Like many other Retail Sector readers, I found Kareena Uttamchandani’s post this week about the end of high street fascinating reading. She highlights a couple of reasons why traditional retail is struggling, principally the rise of online shopping, but also the fact that we live in the age of the customer, the idea being that consumers buy from other consumers and they want to read reviews and leave feedback, both of which are best done digitally.
She then followed with some advice on what retailers can do: use your physical store differently, ensure it’s part of an omnichannel offering and that it offers consumers experience and personalisation – two huge buzzwords in retail.
May I suggest a fourth point? And that’s to not lose sight of the importance of differentiation. The high street is saturated with cookie cutter product. So how do you stand out, attract more consumers in-store and – let’s be honest, this is the critical point – increase your margins and bottom line?
Some retailers are already doing this successfully. Value retailers like Primark, Matalan and Lidl are thriving. Niche stores like Games Workshop are also doing well. And, despite posting an 84% drop in profits, Debenhams is investigating creative new ventures and partnerships, bringing Swoon instore and offering space to independent food producers.
There is also another way to differentiate. And that’s through licensing. While the high street has been doing its best to ride out a force nine gale with story after story about store closures, staff losses, management restructures, low traffic, heatwaves, ‘Beasts from the East’ and poor sales, the licensing industry has quietly been bucking the trend year after year.
In 2016, it was valued at $13bn* in the UK (second only to the US in the licensing table). In 2017, it was worth $271bn* globally, which equated to a 3.3% annual increase. Compare that to the fortunes of retail sales generally, which reported 0.9% and 0.2%increases for the first two quarters of 2018 and it’s not difficult to see the argument for taking licensing seriously.
In case you’re not familiar with the licensing industry. It can work in two ways at retail. Retailers can either sell licensed product, which could be anything from Kylie Jenner makeup and Chupa Chups perfume, to Orla Kiely kitchenware and Masterchef Wine. Or retailers can become a brand in their own right and license that brand to sell product in other stores.
Going back to the first point – why would retailers sell licensed instead of/as well as own-brand product?
There are so many reasons: because a market already exists for that brand, because they can piggyback on umbrella marketing and advertising spend that’s fuelling consumer desires and aspirations, because it can tie in to an intense window of consumer demand (when tied to a movie launch, for example) which can lead to a serious sales peak, because you can negotiate to sell exclusive ranges and because (and here’s the clincher) they can often charge more than for similar, unbranded product. For example, own brand boys’ pyjamas at John Lewis are on sale for around £22 for two sets. Star Wars, Harry Potter and Spider-Man branded pyjamas, on the other hand, cost £15+ for a single set. That’s 37% more per set. Even when you take into account your royalty fee, it still makes very good business sense.
One bricks-and-mortar store that’s nailing it when it comes to licensing is Primark, which continues to buck each and every high street trend. This year, as sales rose by 4%, it overtook M&S as the UK’s largest fashion retailer. It has also been the first to admit that its licensed ranges have played a huge part in that success. It has an innate talent for ‘fast licensing’ by capitalising on cultural phenomena, such as Love Island – the summer TV show that’s taken the UK by storm and has succeeded in tearing millennials away from YouTube and back to the screen.
The show was only on air for a few weeks, yet Primark has managed to create its ranges and get them into store before the season finale. Fashion brand Oasis also created a successful licensing partnership with the V&A last year. Its sales for the same period were also up.
Next question: why would retailers become the brand? In this instance, it pays to think of licensing simply as a marketing or brand extension platform so, by licensing out their brand, it allows the retailer to move into new, exciting categories and channels, increase brand discoverability (especially in a mature market), engage with new consumers in new ways and create an additional, potentially lucrative revenue stream.
This has been achieved successfully by retailers like Ted Baker (beauty, footwear and accessories) and Superdry (grooming products). Fat Face is another retailer who has invested heavily in licensing themselves out as a brand through a range of key partnerships with, for example, Natural History Museum for kids’ apparel, Blueprint for stationery, Scoop Designs for food gifting, Danish Design for pet beds and ICTC for kitchen textiles.
When talking about its successful programme, Fat Face’s head of licensing Gabrielle Sims has insisted that, “making the move to brand extension takes time, innovation, brand consistency, persistence and – more importantly – brand loyalty and trust on behalf of your consumers.
Brands who have a strong DNA, understand and listen to their customers, understand the market and where they can sit at retail, and who work with partners who share their (and their customers’) vision and values,” are more likely to succeed.
“In my opinion,” Simms says, “there is a very clear link between satisfied, happy customers and increased sales and success.” Now show me a single retailer who wouldn’t be happy with that.
By Anna Knight, Brand Licensing Europe brand director. Brand Licensing Europe (9-11 October, London) is the definitive event for the licensing industry in Europe.