MORE INPUT STRENGTHENS BUSINESS
Byline: Arthur Friedman / with contributions from Janet Ozzard
NEW YORK — Licensing has come a long way from the days when Pierre Cardin slapped his name on some 800 products from perfumes to pencil holders, sat back and collected the royalties.
Today, with intense competition and millions of dollars at stake, designers have to strive harder to protect their labels. That means exerting more control — and participating more in the design and marketing process — than ever before.
One of the pioneers of licensing was Bill Blass, whose 42 licenses generate about $700 million at retail, according to Gail Levenstein, vice president and director of licensing.
“We’ve been licensing so long, sometimes we’re perceived as just a licensing company. People forget about the collection,” Levenstein said. “From early on, we took the approach that licensing should help the brand reach a broader audience. So we marketed lines and products at lower prices. Generally speaking, that’s proven successful.
“But we’ve tried in recent years to upgrade our licensed line to be closer to the designer market. This allows you to sell more product to the same customer. Both approaches can be valid if handled properly.”
Blass’s licenses range from handbags to lamps, encompassing most women’s and men’s apparel and accessories categories. This year, it has tried a new approach with its secondary licensed line. A switch to Augustus Clothiers from PBM Inc. has also meant a transformation from a sportswear line to a complete collection concept, Levenstein noted.
As in most cases, the choice of Augustus was “a feeling-out process,” Levenstein said.
“Of course, the company has to be financially stable,” she said. “But it’s also a matter of a perceptual mesh. You have to have the same goals and distribution plans. But you also have to feel comfortable with the temperament of the company.”
“We give the company a thorough going-over,” said Barbara Friedman, president of Anne Klein Studio, which oversees that sportswear company’s licenses. “We do a lot of market research. Your partners can be the obvious ones, or they can be not so obvious. Sometimes you ask the retailers whom they have worked with what they would recommend. You look at their showrooms, you talk to their suppliers and at the way they present themselves. There are far fewer manufacturers to choose from, and you also have to contend with manufacturers who have many licenses.
“As far as I’m concerned, you look for someone who has a strong reputation for quality, because we look at it as a long-term, not a short-term, engagement.”
Calvin Klein Inc. was already one of the most well-known designer names in the market when, a few years ago, the company decided to accelerate its licensing and make the name a mega-brand.
It reinvigorated its famous jeans brand by signing a deal with Rio, which later became Designer Holdings. CK jeans, launched with a provocative ad campaign and the synergy of Calvin Klein’s CK One scent, took off. The line currently does about $460 million in global wholesale volume.
The company also moved aggressively into global expansion, making deals and letting its licensors sub-license, for the manufacture and distribution of the CK bridge sportswear and the jeanswear in Europe and Asia and opening stores for Collection and CK products. It recently opened an 18,000-square-foot CK megastore in Milan and plans a similar unit in London for this fall.
Ralph Lauren has long been a proponent of licensing, with a corporate philosophy that allows the licensee to build its business independently, but still communicate with the parent.
One example is Polo Jeans, which was launched under a license with Sun Apparel last fall. Polo Jeans has separate showrooms and a separate executive structure, but keeps regular contact with its parent across the street.
However, Lauren has had some not-so-great experiences with licensing. For many years, his women’s wear was handled by Bidermann Industries until that company declared bankruptcy and Lauren was able to reacquire the license in 1994. At that time, Lauren said he wanted to build the women’s business — which was languishing at about $120 million in wholesale volume — to match his $550 million men’s wear business.
Jeffry Aronsson, president and chief executive officer of Oscar de la Renta Ltd., said licensing is a way to leverage a brand with new product development and an extended global reach.
Aronsson said it’s important to create synergies among the licensees to create a situation where the “whole is greater than the sum of the parts,” in terms of continued brand growth through advertising, product development and distribution. In addition, Aronsson said that through strategic planning, the licensor can stimulate a licensee’s growth — for example, by introducing licensees to local foreign distributors.
“Licensing can only be successful if the product, distribution and marketing has integrity,” Aronsson said. “Therefore, unless the product bears the footprint of the brand and is handled consistently with the brand’s identity, the product will eventually fail, with potentially disastrous consequences for the brand. This is of particular concern to a luxury brand house like ours.”
Aronsson explained that de la Renta’s product development program has changed dramatically over the last three years. The offerings bearing the designers name for women’s and the Oscar de la Renta Pour Homme for men’s represents the luxury tier and are for the most part developed without licensing agreements.
The Oscar by Oscar de la Renta label, which has a broader distribution and lower price structure, is used for licensed apparel and accessories items for women and men, although Aronsson said they are treated as if they were separate divisions under the corporate umbrella.
Choosing a licensee is a qualitative and quantitative process, Aronsson noted. Qualitative analysis is more of an intuitive feeling, gleaned through meetings and background checks, he said, while quantitative evaluation determines the resource’s capability and compatibility. This includes examination of the business’s financial statements and existing distribution, and production strengths and weaknesses.
While Anne Klein has had several licenses for a long time, such as Swank for jewelry, the company’s extension products are even more important now that its designer-price signature line is closed — at least for the time being.
“It’s very important for us internally, and for our retailers,” said Friedman. “It creates a second tier of product and becomes a collection unto itself. Whether it’s Anne Klein or Anne Klein II, I think the consumer just keeps that name alive in her head.”
Friedman said that the company works hard to make sure all the licensed products relate to each other — not just in terms of quality, but also in color, styling and design. Along with its existing stable, Anne Klein is pursuing activewear, jeanswear, cosmetics/fragrance and innerwear deals. It has introduced belts, hosiery and swimwear, all for large-sizes, for spring.
“We need to finish the natural product extension,” said Friedman. “We have a commonality of themes, colors, hardware — that kind of thing.”
But besides maintaining quality, Friedman said marketing has become increasingly important.
“A while ago, the field was more product driven,” she said. “Now it’s more marketing driven. The licensees have become more aggressive, and the advertising commitments are bigger.”
Keeping a name alive is one thing; reviving a legendary name is another. Leading Halston’s grand revival is Carmine Porcelli, managing director of Halston International.
“We’re launching 16 [Halston Lifestyle] collections at once for fall, which is unheard of,” said Porcelli, who also led a licensing reorganization at Oscar de la Renta prior to joining Halston. The company also plans to open several additional licenses to complement its Halston Signature designer-priced collection.
Porcelli said over the last nine months or so, he talked to more than 400 companies developing Halston’s licensing program. He said he didn’t necessarily choose the sweetest financial deal, but instead concentrated on finding a reputable company that could be a good partner.
“Our approach to every license was the same. We wanted to get involved only with a top company in that market, and we wanted to have Randolph Duke, our designer, work with every company to apply the Halston image. From the reaction we’ve gotten from retailers, I think we’ve succeeded.”
Porcelli said because of the all-out attack on the marketplace, choosing the right licensee was vital.
“Unless you partner with the right company, you have no business,” Porcelli said. “If Halston doesn’t work right off the bat, we don’t get to do it again. So, we had no choice but to choose the best companies in each field. The department stores needed to know that what was ordered was going to be delivered with quality and efficiency.”
For spring, Halston introduced a lifestyle collection of sportswear and ready-to-wear and an intimate apparel line, both of which are made in-house. For fall, the mass introduction of licensed lines stretches from outerwear to bed sheets and includes nearly every apparel and accessories category.
Porcelli said 10 to 15 years ago, brand licensing “took a nosedive” because companies didn’t build in enough control in the licensing contracts.
“Our agreements call for us to control all design and distribution,” Porcelli said. “We approve store account lists, as well as all logos, packaging and advertising.”
Halston’s licensing deals are for a minimum of three years, with a three-year renewal option. Porcelli said this is the time required to establish the brand.
Nicole Miller has 20 licenses, from jewelry to dishes, with those products generating a wholesale volume of $100 million in 1996, said Bud Konheim, ceo. Konheim said the success of the licensing program comes from a consistent core ready-to-wear and sportswear business and tight control of the product extensions. Mere “approval,” when it comes to licensing, is a misnomer, he said.
“It’s more like total involvement,” he said. “Nicole designs the concept of each division, which is then interpreted by the licensee and finally approved by us.”
Konheim said Miller’s director of licensing, Honey Fishman, conducts monthly sessions among licensees to discuss design direction and retail distribution and constantly tracks the performance of each line.
“It’s like a tree,” Konheim said. “If the core isn’t healthy, the branches can’t prosper, and if any of the branches aren’t healthy, that threatens the whole tree as well.”
To that point, J.G. Hook relaunched its core career sportswear line as an in-house product last July, said Gary Kane, president, to “better control design direction, color and distribution by having a true core from which to draw.” Its career sportswear had been licensed since 1989, when the company decided to become a fully licensed operation.
Kane said all licensing revenues have improved since taking the sportswear back in-house.
Hook still has some 40 licenses in women’s, men’s, children’s and home furnishings and is looking into doing a casual line. This comes from the growing importance of brands at retail, Kane noted.
When developing a licensed line, Kane said the company first makes sure the prospective licensee is financially sound and doesn’t produce a competitive product.
“We want them to pay full attention to us,” Kane said. “We also want to make sure they can produce at the desired level and that the company is run by people with personalities that are compatible with ours.”