The Silver Lining Playbook for the Licensing Value Chain
Can’t We All Play Nice in the Sandbox?
At about this time every year, kids go to camp. That won’t be happening this year, and your immediate thoughts will probably include how will the people who work at those camps find new revenue sources, how will the camp pay its real estate taxes this year, and how will the owners be able to weather the storm. But there’s more to this story: licensed products collecting dust. All those camp items like branded hiking gear, backpacks, water flasks and even branded sheets will be shelved. And once we’re past summer camp season, all this year’s licensed back-to-school fall clothing and accessories will be warehoused.
One real trend that may be an issue is the Direct-to-Retail (DTR) exclusivity, which will add complexity, especially for seasonal licensed merchandise. Companies are now having to figure out what to do with excess merchandise and timely inventories while planning for the future. With missed seasons, missed product launches and even missed events like the release of a blockbuster movie, many will have to work to create new profitable opportunities.
How the product, licensing and retail industries survive and thrive will depend on the coordinated cooperation of manufacturers, suppliers, retailers, distributors and licensee/licensor relationships. Many challenges will present themselves; from licensed merchandise to consumer goods at Disney’s theme parks, to promotion incentives for retail products like bedding. Any licenses and guarantees associated with them will have to be reworked, or waived, for an indefinite time period. Of course, there are stronger measures that a company can take—like force majeure—which Marvel did for a few of their upcoming projects. However, that option is rare.
One silver lining we are seeing is an openness to take a new look at agreements and identify ways to expand the offerings, especially for licensed merchandise. Examples of this include allowing different variations of the contracts of licensed products, like adding territories and categories, changing sell-off periods, and off-price discount caps, or selling through different distribution channels (brands are creating their own distribution on Amazon, since Amazon is not fulfilling many items from 3rd parties). This is increasing the speed of the shift to e-commerce. E-commerce sales have increased 23.5% since April 2019, up 209% for the month of April 2020, according to analysis by ACI Worldwide. If you read my earlier blog, you will see that, without an enhanced retail experience, stores will struggle, and brands will continue to shift distribution to e-commerce.
As we slowly start to move around and leave our stay-at-home (or safe-at-home) situations, we will see what the new sandbox looks like. In the meantime, are you sure you are asking the right questions on how your business and partners can collaborate to survive? The one thing we do know is that we are all in this together, and we need to work collectively towards solutions.
On a personal note, I think I may keep the saying “We are all in this together” on my email signature for a long time, because if this pandemic has reminded us of anything, it’s the truth of this statement.