The death of the department store?

This week, luxury retailer Barneys New York announced that it had filed Chapter 11 and planned to close most of its stores (Reuters), leaving retail analysts and consumers wondering: Are we witnessing the death of department stores as we know it?

On Tuesday, Sears Holdings announced it would close 21 Sears stores by late October (CNN)–adding to the long list of Sears and Kmart store closures that have taken place since Sears Holdings Corporation’s October 2018 Chapter 11 filing.

But, wait, there’s more. On Wednesday, women’s fashion retailer A’Gaci filed Chapter 11 with plans to close all brick-and-mortar locations.

Though the economic implications behind what’s happening at retail are too nuanced and complicated to package into a neat sound bite, it’s clear that department stores are in trouble. Whether it’s because of convenience, competitive pricing or an increase in free-and-fast shipping— think Amazon Prime— more consumers have turned away from traditional brick-and-mortar stores and towards e-commerce to make their purchases.

In today’s retail landscape, options abound, which means high-end luxury retailers must compete with a seemingly limitless pool of competitors, who opt to offer the best possible deal to lock in the price-conscious, coupon-code-wielding consumer of today.

Even consumers who are attracted to luxury items want a good deal–and are willing to shop around for it. If you’re a Millennial mom strapped for time, why leave the comfort of your home to scour the aisles of a department store only to see whatever happens to be in-stock at the particular time when you can set advance search functions of a site like Gilt.com.

In 2019, it’s almost an antiquated idea go to a department store. Furniture? There are several furniture e-commerce sites and retailers to choose from. Clothing? Just scroll down your Instagram feed and you’ll happen upon a barrage of ads from clothing retailers–high-end and fast fashion­–cleverly promoting their products to you via incredibly targeted ads that happen to know exactly what you’re poised to purchase. Cosmetics? Why not head to Sephora’s snazzy website, where you rack-up points toward your next Givenchy lipstick purchase and get free samples of product or search Amazon’s endless supply of products. Appliances­–again, Amazon.

So, what place do department stores have in today’s retail landscape? Who will choose Barneys, Neiman Marcus, Nordstrom or JCPenney over an online shop? Or, maybe the better question is, how can department stores compete (and beat) the e-commerce giants and today’s easily-accessible myriad of retailers? What is the strategy? Who is the ideal target demographic? And what is the point of differentiation?

The natural solution might appear to be to target the older consumer who doesn’t shop online but prefers a more tactile approach to shopping; someone who grew up going to Macy’s sales event. But catering to this group is only putting a temporary Band-Aid on the problem.

You’ve got to play the long game like establish brands such as Nordstrom have done. In recent years, the luxury retailer has been lauded by organizations like the National Retail Federationfor leveraging the latest technology and training to provide quality customer service. Nordstrom’s use of mobile apps combined with their focus on personal service has seen the store survive the changing tides of retail and see modest growth over the last few years(GeekWire).

Stores must evolve and embrace the inevitable societal and technological changes that are irreversibly affecting consumer trends. Traditional department stores must aim younger and cooler and leverage all available technology and social network platforms. Macy’s, for example, gets it. The retailer announced this week that its back-to-school promotion would include shoppable commercials on the “Snapchat” app. Macy’s will also launch a video-sharing challenge on the “TikTok” app dubbed “All Brand-New Challenge,” encouraging teens to record videos that showcase their new school outfits and share them via social media. This clever call-to-action speaks to younger consumers in their language–snap and share. Macy’s has also launched campaigns for pop-ups that featured “Pinterest” Pincodes for visitors to scan, which revealed a board with curated outfits based on each location. For the 2018 holiday season, Macy’s also offered shoppable Instagram stories based on personalized gift guides.

Though Macy’s faces an uphill battle (the retailer reported a decline in Q1 revenue, year-over-year), it’s on the right track and launching clever marketing campaigns that highlight its own brand name and cool narrative-driven retail concepts, such as STORY. Department stores should follow suit and implement fresh marketing campaigns that tackle all consumer touchpoints and authentically attract a younger customer base to ensure longevity. Offering free shipping is a must, and meeting consumers where they are–online–is no longer an option but a necessity.

The stakes are high, and department stores who don’t adapt will face the same fate as Barneys, Sears, et al.

source: https://www.licenseglobal.com/analysis/death-department-store

Keanu Reeves, ‘FORTNITE’ and the potential of in-game licensing

How do you know Keanu Reeves?

Do you know him as Neo from The Matrix? The eponymous John Wick from the famed action trilogy of the same name? Maybe as Johnny Utah, the undercover cop/surfer, all-around-cool-guy from Point Break? Or, perhaps, it’s not from a movie role at all.

If you’re like one of the thousands of kids who met Reeves at E3 this year, your answer might actually be that you know the actor as the “‘Fortnite’ Guy.” The Johnny Mnemonic star told Polygon that while walking the halls of this year’s massive video game convention, gamers approached him in droves to ask for a picture with who they thought was the guy who inspired the latest “Fortnite” character skin, Reaper. The battle royale game’s skin bore a striking resemblance to Reeves, so much so, in fact, that the creators of “Fortnite” partnered with the actor to create a John Wick-styled character skin.

Reeves’ anecdote about being the “‘Fortnite’ Guy” speaks to the game’s massive influence in pop culture. Nearly everyone is a gamer in some form, whether that’s playing “Pokémon Go” on a mobile phone or “Call of Duty” on a PS4. This expansive medium of entertainment has proven lucrative for licensing, and companies are now getting creative with the ways they bring their brand into the gaming sector.

Character skins, like the ones in “Fortnite,” have proven valuable for getting brands in front of a new audience. These cross-promotional licensing deals are a unique way to ingratiate a character into the video game space without spending the capital on creating a game that lacks community buy-in. Famed IP such as Reeves’ John Wick and Chief Hopper from “Stranger Things” have already jumped into the consciousness of gamers with in-game collaborations.

‘Fortnite’’s Descent into the Upside-Down

Aside from the Keanu Reeves mashup, “Fortnite” developer Epic Games has also done some clever licensing work with other non-gaming properties, such as “Stranger Things.” The Netflix original series just launched its third season, and to capitalize on the debut, the streaming giant partnered with Epic Games on limited-edition “Fortnite” content.

The timing of show-inspired character skins and locations makes sense, as the series just launched its latest string of episodes. However, such a move would also align perfectly with the modern ecosystem of gaming, where studios launch a free-to-play game that relies on continual new additions that can be purchased as add-ons (i.e., skins and levels).

Licensing in-game content is just now playing a major role in today’s gaming landscape, but as more companies copy the business model, it’s bound to become a more common tactic. It can take a game that has been on the market for months, or even years, and provide a steady-stream of new content that keeps gamers coming back. Not to mention, it leverages the cultural zeitgeist to make something old new again.

‘Smash Bros.’ Plays Nice with the Competition

Downloadable content is just one aspect of the new model of game development. The second major aspect of a successful game franchise is competitive gaming opportunities. Esports competitions are a major part of a property’s success, as the World Economic Forum reports that the space could rake in revenue of more than $1 billion annually in the next two years.

One of the first to take advantage of the success of competitive gaming was Nintendo’s “Super Smash Bros.” franchise. The grandfather of esports fighting games started out in tournaments dating back to 2002 and carried on to the present day with the most recent release in the series, “Super Smash Bros. Ultimate.” Nintendo’s franchise was also one of the first to license third-party properties as in-game characters.

In 2008, “Super Smash Bros. Brawl” debuted with new characters from Sony properties including Sonic the Hedgehog and Solid Snake of “Metal Gear Solid.” That licensing deal with Sony marked the beginning of the third-party licensing craze in gaming that since led to the “Fortnite” deals and others by the likes of Brawlhalla. For both gaming companies, the deal was perfectly synergistic, as esports professionals go on to use third-party characters in competitions around the world.

Gaming’s Changing Ecosystem Has Transformed Licensing

Gaming is the most popular form of entertainment in the world. It’s also at the forefront of revolutionizing how entertainment works in terms of retail and licensing. From free-to-play to esports tournaments, gaming companies have turned their properties evergreen.

This paradigm shift provides ample opportunities for licensing in-game and bringing characters in front of a whole slew of new consumers. These can be synergistic deals for many character and entertainment brands looking for ways to market their properties in front of a massive audience. And if you don’t believe that’s the case, just remember, a bunch of kids at E3 thought Keanu Reeves was a “Fortnite” character.

Source: https://www.licenseglobal.com/analysis/keanu-reeves-fortnite-and-potential-game-licensing

Ganesh Subramanian

Possibilities in Retail through AI & Robotics: From GiTex

By Ganesh Subramanian

Founder & CEO @ Stylumia

We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction – Bill Gates

The combination of artificial intelligence (AI) and  collaborative robotics has the potential to change the world. AI unlocks entirely new capabilities for robots, which, without AI, are rigid and unresponsive to the world around them. We were able to spot many real life applications at the intersection of robotics and AI. This edit is a recap of some of our observations. 

Lead innovations in retail will start to happen in the area of mass public consumption. By keeping a close watch here, you will be future-aware and get future-ready.
 
#1 Robotic Cocktail/ Mixologist

Cooking is an art for chefs, and when a mixologist readies a glass of drink to meet the customer’s expectations and satiate his thirst, it’s both art and science at play. Watch a robotic mixologist in action here or click the image.

#2 Shop Comes Home

Why go to a shop when the shop can come to your door step. A smart combination of Cab Hailing, Self-Driving Car and Shopping all in one. Watch this innovation here or click the image below.

#3 Robotic Pharmacy

From prescription to tendering the medicine, this robotic pharmacy is fully self-serve. With digitisation of the medical system, this explodes the possibility of using data to improve both the doctor’s diagnosis and future prescriptions. You can watch this innovation here or click the image below.

#4 Offline Retailing Personalised to One

With a face scan, pick up a self help scanner and start your shopping. As you scan an item, contextual offers, promotions, marketing messages pop-up. Complete your shopping, check out with your wearable. This is retailing to the level of one which best of companies are able to practice online now, coming to offline soon. You can watch this innovation here or click the image below.

Here is an unmanned store concept. Enter with your Face ID, shop and keep moving.

#5 Localised Automation

Automation need not be at the scale of a Store. This innovation is a clear example of automating one process, for eg., Check-out scanning. One of the key issues in bar code based scanning is many bar codes are not readable and there is plenty of time wasted and customers have to wait. This 3D scanning machine with computer vision can recognise the products irrespective of where the bar code is and even if the bar code is missing (using the image and text on the packaging). You can watch this innovation here or click he image below.

#6 Computer Vision: Possibilities

Computer vision provides machines, the cognitive capabilities which helps machines now to do a lot of skilled jobs at scale. The following possibilities are covered in the video below

a) Object Identification
b) Weapon Detection
c) Character Recognition
d) Personality Identification
e) Violence Detection
f) Emotion Detection
g) Drowsiness detection

You can watch this innovation here or click the image below.

#7 Smart Wall

This is a see through smart screen which can be fixed in malls or retail stores with a camera right on top. As the people walking by stop there, they will get personalised recommendations of brands and products. They can interact with the screen and shop. The walls collect information on the people who came using the camera and share the details on customer profiles and their interactions with the brands. Consumer research and interactions made simpler and at scale.

Social and humanoid robots will help us do a lot of mundane tasks in the time to come. I had the opportunity to interact with Sofia, the world’s first robot citizen, and Han (a humanoid robot created by Hanson Robotics). I also interacted with another mini social robot which converses with us and slowly becomes like ours, a huge potential in changing education and user interfaces in the time to come. We captured these memories below.

You can watch Sofia in action here or click the image below.

Hope these innovations are stimulating some thoughts in you for the business you are in.
 
With the capabilities of machines improving by the day, what we need to do as human is changing rapidly. If you are not seeing it, it is coming to you faster than you think. It is important for each one of us to look at the skillsets of our teams and organisations in this context to be future-ready.

Apart from bringing the AI technologies to fashion and retail industry, we at Stylumia would like to play a role in the skill enhancement with respect to understanding the technologies available today.

If you would like to know more about future skill-sets required for a fashion brand or retailer, please get in touch with me on the following  – Email: support@stylumia.com : Mob +91 8010812602

bhavik-vora-founder-and-ceo-black-white-orange-brands

Sports Licensing in India – On field to Off field

Sports merchandising not only creates great value for the brand but also creates engagement with the FAN off the field.

The community of FANS not only defines the legacy of the brand but also its shelf life.  It can’t be truer for one of the biggest forms of licensing i.e SPORTS.

Globally, Sports Licensing is one of the biggest licensing categories for entertainment and has seen some hugely successful programs on Brand Extensions. There are typically 2 models that the teams/talent follow, and there have been successful case studies in both.  Sports Licensing is currently valued at USD 24.9 billion and is expected to make USD 48.17 billion by 2024.

Sports Teams are built by their fans or fanatics, as they are popularly referred to, because of their excessive enthusiasm for their favorite team or player, and the devotion towards them.

India has been an untapped market when it comes to sports licensing. As far as sports is concerned, India has traditionally been a cricket dominated country, however, that hasn’t really translated into a merchandise program, except for IPL team Jerseys, which are predominantly sold during match days, and face severe issues with fakes. With technology and a large youth population, there has been a considerable shift in the genre. The rising e-commerce and online sales have further positively impacted market growth.

Some things to look out for…

IPL Merchandise will gain momentum

rcb-merchandise-virat-kohliIPL has already completed a decade and some of the teams, which have maintained consistency in players, culture, communication & performance, have developed a large fan base and are completely license ready. With the right strategy, they can create a very successful and long-term consumer product program. At Black White Orange, we manage the licensing program for the RCB (Royal Challengers Bangalore) & I’m happy to say that we’ve already initiated steps in the right direction. Hopefully, it’s a matter of time when others follow suit. With RCB, we’ve conceptualized the strategy, created an exhaustive style guide, found the right partners and products are now in stores! We’re planning to launch products across categories during & after the IPL this year. The support we’ve received from team RCB is immense & that goes a long way in projecting the right image & sustaining the brand.

International Sports Teams will expand their presence –

Football is becoming the preferred sport among youngsters and kids not just in viewership, but also in terms of play time. ISL has had a great start already. The success of the merchandise program is directly linked to the success of the league as well as consistent & competitive performances from the teams.

The NBA probably has one of the highest penetrations as a sport at school level, outside of cricket& are running a very successful grassroots level program. This strategy helps create a fan base at a young age, which starts consuming the brands and products very early.

Popular Sports Stars and their Extensions –

There has been a massive movement in this space with some of the top sports personalities venturing into their own line of products. The internationally co-branded line between sports personalities & brands has seen huge success with the biggest of them being Air Jordan with Nike. Messi and Ronaldo also have a similar line with Adidas and Nike respectively. Closer Home, Virat Kohli has led the way with the launch of WROGN & the recent addition One8, in collaboration with PUMA. Yuvraj Singh’s brand YOUWECAN that launched last year, has also been accepted well by the consumers.

Local Sports Leagues will be a big future

Sports outside of cricket are becoming a big draw and the success of Pro Kabbadi league and popularity of players like PV Sindhu, SainaNehwal& K Srikanth is a big testimony to that fact. There will definitely be some action in this space.

School & College Sports merchandise has massive untapped potential.

This is a 7 Billion dollar business in the US but completely unexplored in India, and as sports become a key part of School & College life, consumption of owning a piece of your school and college team is going to gain massive momentum.

Challenges in India;

Product Design Capability is a big challenge and creating high quality & aspirational creative assets, which translate well into products, is the key ingredient of a successful licensing program.

Indian brands should look at merchandising as a revenue model and not a marketing tool; it needs to invest in creating the right strategy, the right culture and the right infrastructure to get maximum value.

Counterfeit products pose a massive challenge for this business and immediate measures are required to curb this menace.

About the author:

black-white-orange-logoBhavik Vora, Founder & CEO, Black White Orange Brands Pvt. Ltd

A new-age start-up driven by experienced and passionate minds, Black White Orange provides merchandising solutions and helps brands, celebrities, media, and retailers find ways to strengthen their relationship with the most important stakeholder – the consumer. We offer services in retail, distribution, syndication, brand consulting & creative solutions, both within India & overseas.

dave-sharat

Emerging Markets And Brand Licensing by Dave Sharat

EMERGING MARKETS AND BRAND LICENSING
What benchmarks successful Brand licensing in emerging markets ? Surely there are more than one factor that steers the business, in as much as the several pitfalls that render deals going south. It would be hard to have a consensus on all but here are some that would ring a bell from your own times perhaps.
BITING OFF MORE..
This goes both sides of the fence.. licensors and licensees falling on their own swords. Over zealous expectations from a market and the need for presence in a new market on the one hand and in trying to “win”  the license, the prospective licensee often providing the licensor with a “best case scenario” instead of a more realistic case, on the other, are deterrents. The often hyped initial projections will then form the basis to develop minimum sales targets and royalties, which will then go into the contracts. Trouble looms when both sides agree to just about “any” terms in order to have a “get go” and the inability to achieve the objectives ultimately result in a stalemate. Getting in over one’s head, prospective licensees often try to secure multiple regions or channels as part of the deal. This may be because the licensee really believes it can take full advantage of all of the rights offered and sell its product into each of the channels or regions.
Creating unrealistic expectations also comes when licensees may not fully understand the true strength of the brand whose license they just acquired. The licensee may overestimate the power of the brand, believing the brand alone on their product will result in acquiring new clients or larger programs with existing clients.
Licensors often want the licensee to treat the licensed category with the same care they would treat a product category in their own organization. They expect the licensee to develop the product following the brand’s style guides carefully and to follow externally a similar protocol to the one that the licensor follows internally. The licensor wants the licensed product to be of a quality that the licensor would be proud to have on a retail shelf next to the internal product. Optimizing expectations on both sides is what’s key


DUE DILIGENCE 
The classic and most frequent mistake is to assume that a formula for the licensing or franchising of a brand in one market will work equally well, unamended and unadapted, in another market. There are many examples of brands which are large and successful household names in their home markets but have tried and failed in emerging markets.KFC Vs McDonalds in China, HOME DEPOT closing in China whereas B&Q  flourishing by consistently reading the market better have been highlighted before too. The animated cartoon ‘Little Krishna’ which was a hit on Nickelodeon India is another eg. Bu then to launch a merchandising range featuring bath mats and bedroom slippers was a great mistake: Little Krishna was, after all, still a god and never, ever would you place your feet on an image of a god! The lesson is – selling in a particular market would need understanding the minds of the buying public or the target audience. What works in one part of the world may not work at all in another part of the world.

TRANSCENDING BRAND STRENGTHS 
Assuming the brand is as well known and as highly prized in the local market, as it is at home, is another cry. It is remarkable how deluded senior executives in leading “Western” corporations are about how well-known their brands are in other markets. Even with the advent of the Internet, a brand may simply not be known to large swathes of the population in large parts of the world. As a result, in a negotiation with a potential licensee, the brand owner needs to articulate to the licensee the value proposition that is being brought to the table, and not to assume that this “speaks for itself”. Thus in a market which it plans to develop, a licensor would be well advised to offer additional marketing support and funding in order to assist a potential licensee,. This could include allowing the local licensee to get the benefit of bulk purchasing discounts on marketing materials, to offering prizes to fly successful sales staff to the head office. Patience and persistence in building up the brand in critical. A striking example of the difference between what might appear to someone sitting in the UK and what might appear to someone sitting in China is the story of Stockport County football (soccer) club which has just as much as brand resilience as Manchester United but then Stockport County club does not figure in any serious football rankings. This was because of the energetic efforts of the Commercial Manager of Stockport County, who regularly visited China, made sure that Stockport County was known in many different places, organized events and flew the team out for exhibition matches. As a result, the amount of goodwill attaching to the Stockport County brand in China was remarkable – even after the team’s fortunes in the UK had plummeted! At one point, one third of the club’s revenues came from China !

DIVERSE LICENSEE GENRES
Assuming that the licensee in emerging markets will have the same attitude to the license relationship, as licensees in mature markets is overrated. In many emerging markets, e.g. Africa, Russia, the brand owner must educate local licensees about what is involved in operating and managing a successful license, not just simply negotiating a deal, sitting back and waiting for the royalties. In Asian markets, the licensee will often take the view that if the license relationship has an initial term of 3-5 years it is likely (for whatever reason) not to be renewed. Thus they will be pushing for the best returns as they can, as quickly as possible, before the license is taken away from them. This, ironically, is at odds with the emphasis, much spoken of in Asia, about “developing a long-term relationship” with business partners. It perhaps suggests a certain cynicism towards Western licensors. Thus decisions which may not be in the long-term interests of the brand may be taken just to make a short-term profit. Licensors should invest much effort in selecting and educating licensees for the long term, who understand the overall strategy for the development of the brand. Naturally the licensor’s actions should support their long term assurances.

HASTY ALLIANCES 
Assuming one can quickly find the right partner and tie up a successful deal gets in the way eventually. It is very unwise to fly into a country to sit down for a few pre-arranged meetings, expect to tie up a successful and long-lasting deal with a licensee, and fly out a few days later. That is simply not how business works in many emerging markets. The importance of doing whatever it takes to check the track record, background and bona fides of licensees cannot be over-emphasized. It is prudent to invest time and find the right partner or agent. than close a deal with any partner. Plan for multiple visits.

EXIT STRATEGIES
Contrary to the above if a deal has to be done quickly, one must at least make sure that in the license agreement there is an ability on the part of the licensor (and this need not necessarily be reciprocally granted to the licensee) to terminate the license arrangement quickly, easily and cleanly if things are not working out. We know of situations of a license agreement entered into for a key territory for 10 years which was only terminable on breach of contract or insolvency. In a later acquisition of the licensor’s business, the purchaser could walk away from the deal when it discovers the license, not being prepared to buy the business with a commitment to that territory for 10 years and which could only be exited on breach. On the other hand, of course, one needs to give the licensee a reasonable “run in” period in order to establish the business and the profile of the brand and to generate revenue. Three years would usually be a minimum.
IP PROTECTION
Don’t worry too much about protecting your IP – it can be fixed later if need be. Wrong..wrong..wrong ! Especially in markets which are highly liable to infringement and piracy, if anything can be protected, it should be abinitio… not later. What may be considered “adequate” protection in Western markets from a trade mark perspective may well not be enough in emerging markets. The obvious example is the local language variations of the brand, including in local script if applicable. In several Asian markets, a brand will be known by a local  name, whether ones chooses it or not. It is always wise to control this. A similar problem arises if one allows the local distributor or licensee to register the local version of their name. When the parties fall out there is nearly always a fight over ownership.

In addition, all logos should be separately registered (this is not a situation where you should cut costs by registering the word and logo together) and different variations of the name (e.g. MARY QUANT and QUANT MARY.) In addition, domain names should be covered to a reasonable degree, and other types of intellectual property, such as design registrations, should be protected where possible. The more official certificated registrations that are on files, the stronger is the position will be when problems (as they very likely will) arise.

REGISTERING LICENSES
As a sequel to the above there are still some countries where recording a trade mark license agreement perse with the respective government authorities is important. These include China, Malaysia, Singapore and Thailand. This will secure the rights of the actual trade mark owner in terms of “use” of the trade mark, countering any vulnerability to cancellation for non-use, and will enable the trade mark owner to take direct enforcement action. In addition, it can be very important to ensure that royalties can be remitted from the country to the brand owner. In many countries an abbreviated or pro forma version of the license, which does not give away the sensitive commercial terms, is sufficient for registration purposes. Naturally, this kind of registration must be kept up to date when the licensee changes or other significant alterations take place.

SUPPLY CHAIN AUDITS
Failure to carry out checks on the supply chain can be disastrous for the brand owner. There are examples where there has been a good “master” licensee who has done everything required of it under a license agreement in the emerging country, but was given a free rein to appoint sub-contractors (and sub-sub-contractors). The result was that the product manufacture was poorly policed so that overproduction and counterfeits flooding the market. The answer is to exercise a great deal of vigilance over who is to be allowed to carry out parts of the distribution or manufacturing under sub-contract and in default refuse to allow this unless the ultimate brand owner has vetted such sub-contractors. Another aspect of this issue is what might be termed “brand hygiene”. Brands, have struggled ever to recover their public image and credibility after it was discovered that products at the end of their supply chain being made for them in “sweat shop” factories involving child labor. The complexity of the problem gets further accentuated by the fact that once these factories are shut down, the wave of local complaints of it destroying a key part of the local economy have to be combated.

ROYALTY AUDITS
It is extraordinary how many licensors, whether in emerging or any other markets, seem to have a fear and reluctance of enforcing the commonly-included rights of audit under license agreements. The most usual excuse given for this is that “this might be seen as an aggressive move by the licensor”. However, in experience, over 95% of these exercises reveal underpayments of some kind. Very often underpayment of royalties is not done deliberately or maliciously but simply through incompetence or an over-narrow conservative interpretation of what is covered under the license terms, especially as new product ranges come on stream. To overcome the issue of alleged “licensee hostility”, the best approach is to automatically audit all licensees on a rotation basis, say once every two or three years, so that licensees do not feel that they are being “singled out”. Having a pre-revenue audit can be helpful in checking/helping the licensee understand what is required and checking that the appropriate accounting processes are in place.

PIRACY ACTIONS
Some brand owners, comfortable in their home markets, ignore the problems of counterfeit goods in distant emerging markets. Levi’s Jeans is an example in Asia. The problem is that, unless you “stop the rot” early, it will grow and grow.Then the counterfeits not only will flood the emerging markets, but they will begin to start damaging sales in your “home” market. Inclusive provisions for dealing with the problem of counterfeiting in your brand management budget, followed by swift and aggressive action is necessary. This is far easier to do than it was 10 or 15 years ago. Today, there are well organized firms with extensive networks able to give early warning of problems and take swift action. In any anti-counterfeiting programme, the key thing is to make sure that the goods are destroyed (and not merely impounded, because they may well be sold out of the back door by the official authorities once the brand owner has disappeared…) and to make sure that any enforcement action is publicized loudly in the local press so that there can be no question that the counterfeiters know that you are a brand owner who will stand up for your rights. Often in that situation the counterfeiters will shift their attentions to your competitor, who does not take action to enforce its rights, seeing it as a “softer” target.
These are just some of the alerts in the process of licensing brands in emerging markets. It sure requires consideration of multiple issues: legal, cultural and commercial and it is always advisable to seek expert local advice if need be.
About the Author:
Dave Sharat has spent many years in licensing with companies like Disney, 4 kids entertainment and Animation International managing businesses laser focused on markets in Asia including India.

LICENSING IN INDIA: A FORCE? by Rahul Gupta

A famous playwright once said “ What you consume is what you become”……

THE CASE FOR THE LICENSING BUSINESS IN INDIA

Today our planet consumes all kinds of natural resources and some unnatural resource as well. When I refer to unnatural resource I mean brands. We eat them, we LIVE them, we drink them and we dream about them. There is no escaping them. Brands hit us in all forms and sizes…be it superheroes, coffee, toys, apparels and even events. They leave an impression on us.

India is possibly the worlds youngest population filled nation. More than 500 million people in India are under the age of 40. They are not just 500 million in number, they are 500 million with smartphones, internet access, good education and an aspirational mindset. If somebody were to find the two inflection points in Indian consumer evolution, I would pick 1991-92,1995,1996 and 2009.

In 1991 India opened its doors to liberalization and a universe of ideas and opportunities.

In 1992 with Tamil Sun TV, India forayed into private television broadcasting.

In 1995 Cartoon Network first launched its India channel becoming India’s first kids channel.

In 2009, HTC launched HTC Dream, India’s first smartphone featuring a Google O/S.

Today we have over 28 million smartphones with data, 857 TV Channels and over 450 million Indians have access to Internet.

The above landmarks represent the landmark shift in consumerism in India.First came great content, then came great fanhood. Today people consume their favorite stars, brands on multiple levels. You might love watching Pokemon on TV, but you can now have a Pokemon lunch box, T shirt, stickers, toys and more. These expanded consumer product/ service related to a specific intellectual property or creative is essentially the face of the licensing industry. Licensing in India largely related to the consumer products space.

Licensing is not very old in India. From my perspective, Licensing industry is an industry created for the fans and people who hold mad love and passion for heroes, brands etc.

The need for licensing is there because somebody needs to assuage the hunger of fans!

The Licensed products consumer group

Lets delve into this. Somebody who knows a cartoon character, star or a hero decides that consuming just on TV/Theatre is not enough. He/She decides to display their love and passion for them by buying a product or service. This act is the first sign that there is a special relationship between the consumer and the brand as he/she buys a product which essentially gives them a license to celebrate this relationship. Kids are top rate consumers in this category as their affinity for their favorite stars extends into dozens of categories. Delhi toddler Arjun Gupta at 6 years owns around 17 different products with Captain America on it. There are countless kids in your locality who do exactly what Arjun or any other fan kid does.These children represent the eruption of a new age consumer, the consumer who wants the fullness/ wholesomeness in his brands experience.

A WORLD DOMINATED BY THE PERFECT CREATION, LED BY CHILDREN

Now what makes a cartoon character or star license worthy? He/She should have qualities which are not present in a normal human being and he/she should generate interest in themselves by their adventures and activitites. For Eg Kids love the costume of Captain America and the principles of “Faith” and “Honor” which guides his stories in beating up bad guys. Barbie still remains every living girl’s dream doll, it just weaves some magic into generations of kids by its appearance. Be it ChottaBheem,Spiderman, Wolverine, Superman or Batman, they all  connect with their fans at some “spiritual” level.

In order for this to happen, companies need to create world class literary characters who suit the palate of a variety of audiences. The writers/creators of characters and superheroes have to create a world which attracts audiences and invites them to live in it with open arms.

AN INDUSTRY TO RECKON WITH

The Indian licensing products industry generates a revenue of over $350 million USD

(Rs 2340 crores) in retail sales according to some estimates but the potential is at least 10 times of that. This industry operates at multiple levels.

First, there is the studio/tv channel/production house who own a hit TV Show/movie etc. Second, there is a licensing division of this company or uses an independent licensing agency to license its cartoon characters or IP’s, Third are the licensees/ entrepreneurs/companies who pick up licenses of different IP’s for different product lines. Eg Hindustan Lever etc. And the last mile is the distribution/retailer ecosystem which sells products to the consumers directly.

The major licensors in India are Disney, Viacom 18, Warner Bros, Dream Theatre, Green Gold Animation, A.I.Licensing, Black White Orange, Carving Dreams and a clutch of selected agencies.

The products range from foods, apparels, toys,board games, back to schools products ( tiffin boxes, pencil boxes, backpacks, stationery products, sports items etc), book publishing and more.

Formula One Grand Prix also gave out license to build The Buddh International Circuit to Jaypee Group which put in an investment of over $200 million.

CHALLENGES BIGGER THAN IMAGINED

If one looks at the organized and unorganized retail market which is pegged at over $24.5 Billion USD in 2015 in a report by IBEF, the size of licensed merchandise business is tiny at $300 Million USD in retail sales. According to a recent study by VcCIRCLE and Technopak, the Indian education industry itself which is home to 10,000 plus colleges and over 1 million schools is estimated to be generating revenues of over $100 Billion USD with over 52% coming from schools alone. The licensing industry pales in comparison. WHY?

Lets try to get a perspective…

A SEMI BAKED PIE

Licensing is an extension to the entertainment business which is already reaching 75% of Indian households through television, mobile phones, radio, internet. This ensures the brands get a huge audience and fans. So what is the reason the sales are so tiny. A lot of Licensees complaint of not being offered a fair market to sell in. As in piracy and smuggled goods reach retailers very fast who are not willing to pay the steep license fees and minimum revenues share. The case of for MG’s come from the high expectations of the Indian retail business. Somebody high up in Disney or other studios drum up the logic of a country of half a billion target consumers with at least a billion dollars in revenue. The reality of this is quite different. These overestimation of business revenues from India results in this lopsided state of the licensing industry in India. Then there are sectoral problems like high real estate prices, high rents and expensive man power. Otherwise what will explain this mismatch of $300 million USD for a market size of at least $20 Billion annually. Moreover 95% plus retail business owners (small family run businesses) in India don’t know about licensing and its benefits.

I have been engaged in producing and executing kids expos and help children brands improve their brand experience for over half a decade.The kids market is attracting 100’s of new entrepreneurs joining in every year.

In my experience , the following benefits can enable entrepreneurs kickstart their businesses from the licensing business. :-

1. The Licensing business already gives you a readily built brand. For an entrepreneur that’s the toughest thing to do. Telling a customer who visits your store about who Doraemon/Angry Birds is a non existent issue. The buyer knows exactly what he wants, all you need to do is give a good product at a competitive price.

2. Connects the entrepreneur to a global brand and its practices. As a license is obtained, a licensee is expected to match up to high quality manufacturing which ensures global exposure to him/her.

3. As we head to GST, and a more sharper tax regime, the licensee is far better equipped as he tabulates and manages his numbers more transparently as opposed to a regular business owner.

4. Content for television and film is exploding at the seams which ensures that the licensing business is here for many years to come. This should help entrepreneurs to plan for the future and even raise capital. Content ensures that the fan is always ready to buy a product.

5. The humongous growth of modern retail is here to stay, giving larger shelf space and more visibility to licensed products.

6. The potential of the kids space/licensed products is immense and is fundamentally a strong consumer story.

NEED FOR THE GOVERNMENT TO STEP IN AND TREAT LICENSING AS A PURE INDUSTRY

As licensing industry is only at less than 1% of its minimum potential, the Govt should look at Licensing as a made to order industry at a time when they are cracking on black money, changing currency and continuously reforming the tax structure. Licensing has everything transparent to offer. A good clean ecosystem, a sector which deals with the future generation of the nation and a unicorn area which can explode if given support.

I feel the government can do the following things :-

  1. Set up a Licensing committee at FICCI and CII to give the industry a voice on a big platform.
  2. Educate entrepreneurs and people in general through start up India and Make In India initiatives as a business/job of choice.
  3. Engage the I&B Ministry in the industry more actively
  4. Set up a anti piracy task force to crack down on fake goods in the market. This itself will give a revenue fillip.
  5. LIMA India should be involved in policy making to do with children consumer group.

 

THE FUTURE

In a country dominated by fans with their undying love for sports and entertainment, the future is nothing but bright for licensing businesses. With increasing tele density and wider coverage of 4G networks and a vast network of cellphones retail, content will reach more than 90% of India’s population. This will give fillip to both Indian and foreign content. Netflix and Amazon Prime TV have set up massive budgets for local content production in India.

Recently Mattel India created the exclusive Krrish action figures and merchandise for The Krrish movie franchise. The products were of world class quality. It was the first time an Indian IP went into such high quality merchandise strategy. Green Gold Animation’s stellar ChottaBheem character too has crossed borders by having a growing base of fans in Asia.

Theatrical Films release of Hollywood titles now has parallel release dates in India as with the US and other western markets. This keeps in full access to their favorite superheroes and cartoon characters.

India should eventually create an ecosystem of top rate licensed and should be the worlds top 5 licensing market given its enormous population and love for entertainment and sports.

Entertainment and Event properties are mushrooming all over India. IPL , ISL and Pro Kabaddi League are India created IP’s which can do phenomenally well as they are having a hug fan base.

In addition, the digital and web ecosystem are creating their own superstars like AIB,TVF etc.

Its my view that licensing as a business will grow exponentially. It just needs the right support and a fair playing field. With a revenue potential of billions of dollars, the Govt. should have a look at this promising industry which will benefit the consumers and the establishment.

Godspeed!

 

About The Author:

Rahul Gupta is the Founder of World Children Expo(WCE) in India. In addition he runs a brand consulting outfit which helps kids focused brands/start ups in the edtech and retail spaces in fund raising and improving customer experiences.Rahul earlier worked with The Gotham Group in Los Angeles. He Holds a CFM from New York Film Academy and an MBA from S.P.Jain Institute of Management & Research, Mumbai.