untold millions spent on fashion and designer caps fromnonsports-related clothing brands, such as Stussy, No Fear andGuess?; novelty caps such as those promoting a hobby like fishing;or machine-embroidered caps custom-made for company outings orbirthdays.

While baseball-style caps have been around as long as the gameitself, it's only been within the last decade or so that sportsteams have really begun to market their brands via headwear.According to David Stewart, chairman of the marketing department atthe University of Southern California's Marshall School ofBusiness in Los Angeles, the quality and variety of sports-brandedcaps not only provides people with an opportunity to express theirloyalty to a team but appeals to their sense of taste as well."Teams have gotten much more savvy with respect to design andfashion," says Stewart. "The days of having just whitecaps with a logo are gone. Now you have caps that are much morecolorful and that make more of a statement."

Unlike many fashion trends, the popularity of caps seems to spanall age groups and income brackets. "You have the olderconsumers who are identifying with the team, and you have theyounger consumers who are just wearing it as a fashion statement;that it's associated with a certain team may be secondary orirrelevant," says Stewart.

Put A Lid On It

The multisegmented and dynamic market for baseball-style capshas spawned a handful of stores that sell nothing but. In the early'90s, Ben Fischman was in college when he noticed that anoverwhelming number of his classmates (both male and female) worebaseball caps on a daily basis. Although the students consideredtheir headgear a vital fashion accessory, no one Fischman askedcould remember where they had bought their caps. Malls and sportinggoods stores carried them, but after checking there, Fischman foundtheir selection and quality seriously lacking.

In 1993, Fischman started selling licensed sports caps from akiosk at a Chestnut Hill, Massachusetts, mall. Sales of the capswere brisk, and soon Fischman, now 27, was able to move Lids into afull-fledged retail location. Lids Corp. now has 200 locations in40 states and sells more than 8 million hats every year.

Jack Chadsey, 50, CEO of Lids Corp., attributes the chain'ssuccess to a strong focus on quality and assortment (the companytypically stocks nearly 5,000 caps in each store), as well assurges in sales that result from event-oriented marketing. "Wetake advantage of different events that take place throughout theyear," says Chadsey. "When football season begins and theJets win their first three games, we will make sure we have Jetshats on hand. When the Denver Broncos won the Super Bowl, within 24hours, we had Super Bowl Championship hats in all our stores; thesesold out in two or three days. Events are huge opportunities forus."

In its fifth year of operation, Lids is growing at an astoundingrate, with plans to open 100 to 125 new stores in the United Stateseach year. Also in the works: opening stores in Canada and PuertoRico.

Another type of cap store serves customers who want to designtheir own caps. Cap Factory, which offers caps that arecustom-embroidered on the spot by a computerized sewing machine,has grown into a 10-store nationwide chain since its launch in1994.

"While the marketplace for licensed goods is enormous, itseemed to me there was an older demographic group that would bebetter served by having a customized product," says CapFactory founder Larry Sax, 36. "There is a point inpeople's lives where they're a little less inclined to wearwhat everyone else is wearing. Cap Factory gives them anopportunity to get a hat with the name of their boat, grandkid,business or anything else they'd like."

Cap Factory employees use a PC to show customers letteringstyles and graphics, and when a customer is satisfied with thedesign, the information is downloaded into the sewing machine. Capsembroidered using this process, which takes five to 10 minutes,retail for $17 to $30--roughly the same amount a customer wouldspend on a licensed sports cap.

Mail order accounts for a growing portion of Cap Factory'sprofits, which Sax attributes to the company's Internetadvertising. Putting the company's Web address and phone numberon products' tags has gotten consumer attention."There's a tremendous opportunity with the Internet,"Sax says. "With very little effort, we get a hugeresponse."

Capping It Off

Compared to other types of retail locations, opening a cap storeis relatively simple and inexpensive. Because the store onlycarries caps and cap-related items such as cleaning kits, the sizeof the inventory (and the capital outlay it requires) can be helddown. And because the caps and their displays don't take up alot of floor space, there's a significant savings on rent. Forexample, the first store opened by The Hat Zone Inc., a Lee'sSummit, Missouri-based cap retailer with 18 stores, cost less than$60,000 for a 300-square-foot mall space.

If you go the custom-embroidered route, a good portion of yourstart-up capital will be devoted to the automatic embroideringmachine. Bridgewater, New Jersey-based Brother International Corp.offers a line of multihead, multineedle machines that each costbetween $18,000 and $60,000, not including the computer andsoftware necessary for creating graphic designs.

As with any business, there is a certain element of riskinvolved in opening a cap store. According to Stewart, while anarrow niche may be a cap store's advantage over full-scalesporting goods stores and other retail outlets, it may also be astore's Achilles' heel. Although it's unlikely peoplewill stop buying baseball-style caps in the near future, there aresome ways to protect yourself should the cap market suddenly gosour. "[You could] broaden the appeal by carrying differentkinds of hats," says Stewart. "It's certainly a wayto hedge the risk, but it requires a larger investment."

Another way to reduce your risk is to start small. As Lids'experience has shown, a kiosk in a mall is a good place to start acap empire. "You don't have the rent you would have with a[standard retail] store, and you're not going to carry a biginventory," says Stewart. "For someone who doesn'thave a lot of business experience, it would be a good way to get asense of what the business is about while not incurring too muchrisk."

A Head For Business

Making your cap store a success involves a lot of research andplanning. Lids' Jack Chadsey found that while many young womenwere both sports fans and cap wearers, 80 percent of hischain's customers were male. To make female customers feel morewelcome in the stores, Chadsey brought in a retail designconsultant who created a softer, more neutral environment thatincluded life-sized wall graphics of women wearing the store'scaps.

Stewart suggests that one key to prosperity for a business basedon sports-licensed caps is to go where the sports fans are."You shouldn't put [your business] in an upscale mall--therent is very expensive there, and you have to think about theclientele you're going to attract," Stewart says."Ideally, cap stores should be in a kiosk in a suburban malllocation or a small storefront in a central city, areas that mayhave strong allegiances to sports teams."

Baseball-style caps are hot and getting hotter. The continualaddition of expansion teams to the schedules of major-leaguebaseball, football, basketball and hockey means that in the nearfuture, there will be more sports fans than ever looking for afashionable way to rally around their favorite teams. Even thosewho couldn't care less about sports comprise a potential marketfor caps. People's desire to express their personalities willnever go out of style, and these "T-shirts for your head"are an ideal way to make a lasting impression or, at the veryleast, camouflage a bad hair day.

Next Step

• Brother International Corp. offers a line of computerizedembroidering machines in a wide assortment of sizes andcapabilities. Contact the company at 100 Somerset Corporate Blvd.,Bridgewater, NJ 08807 or (800) 432-3532.

• The National Sporting Goods Association (NSGA) providesinformation, news and trends on the sporting goods industry andoffers annual shows and expositions. Contact the NSGA at 1699 WallSt., Mt. Prospect, IL 60056-5780; (847) 439-4000 or log on tohttp://www.nsga.org

• The Hat Zone Inc. offers franchise opportunities forentrepreneurs. Contact the company at 1036A N.E. Jib Ct., Lee'sSummit, MO 64064; (816) 795-8702; fax (816) 795-9159

Contact Sources

Cap Factory, (800) 222-HATS, mail@capfactory.com

Lids Corp., 60 Glacier Dr., Westwood, MA 02090, marketing@lidcorp.com