BRANDS AND LABELS: THE ISSUES
A BLUEPRINT FOR BRAND LICENSING

Byline: Arthur Friedman

Apparel was the largest sector for licensed products last year, recording retail sales of $11.4 billion, or 16 percent of the overall retail licensed goods volume. However, it was the only category among the top 10 that lost market share, with sales dropping 2 percent from 1993.

NEW YORK — Building a powerhouse brand through licensing has become a key marketing strategy in apparel and accessories.
In fact, they rank among the top product categories in the $70 billion in retail sales of licensed products in the U.S. and Canada generated in 1994, according to The Licensing Letter, a trade publication covering the licensing industry.
Apparel was the largest sector for licensed products last year, recording retail sales of $11.4 billion, or 16 percent of the overall retail licensed goods volume. However, it was the only category among the top 10 that lost market share, with sales dropping 2 percent from 1993.
Accessories ranked third overall, with $6.8 billion in retail sales or about 10 percent of the licensed-goods market share. Accessories was also the biggest growth category in 1994 for licensed merchandise, posting a 10 percent sales gain over 1993.
In second place was toys and games, with $7.8 billion in sales and 11 percent of overall licensing revenues.
According to The Licensing Letter, the four largest licensed property types in 1994, all of which include substantial apparel segments, include:
* Entertainment/Character: $17.2 billion in sales; 25 percent market share.
* Sports: $13.8 billion in sales; 20 percent market share.
* Trademark/Brands: $13.2 billion in sales; 19 percent market share.
* Fashion: $12 billion in sales; 17 percent market share.
Shawne Mastronardi, director of retail services at Kurt Salmon Associates, a management consulting firm specializing in retailing and consumer products, said there are five primary objectives to licensing a brand. The first three activities support a strategy aimed at “building a brand franchise.” They are:
* Protecting a trademark.
* Enhancing brand image.
* Focusing on a plan for initial market penetration.
Mastronardi said in order to build a successful brand franchise, a company should initially offer a range of products that are generally related in use. Licensors should also make sure they have a consistency in distribution channels across products and a focus on quality and repurchase intent.
Once a brand is established, often the key licensing objectives aim at broadening a consumer base and building a revenue stream, Mastronardi said, with an overall purpose of “capitalizing on a brand franchise.” A solid strategy to achieve these goals should include:
* Offering a wide array of products within and extending beyond the core category.
* Using multiple channels of distribution.
According to WWD’s Infotracs supplement published last month titled “What’s in a Name,” entertainment/character names that have become accepted as top brands include Looney Tunes, Mickey & Co. and Peanuts. These names are particularly important for children’s apparel, as well as adult novelty gift purchases.
Sports licensing is a big category for basic apparel, the bulk of which is derived from team logo gear such as sweatshirts, T-shirts, jackets, hats and socks. A growing segment includes apparel licenses for equipment lines like Wilson, Spalding and Nautilus.
The trademark/brand category is the least important for apparel and accessories. Where it is used in these categories it consists basically of novelty merchandise like shirts and baseball caps. The big names here are the likes of Coca-Cola, Marlboro, IBM, Budweiser and Pepsi.
Obviously, the category where apparel and accessories are most prevalent is the fashion segment. Mastronardi said apparel is such a strong player in the licensing game because — more than any other category — it presents a consumer’s personal expression.
“Typically, apparel is worn to be seen,” she said. “Many people want to show off what designer they like, where they’ve been or what team they like, and apparel and accessories are a great way to do that.”
In the 1995 Fairchild 100 consumer survey, published last month, several successful licensors were highlighted among the top brands.
Calvin Klein was the most recognizable designer brand in the survey, conducted by the NPD Group, a market research firm based in Port Washington, N.Y., and the ninth brand overall in consumer awareness.
Klein’s licensed fragrances, including the blockbuster CK One unisex perfume, will generate $500 million in retail sales this year, while his underwear license with Warnaco will bring in about $100 million. Klein’s licensing royalties are estimated at $50 million a year.
Other licensing giants among the designer crowd are Ralph Lauren and Bill Blass, who came in 33rd and 34th in the survey.
This year, Lauren inked a deal with Sun Apparel for women’s denims and announced plans for a licensed better-priced women’s line with Jones Apparel Group. Blass products generate about $800 million at retail, the great majority from licensed goods.
Designer names like Christian Dior, Anne Klein and Pierre Cardin — often called the licensing king — also scored in the 50-most-recognized brands. Cardin generates a whopping $1.2 billion at retail for all products from a record 800 licensing partnerships worldwide.
Casual sportswear companies that have become successful licensors include Guess, Chic/HIS and Ocean Pacific/OP.
Adelle Kirk, a consultant to KSA specializing in brand development, said licensors face many key issues in developing a brand-licensing program. Initially, they need to set goals on what they want to achieve through their licensing efforts and how they can best control brand image and growth.
Licensors should determine what products there are already on the market that would impact their franchise, as well as what products consumers expect or want from their brand.
Once that base is set up, a licensor needs to decide on the proper distribution channel, taking into account product mix, the number of licensees for the core product and possible line extension into sub-brands. Examples of sub-branding range from secondary lines like Donna Karan’s DKNY and Calvin Klein’s CK to Disney’s Mickey & Co. and Coca-Cola’s Always Coke or Coke Classic trademarks.
Once the brand franchise strategy is set, a licensor needs to choose a licensee for its products. Kirk said KSA advises licensors to use the following criteria before signing a licensing deal:
* Product category and merchandising expertise.
* Ability to produce a quality product that is consistent with brand image.
* Low-cost manufacturing and sourcing capabilities.
* Consumer marketing expertise.
* Look for a firm with strong retail connections, but one that does not produce competitive merchandise.
Mastronardi said choosing the right licensee is often the key to making or breaking a licensing program.

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