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Spain’s economy slows down but licensing stays on an even keel

Spain is in the midst of an economic slowdown that has taken hold more quickly than expected by European economists. Just last month, Spain's Economy Minister Petro Solbes hacked the growth forecast from 2.3% to 1% in 2009. Moreover, like much of Europe, inflation remains high, while consumer spending has flattened. (In June, retail sales plunged by 7.9%.)
September 1, 2008

Spain is in the midst of an economic slowdown that has taken hold more quickly than expected by European economists. Just last month, Spain’s Economy Minister Petro Solbes hacked the growth forecast from 2.3% to 1% in 2009. Moreover, like much of Europe, inflation remains high, while consumer spending has flattened. (In June, retail sales plunged by 7.9%.)

Fortunately, the US$314.5-million licensed toy market’s outlook is not as grim. The successful release of Ben 10 and Gormiti, along with an average price increase and the solid performance of higher-priced products, has helped. In fact, youth electronics alone (defined by NPD as toy-like electronic and digital items such as DVD/CD players, digital cameras and cell phones) have contributed to a 20.5% spike in the licensed toy market in the first six months of this year compared to the same period in 2007.

In terms of other product categories, licensed video games are also becoming much more popular, says Barcelona-based Imira Entertainment’s Laura Navarro, licensing manager for Spain and Portugal. The more affordable price-points of game consoles such as Nintendo’s Wii and DS are making the category an integral component to a successful licensing program in the country – something Navarro never would have predicted 10 years ago. Meanwhile, royalty rates have also remained relatively steady in the last few years, ranging between 10% and 15%.

That said, industry players in Spain are keenly aware of decreasing consumer confidence and its potentially damaging effects when combined with the huge spike in gas, raw materials and shipping costs being borne by manufacturers right now. Madrid-based BRB Internacional licensing manager Julio Fernandez says these factors are making it very difficult for companies to prepare for their holiday campaigns and general sales plans over the next 12 to 24 months.

And in these rough economic times, just as in the UK, Spain’s licensors and licensees have to look at more creative marketing strategies, rebates and exclusives in order to stand out from competitors. The region’s big retailers, including El Corte Ingles, Carrefour and Auchan, are currently offering better in-store placement and a spot in their advertising flyers if they get exclusive licensed product in exchange.

However, Elastic Rights president Ignacio Orive notes that no one retailer in Spain has a large enough market share to support a meaningful exclusive products program in the way that Walmart can in the US. And he explains that the economies of scale just aren’t there to manufacture unique SKUs for each retailer.

So more often than not, exclusives involve packaging products that are readily available in all retail accounts with a special premium to create a point of difference. Recently, for example, Orive was able to bring together Cookie Jar’s Caillou toy licensee Famosa and DVD partner Big Picture to run an exclusive plush-with-DVD promotion at big-box chain Carrefour.

And as with other territories, Orive warns that Spanish retailers will only enter into licensing negotiations for strong recognizable properties that they feel will increase either traffic or in-store sales volume. Like Italy, Spain also has a consortium of some 30,000 kiosks selling licensed goods. This tier is still important to retail planning as it provides a solid stop for the second phase of a licensing program, especially for lower-priced goods such as stickers and figurines – just the kind of items kids will be looking for as their parents grapple with an economic crunch.

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