The challenging economy, price-conscious consumers and retail consolidation have made licensing a designer or lifestyle brand in the lingerie sector more difficult in the last year, executives said.
As a result, fewer first-time licensors are shopping the industry for deals, and the majority of established designer and national brand name licensees are sitting tight on existing agreements, focusing on enhanced quality and design, brand image, on-time deliveries, competitive pricing and solidifying retail partnerships.
However, manufacturers and designers are not the only parties interested in licensed product. Retailers from all channels of distribution over the past couple of years have signed licensing ventures. They range from the secondary label Simply Vera that The Komar Co. produces under license for Kohl’s as a store exclusive, to Tommy Hilfiger sleepwear and loungewear the D2 Brands unit of Delta Galil does exclusively for Macy’s.
Executives believe merchants will pursue more direct licensing pacts this year as they try to differentiate themselves from competitors.
Andrew Jassin, managing director of Jassin Consulting Group, formerly Jassin O’Rourke, said securing a successful licensing deal will be fraught with demands and conditions.
“The licensing process has become more complicated,” Jassin said. “Today, most licensees won’t execute a deal unless they know a retailer will make a commitment. This has been going on since the consolidation of Federated stores and was exacerbated a year ago by the bad economy. It’s expected to continue.”
Despite the impact of the economic turmoil and a shrinking retail base, Jassin said licensed product continues to be a strong component of store sales.
“It’s a very important vehicle to find a method to sell to retailers, and many retailers are taking direct licensing into their businesses,” said Jassin, noting examples such as Daisy Fuentes at Kohl’s, Liz Claiborne and Joe by Joseph Abboud at J. C. Penney, and Tommy Hilfiger at Macy’s.
“We’re seeing more retailers being aggressive about direct licences than ever before and they will become more aggressive this year about licensing brands,” he said. “This is about distinguishing themselves from the competition. Retailers are looking for a more controlled interest in having a brand, whether it’s a derivative brand such as Simply Vera or a [primary] brand such as Tommy Hilfiger.”
Arnold Aronson, managing director of retail strategy at Kurt Salmon Associates, said direct licenses with retailers “create a compelling reason for consumers to buy if there is resonance in a brand. You can get it [the brand] here. That creates a destination motivation. Retailers are definitely becoming more aggressive about licensing.”
Regarding celebrity licenses, which also are being affected by unexpected complications such as the Tiger Woods scandal and Hanesbrands dropping Charlie Sheen from its Hanes ads after his arrest on Christmas Day, Jassin said, “We shy away from celebrity licenses because it’s a huge economic risk based upon the troubles some celebrities have had. If a celebrity gets busted for a criminal offense or if there’s a scandal, consumers get turned off and the license becomes a dangerous risk.”
Executives at lingerie and sleepwear companies said they are taking stronger measures to ensure the viability of their licensees.
“Licensing remains an important opportunity and the core strategy remains the same — translate the power of the brand into our category,” said Jon E. Lewis, president of D2 Brands, which produces the licensed Tommy Hilfiger and Lucky innerwear. “In 2010, retailers continue to be selective with new brands and are conservatively planning current businesses, so the task can be quite challenging.
“Both the intimates offering and the parent license must bring a unique value proposition to the floor,” Lewis said. “Tommy Hilfiger, for example, is a strong brand across multiple categories at Macy’s, and with our intimates launch fills a void in status by providing American classics with a twist. Our new Lucky placements are exceeding plan since the product brings a new aesthetic to our category and truly represents the strength of the parent brand.”
Depending on the strength of the parent brand, Lewis said licenses should weather this economy, since consumers tend to turn toward names they can trust when they are conservative with spending.
“The challenge is for the parent brand to remain relevant in this new economy, combined with intimate apparel offerings that continue to ensure a strong price value,” he added.
Robert Gardner, vice president and general manager for the licensed Donna Karan Intimates and DKNY foundations at Maidenform Brands Inc., said, “For Donna Karan and DKNY intimates, it’s a great time to have iconic brands that represent attainable luxury. When you look important to the consumer, you become important. Just walk through a major department store and note the dominance of DKNY: handbags, jeans, fragrance, watches, intimates and more. As consumers return to more familiar shopping patterns, they want to know what they’re spending their money on. A strong brand gives them that comfort level.”
Gardner said Donna Karan and DKNY will expand to a greater number of doors in 2010, in the U.S. and internationally.
“We are focusing on what we do best: leveraging soft technology that leads to better, more comfortable everyday styling with a twist, as well as offering compelling newness with a strong price-value ratio that makes our consumer feel special and look better in her clothes,” he said.
Marcia Leeds, chief executive officer of Richard Leeds International, which specializes in licensed characters, including Betty Boop, Mickey Mouse and Tweety, said, “Having a brand or even character brands is a big advantage as long as there is newness in fabrics, silhouettes, and of course, art style. New licenses are great as long as they complement what’s going on in the trends of a season, trends that fit into the theme of the sleepwear floor. I always say, ‘Look for newness, but don’t walk away from proven winners.’ For instance, Betty Boop is an evergreen property. But we added newness by cobranding Betty Boop with Coca-Cola. Our Betty-Coke sales have been stellar.”
Seth Morris, president of the Carole Hochman Design Group, which does sleepwear by Lauren Ralph Lauren, Oscar de la Renta, Lilly Pulitzer, Jockey and Betsey Johnson Intimates, said, “We believe strongly in brands that are classic, iconic and have stood the test of time with the consuming public. But I think everyone was forced to take a step back due to the uncertainties we have all experienced. We continue to view licensing as a key component of our business model.”
Morris said the challenge is to present newness and value to stay a step ahead of the lower-priced private labels.
“We are working more closely than ever with our licensees and retail partners to ensure we are maximizing every opportunity,” said Milou Gwyn, vice president of domestic licensing at Jockey International, which has a sleepwear license with The Carole Hochman Design Group. “That could be a special style or a unique print, exclusive marketing event, or creating a consistent and positive shopping experience through floor presentation. One of the biggest challenges facing everyone today is that there is no longer a margin of error. Ensuring relevance in what is now an extremely selective shopping experience is critical to success.”
David Komar, vice president of marketing at The Komar Co., which includes licensed sleepwear and loungewear brands such as Ellen Tracy, Eileen West, Donna Karan and DKNY, and Liz Claiborne at J.C. Penney, said, “We have an integrated licensing strategy in that we target all levels of distribution in our portfolio of brands. The licensed business has been challenged in the same way that the retail business as a whole has been affected. As a result, we have had to focus and become more inventive. The right brands still speak strongly to the consumer and are a crucial part of the value proposition.”