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Licensing: More than ever, a key strategy for retailers

Faced with uncertain economic conditions, retailers are scrambling for new ways to drive consumers into their stores, at the same time establishing a clear advantage over the competition.
So, how does a retailer go about making itself unique? More often then...
June 1, 2001

Faced with uncertain economic conditions, retailers are scrambling for new ways to drive consumers into their stores, at the same time establishing a clear advantage over the competition.

So, how does a retailer go about making itself unique? More often then not, it involves a deal for licensed merch on a direct-to-retail basis with a major licensor-two notable examples being recent deals forged between Kmart and Disney, and Wal-Mart and the Olsen twins.

While such deals take several different forms, the most common are those where a retailer acquires exclusive rights to a property-or certain product categories-direct from the licensor, then arranges for sourcing on its own. Many retailers and licensing professionals consider these agreements to be the wave of the future, since they allow the retailer the opportunity to create hip, trend-driven merchandise tailored to its particular clientele, helping to reduce the number of SKUs and suppliers, and better control inventories.

But it’s not just the big fish of the licensing pond that can succeed with retail exclusives. By being resourceful and thinking creatively, small and mid-size licensors can create high-impact programs with high-profile retailers. For example, looking to bolster the presence of its Popsicle brand in the sleepwear category, Leeward International teamed with JCPenney last spring on a line of junior and ladies pajamas.

Yet in exploring exclusive opportunities for their brands, licensors should consider looking beyond traditional mass merchant outlets and department stores. While these heavy-traffic chains are ideal, the right partnership with niche retail channels-drug stores, regional retailers, supermarkets and other specialty venues-can also produce huge results.

Often, niche channels are more amenable to exclusives because such deals open their outlets to new shopping audiences; thus, they may be more apt to support an exclusive with greater in-store and advertising muscle. Recognizing that drug store chains are a key outlet for consumer candy purchases during the Halloween season, Universal Studios teamed with drug store chain CVS last year on a campaign that developed Universal Monsters-themed merch tied to this seasonal event and was backed by huge in-store promotion and advertising.

Retailers and licensors also realize that their exclusive partnership has a major effect on consumer loyalty. The ability to increase a relationship with the customer base by offering them something they cannot get elsewhere will result in return visits. From the licensor’s perspective, these return visits will further impact the awareness of their brands, while retailers benefit from sales of the single property and the additional revenue from other items the shopper will ultimately purchase at their location.

As with almost any business arrangement, there are potential downsides and trade-offs to exclusive and direct-to-retail deals-limiting the accessibility of the products to one retailer; straining licensee relationships in certain product categories if that licensee isn’t chosen to be a part of the deal; and straining retailer relationships by signing a deal with one to the exclusion of all others. But clearly licensors and retailers feel the benefits greatly outweigh the risks.

Ultimately, the success of retail exclusives are dependent on a carefully thought out partnership between the licensor and retailer. The licensor needs to target the right retail outlet for its brand-bigger does not always mean better-and show the retailer how the licensed merch will drive traffic.

The bottom line is that retailers turn to licensed merchandise to break away from the pack and give customers a compelling reason to come into the store. The simple fact is that licensed products and brands reinforce loyalty, create awareness and drive traffic. And what retailer wouldn’t want that?

Charles M. Riotto is president of the International Licensing Industry Merchandisers’ Association (LIMA).

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