Drapers investigates why big-name brands are banking on licensing for sales expansion and product extension when times get tough.
Fashion licensing is a growth market. Tough trading conditions and intense competition on the high street are prompting brands to turn to opportunities in new categories, such as footwear, beauty, childrenswear and homeware for expansion.
This summer, two big names signed partnerships for new categories. Womenswear brand Karen Millen announced it was to expand its accessories and bags offering internationally in partnership with Global Brands Group. Reiss signed its first-ever licensing deal for footwear and accessories with the group, which also works with Calvin Klein, AllSaints and Juicy Couture, earlier this month.
This follows Karen Millen’s appointment in June of footwear licensee Pentland Brands, which has supplied and distributed footwear for Ted Baker since 2001.
It is incremental revenue growth that doesn’t cannibalise the brand in any way. It adds intrinsic value
Mike Thompson, Hype
As many brands face a tricky balancing act between streamlining costs and continuing expansion, the licensing sector could provide a golden ticket to increasing revenues and extending brand reach – without the risks.
For Karen Millen, the decision to license its footwear allowed the brand to expand its “lifestyle” proposition, while also benefiting from the industry expertise of its partner.
“A key pillar of Karen Millen’s future growth will be underpinned in part by a drive towards becoming a full ‘lifestyle’ brand,” says international business development director Simon Gaffey. “We also recognise and understand our limitations in terms of our existing teams and in-house capability, so licensing is a very obvious channel and route for us.”
We recognise our limitations in terms of our existing teams and in-house capability, so licensing is a very obvious route for us
Simon Gaffey, Karen Millen
Industry-specific distribution expertise was another factor. “With footwear, we recognise that there is limited selling capability and capacity within our existing footprint,” adds Gaffey. “The licensing model can accelerate access to scalable distribution networks in categories or regions where Karen Millen does not operate, either through our retail footprint of [own] stores and concessions, or through our own existing wholesale routes.”
He also highlights licensing as a way for brands to gain access to specific design and product development expertise, without the need to build entirely new and expensive in-house teams for comparatively small categories.
This specificity and subsequent cost saving is one reason areas such as footwear and childrenswear are ripe for licensee potential.
“One factor that leads brands to licensing is the cost of having a team on the smaller categories of the business,” explains Boo Jalil, CEO of Brand Machine Group, which holds the childrenswear licences for Farah, Ben Sherman and Converse. “Licensing gives opportunities when you want to be product appropriate, when you want to get your cost of doing business down – especially in the world we live in today – and you want to get a pure net return on very minimal investment.”
Licensing gives opportunities when you want to get your cost of doing business down
Boo Jalil, Brand Machine Group
Richard Newcombe, global president of the footwear division at Pentland Brands, agrees: “Building a successful and sustainable footwear business requires specific expertise and capability. Both recruiting and leading a new category can be capital intensive and distracting.
“Partnering with a recognised industry expert that has proven footwear expertise, strategic vendor relationships and established routes to market, can both accelerate and de-risk a brand’s expansion into the category.”
The addition of new products to a brand’s arsenal also allows it to draw in a wider pool of customers and extend brand awareness without jeopardising its core business.
“Licensing is a new string to the bow for Hype,” says Mike Thompson, chief operating officer of the young fashion brand, which launched its first licence – a gifting partnership with beauty supplier SLG – 12 months ago. Hype now also licenses homeware and loungewear.
Partnering with a recognised industry expert can both accelerate and de-risk a brand’s expansion into the category
Richard Newcombe, Pentland Brands
“It was very strategic in terms of what we choose to collaborate [on],” he explains. “It needed to be a natural extension of the brand but in categories where we realise we can’t champion and own ourselves. We see licensing as a brand extension. It’s an incremental upside, or, if you like, the icing on the cake. It is incremental revenue growth that doesn’t cannibalise the brand in any way. It adds intrinsic value.”
Thompson says a soon-to-be announced licence partnership on prescription glasses will enable the Hype name to sit alongside brands such as Superdry and Police, and will double its points of sale.
In addition to outsourcing categories through licensing, brands are also profiting from partnerships with big name brands. Hype has made this a cornerstone of its business, working with household name such as Disney, Jurassic Park and Coca-Cola to create exclusive merchandise.
“It almost acts as a ‘brand halo’ for us in terms of driving awareness,” explains Thompson.
Tay Singh, director of young fashion brand Daisy Street, which launched a licensed Powerpuff Girls collection for autumn 18, agrees: “It adds credibility to the brand by being associated with a globally known asset. It’s a good revenue driver and the association of the brand being linked with a household name is important.”
However, licensing is by no means a panacea. Brands must take a careful and considered approach to ensure they are not devalued: partnerships and products have to be seamless to avoid the risk of turning off shoppers.
“It’s the consumer that has the power,” says Newcombe. “They are far too knowledgeable to accept anything that is not authentic and credible – anything else risks irrevocable damage to brand equity.
We make sure all our licensed ranges fit back into the in-house range and the stores
Josie Will, Joules
“Historically, some brands viewed licences as a fast track to significant sales growth, but you need to take proper care of both product and distribution. The industry is littered with casualties of this strategy.”
Gaffey agrees, and highlights the importance of building a clearly defined, symbiotic partnership that focuses on collaboration, to ensure both parties’ success is interlinked.
“Partnerships must be truly collaborative to be successful. Everything from design, positioning, pricing, online and offline distribution, marketing and social has to be planned and executed in concert to ensure controlled and managed brand building and optimisation,” he explains. “Clarity and transparency from the start: no surprises once the licence is signed, with commercial and contractual terms that honestly reflect shared ambition, risk and reward.”
He also cautions that licensing is not a guarantee of sales success for smaller brands: “Their focus may be on building and establishing a core product offering or international expansion. Doing this while licensing product additions may prove to be distracting for the management teams.”
Josie Will, licensing manager for lifestyle brand Joules, which has partners for products including bedding, umbrellas, toiletries and sofas, explains how linking licensed items and core ranges is key to ensuring an integrated offer: “Joules has a very clear tone of voice through our prints. You can really see the clear handwriting of the brand. So we always need to be looking back to the core brand values when we look to licence a product.
“We make sure all our licensed ranges fit back into the in-house range and the stores. We make sure all the design and development is referring back to our in-house products, so the themes match up.”
Anything that is not authentic and credible risks irrevocable damage to brand equity
Richard Newcombe, Pentland Brands
“People are becoming more aware of licensing, and brands are willing to try more things,” she says. “A new, interesting brand collaboration is going to catch the headlines, capture people’s interest and create a buzz. In today’s world, where you have to shout the loudest, brands are constantly looking for new things to talk about.”
In a market where budgets are tight and competition for attention is tough, licensing could provide a cost-effective way of expanding a business, and launching new, attention-grabbing and audience-increasing products.
However, brands need to make sure it is authentic and a natural extension of the brand to be successful. If done in a way that protects the brand equity, licensing will continue to grow as a tool for retailers seeking expansion.