Applause handshakes its way to master gift heights

While master toy and apparel deals are viewed as essential bookends for kid property merch programs, such agreements have traditionally been rare in other product segments. But as licensor activity in the gift channel increases, specialty gift and plush manufacturer Applause is switching into master-deal gear.
October 1, 2002

While master toy and apparel deals are viewed as essential bookends for kid property merch programs, such agreements have traditionally been rare in other product segments. But as licensor activity in the gift channel increases, specialty gift and plush manufacturer Applause is switching into master-deal gear.

‘The idea is to join the characters, licenses and materials popular in the toy industry with the sentiment and seasonality of the greeting card industry to create a master gift company,’ says Applause CEO Bob Solomon. While Solomon, a gift industry veteran, has been nurturing his master gift strategy for the past 15 years, the market timing was never right. So why now? ‘During the early ’90s, the mood of the market was buy me; five years ago, it was collect me; and now, I truly believe the feeling at market is love me,’ says Solomon. ‘People buy our type of products when they’re feeling sentimental, so the big gift idea is more valid today than ever.’

So far, Fox (The Simpsons), Nick (its entire library) and National Geographic have bought into that idea, but even Solomon admits that it’s been an uphill climb to change licensors’ mindsets – particularly when it comes to plush.

‘Larger companies such as Mattel and Hasbro dominate the mass market tier of distribution, but they’re not really set up to hit the specialty and gift tiers at the same level that a company like Applause can,’ says Tim Rothwell, senior VP of marketing and merchandising at Universal Studios Consumer Products Group, which has worked with Applause on Curious George. ‘We’ve always approached the two businesses separately.’

Applause sells into mass-market retailers such as Target on the gift side and owns mass-targeted plush manufacturer Dakin, but many licensors aren’t sure that Applause can attain the level of distribution that large toy companies enjoy at mass. They’re also willing to bet that the Hasbros and Mattels of the toy world will hug their plush close if Applause attempts mass domination.

‘The margins are in the plush business and not in PVC toys, so I’m not sure what the win would be for the master toy partner to handle only low-margin items,’ says Rothwell. HIT senior VP of consumer products Holly Stein concurs: ‘Many companies love to have plush as part of their deal because of the margins and because it’s one of the least costly categories to develop,’ claims Stein, who has worked with Applause on Bob the Builder. ‘And there are benefits to going with a master toy type of agreement in which you grant a larger company multiple rights [including plush] because it can leverage manufacturing costs, thereby freeing up more money for marketing and promoting the license.’

If companies like Mattel and Hasbro were willing to release their grip on plush, Rothwell believes that the fragmentation of the master toy agreement would only make for a tougher sell-in at mass: ‘Retailers are consolidating their buyers and want to do more with less, so going in and splitting up categories such as toys could add some challenges to the sell-in effort.’

For now, Solomon admits that his focus in crafting master plush deals is on Applause, which he is positioning as the ‘Armani of gift and plush.’ Of course, Solomon can’t ignore mass merchants in the deep discounter business, so he still needs to offer a ‘Banana Republic line.’ Says Solomon: ‘The specialty retailer is looking for breadth of product, an assortment that makes a statement. The mass merchant is looking for more depth, so they may focus on just one or two SKUs.’

Applause adjusts its product development approach to meet the varied needs of its diverse retail base. Extra care is put into fabric and packaging details such as ‘To and From’ hang tags on Applause plush to make it giftable, while Dakin lines tend to be simpler to make them more palatable to mass retailers. For example, ‘if you take one of our Mickey Mouse products and lay it out with no packaging, one might view it as simply a nice toy. But if we embroider ‘Orlando’ on it and sell it at Disney World, it’s a souvenir gift. If we put a graduation hat on Snoopy, it’s a graduation gift. Those small features change the complexion of the product, and that’s what we do to separate ourselves,’ says Solomon.

Whether or not they’ve explored master deals with Applause, many licensors agree that the company’s distribution in gift channels and non-traditional outlets makes it one to watch. ‘I’m just looking to sell my product where people go,’ says Soloman. ‘When people go to Blockbuster, they’re there to rent movies, not to buy gifts; but Blockbuster is one of my biggest retail accounts.’ The company’s direct sales team is dispatched daily to independent stores and small boutiques to build personal relationships at all retail levels. ‘We look at the market one ZIP code and one store at a time, which gives us the opportunity to sell into places such as hospital gift shops, florists and convenience stores,’ says Solomon.

Manufacturers subscribing to the ‘go big or go home’ retail philo-sophy may also be tracking Applause’s master gift climb after watching it reel in the likes of Nick on the strength of that strategy. ‘We used to divide up some of our gift and toy rights, and in the gift channel, we’re now looking at merchandising Nickelodeon properties together, which is really how you see them on the network,’ says Nick VP of licensing Samantha Freeman. ‘We want to maximize coverage for our licenses beyond mass, and a partner like Applause can reach the balance of outlets.’

Nick’s ensemble philosophy also jibed with the direction in which Solomon has taken the company since purchasing it a year ago. ‘Unlike a toy company, which can live or die in any given year depending on the product or character it might be working on, I’ve tried to create a festival of licenses and characters. I don’t feel comfortable being over-reliant on any one character, license, vendor or retailer.’

With the kid category covered by multi-year deals with Disney and Nickelodeon, Solomon is now turning his attention to the teen and infant/early preschool segments to round out his portfolio.

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