What Floats
in Licensing?
FROM PUBLISHING
TRENDS (NOVEMBER 2004)
Here’s
a lesson from the licensing pros: Political affiliations
or patriotic logos may attract some, but they’re just
as likely to repel potential buyers. That was Everlast’s
recent eye-opener, according to its SVP Global Licensing,
Hal Worsham, when the company discovered that
its signature USA logo had depressed international sales
— confirming the US’s recent loss of popularity across
the pond, and leading the members of a recent licensing
panel to surmise that perhaps the Bush Administration
hasn’t been good for the licensing business. The panel
was part of EPM Communications The Licensing Letter’s
informative one-day symposium, “The Future of Licensing,”
held in New York City in early October.
Although the excellent cast of presenters and panels
offered an otherwise upbeat picture, sales of licensed
merchandise saw a drop to $18 billion in 2003, with
further decline expected in 2004. Most merchandise continues
to be that sold through discounters (mass merchandisers)
and supermarkets, with food being by far the largest
category. TLL Executive Editor Marty Brochstein
genially set the tone with a litany of woes we are all
familiar with: consolidation, consumer spending, and
higher oil prices.
Dan
Stanek of market research firm Retail Forward
assured his audience that the best and the worst of
times are behind us. In the ’90s, licensing saw a 6%
annual compound growth; but these days the best to be
hoped for is 4.5%, and that is predicated on reaching
both high-end and mass consumers. He predicted the economic
gap will continue to widen with less and less of a middle
ground — even Wal-Mart is seeing softness in
their sales, and the world’s top retailer figured prominently
in all panel discussions. And for good reason: the behemoth
now gets a weekly visit from fully half of all Americans,
an astounding statistic.
Nevertheless, available areas for growth include e-commerce,
(even though it represents only 2% of total licensed
retail sales, it is up 62% in five years and is also
a marketing tool, bar none), supercenters (sales and
profit margins grow dramatically when big stores convert
to the even-larger format), drug stores and dollar stores
– the latter notwithstanding the gloomy assessment of
sales in the bottom part of the market. Stanek coined
the term “Zoomers” for a new breed of consumers — boomers
with zest, who happily shop at Bergdorf Goodman and
Wal-Mart — and catering to this customer is the latest
challenge. Nevertheless, with licensing volume flat
and limited shelf space, cannibalizing from one to another
is inevitable, interjected TLL publisher Ira Mayer.
Notwithstanding Everlast’s recent international experiences,
business abroad remains an available area of growth
for retailers (presumably sans stars and bars), as Wal-Mart
has not proven to be very adept in this arena. But,
retailers may not want to stray too far, since the US
represents over 65% of all retail sales of licensed
merchandise.
Everyone’s margins are under siege, not the least due
to retailers’ attempts to compete with Wal-Mart. The
dollar stores have reached critical mass and are a different
animal, requiring their own tightly marked-up merchandise
and making the appeal of outsourcing that much more
apparent. In this climate, the licensor and the retailer
must work from the same assumptions and be more collaborative
than in the past, when issues such as royalties, guarantees,
and tunnel vision regarding the rest of the marketplace
were more the norm.
The keynote speaker, Tim Kilpin, SVP, Girls Marketing
& Design, Mattel, gave a spectacularly upbeat
presentation demonstrating how Mattel was continuing
to extend Barbie’s reach and evolution from a toy, to
a consumer product, to intellectual property. Despite
Barbie’s recently reported sales decline of 26% in the
third quarter, she still represents $3.6 billion globally
at retail. As part of the brand expansion, for the first
time she’s going to be up there with Barney, Bullwinkle,
and Garfield in the Macy’s Thanksgiving Day parade.
Their challenge: Girls now “transition out” of Barbie
at age six, and to move her to the 7-14 age bracket,
they’ve hired actress Hilary Duff as a spokes-Barbie
to market a line of clothes, and created a series of
animated features available on DVD. Kilpin echoed the
importance of the Internet to their marketing strategy:
The Barbie site gets 55 million hits a month (22 million
individual), and a sticky average of 15 minutes per
visit. Although they do not sell on the site, it links
to such retailers as (guess what?) Wal-Mart, Toys“R”Us,
and Amazon with hugely positive results.
Conclusions: license cautiously, market hugely, and
make your mantra: “Go where the consumers go!”
©2004
Publishing Trends
