JUNIOR FIRMS EMBRACE LICENSING
ONE OF THE QUICKEST WAYS TO EXPAND A BRAND’S CONSUMER AWARENESS IS THROUGH LICENSING, JUNIOR FIRMS ARE LEARNING.
Byline: Rusty Williamson
Those feisty junior firms are vigorously entering the licensing arena, and citing the strategy as one of the fastest ways to grow. While many higher-end companies — which for years have plastered their names across a host of categories — are now rethinking their strategies, junior brands are getting in on the game in a more aggressive way.
Many junior firms are less than five years old and are only now at the level — from a financial and brand-recognition standpoint — where they can expand through licensing deals and additional product categories outside of apparel. A number of teen firms are aiming to become lifestyle brands, rather than just a T-shirt company or denim label. Among the firms who have been more aggressive in this arena are Rampage, XOXO, Dollhouse, Mudd Inc., LEI, Ocean Pacific, Steve Madden, Unionbay and Hello Kitty, a division of Sanrio.
While teen and young contemporary firms acknowledge that there are challenges, and headaches, involved in licensing — including quality, artistic and design control, and maintaining marketing and advertising congruency over a stable of licensed products — those factors don’t outweigh the potential of licensing a hot brand to dramatically increase sales, executives said.
“Licensing is the basis for our business model,” said Andrew Lelchuk, vice president of business development and e-commerce for Ocean Pacific, more commonly referred to as Op. “Licensing in any form is about brand enhancement. With the design and product development processes that we have in place, we can effectively steward the brand and maintain the quality and value of our products established in our brand positioning.”
Lelchuk added that licensing not only rounds out the brand’s product assortment, but helps to reinforce its lifestyle image, which historically revolves around the beach and surfing.
Op currently has a spectrum of licensees that produce everything from the more obvious apparel categories to sunglasses, shoes and fragrances. The company currently is exploring the possibility of adding intimate apparel, sleepwear and home to its lineup.
Larry Hansel, chief executive officer at junior firm Rampage Clothing Co., said the goal of creating a lifestyle brand was the genesis for Rampage’s licensing campaigns, which kicked off in 1995.
“Licensing allows you to touch more consumers who normally wouldn’t go to juniors to make a purchase. They go to shoes and end up buying your brand,” he said. “Licensing also gives you more visibility with retailers, which makes the brand even more important.”
There are now 15 Rampage licensed divisions across the world, ranging from jeans and knitwear to swimwear, watches and eyewear. There are at least two brand extensions planned within the next year, though Hansel wasn’t ready to discuss details.
Licensing now generates about half, or $100 million, of Rampage’s projected brand volume of $200 million this year. Those figures reflect rapid growth over a year ago, added Hansel.
Licensing powerhouse Sanrio, the company that owns the Hello Kitty property, which only began licensing in the U.S. six years ago, now has nearly 70 licensees, from T-shirts to toys.
Globally, the company has nearly 600 licensees, with an incredible 30,000 licensed items in Japan alone, which is the company’s home country. There, the myriad products reflect the Asian passion for nostalgic but hip cartoon characters hailing from Sanrio’s prolific creative department. Earlier this month, the firm signed an agreement with Paul Frank Industries, the young-contemporary collection, to launch a special collection of limited-edition accessory items such as CD wallets and shoulder bags.
Hello Kitty is Sanrio’s star brand, both in the U.S. and internationally. First appearing in the early Seventies, the character is enjoying a surge in popularity. Hello Kitty’s global appeal is reflected in the reach of the brand: the character is popular with preschoolers, as well as dance-club devotees who sport Hello Kitty T-shirts.
In Japan, there are Hello Kitty cars, telephones and wheelchairs. Sanrio is projecting total U.S. retail sales this year to hit $300 million, a 12 percent annual gain.
“The rise in sales is partly attributable to the growth of our licensing program. About 40 to 50 percent of retail sales comes from licensees,” said Bruce Giuliano, vice president of licensing at Sanrio. “Juniors is a fast-growing division at Sanrio. Teens and the 20-something market are both very strong customer groups for us. So we feel that, from a licensing standpoint, it’s very important to develop that particular product base. Out of our 60 licensed divisions, six are now juniors related, with six more possible in the near future.”
Dollhouse, the trendy New York junior apparel firm, now has 10 licensed divisions and is looking into eyewear, cosmetics and home, among other possible areas, said Dana Sheill, director of licensing and brand management.
“Finding the best licensee requires lots of networking,” Sheill said. “It can be a difficult process. We have to make sure that their distribution, production and quality capabilities are the best. But just as important, they must understand what the Dollhouse lifestyle is all about.”
Sheill said Dollhouse branched into licensing in 1998 when consumers started asking for lifestyle branded products, such as intimate apparel and footwear.
“Our explosion came in 1999 with the expansion into dresses, logo T-shirts and accessories,” Sheill said.
Dollhouse’s volume is estimated at $70 million this year, of which nearly $20 million is generated by licensed products, according to Sheill.
Unionbay began its licensing program about a year ago and already it accounts for about 10 percent of the company’s total volume, said Cathie Underwood, vice president of licensing at Seattle Pacific Industries, which includes the brands Unionbay, Reunion and Sergio Valente.
“We started licensing because of retail requests for additional product categories,” Underwood said. “Generally, it’s time to license when the brand is strong enough to carry new product category extensions domestically or to begin as a raw brand in international territories. This requires significant time in the market and investment in national advertising to be successful.”
She said licensing is a way not only to increase consumer awareness, but to build sales in categories in which the company lacks internal manufacturing capabilities.
Like most big brands with licensed divisions, Unionbay handles marketing and advertising campaigns in-house.
“Licensees use our national campaign to conduct any advertising they may do,” Underwood said. “They also use the national ad campaign images for in-store programs.”
Rampage takes a similar approach as Unionbay and maintains creative control by handling all marketing and advertising from corporation headquarters, added Hansel.
“When we go on a shoot or do a new campaign, we try to take all the licensed items with us for the exposure and to show the cohesiveness of the brand,” he said. “It creates a unified picture.”
Rampage also works closely with its licensees about interpreting trends and maintaining a unified creative front, efforts that many company executives said are key to successful licensing.