Brand licensing is an ever-dynamic industry. It has, however, undergone extreme changes over the recent decade. In the first place, relationships of the licensing stakeholders have been significantly affected by the alternations in the industry. Thereby, while some licensors might still rely on their licensees and agents to interact with retailers, they're no longer in the position to sit back and await the royalty revenues to hit their account. One of the reasons for this phenomenon is the rise of new retail trends, one of which is retailtainment.
Nowadays, licensors must understand the role retailers play in the success or failure of a licensing program and actively collaborate with them to increase the market presence of the licensed products. Smart licensors actively manage their relationships with retailers, basing many of their licensing decisions on the retailers’ needs. Notably, these brand owners also recognized that retail is a perfect ground where they can design unique shopping experiences for their customer, thus attracting them back to the brick-and-mortar.
Retailers make the brand’s licensed products available to the consumers. As a full-fledged stakeholder in a licensing program, they seek to maximize their equity and therefore pursuing own commercial goals. Their major interest is a balance between the quality, price, and rentability of licensed products, as well as a long-term product strategy from the licensor’s side and, preferably, an exclusive nature of the agreement. Because of their financial involvement, they want to be sure that the licensed products they place on their shelves will sell.
Since the commerce trends are always shifting, the world of retail is becoming more involved, which affects the way that retailers operate. It’s difficult for retailers that predominantly rely on brick-and-mortar sales to survive in the stiff conditions of today. To everyone's great surprise, online e-commerce isn’t the main rival. Although online shopping has been steadily gaining its momentum since the early days of Amazon, its market share today accounts for the average of mere 7-8% in the U.S. market. That said, the reduced prices in e-commerce appear not to be the main criteria for consumers.
While the situation is slightly easier with online commerce, where merchandising - let’s be honest - has more space for creativity these days, brick-and-mortar retailers have limited options to wow their customers. This fact precisely explains the need for licensors and retailers to join the promotional forces and collaborate closer than they would have with the mediation of agents and licensees.
As we mentioned, high in-store prices aren’t the primary challenge for traditional retailers. Instead, the real game changer is the shift of value proposition perception by the consumers towards the experience. They're still willing to give their time and effort for the regular shopping. However, they no longer want to do it for its sake, expecting an emotional payoff. Consumers need a reason to go to big super centers when they can purchase most things on the internet. Many legacy retailers have been struggling to find one while still maintaining the status quo.
Advanced retailers have found ways of breathing the experience into their stores. They've observed that on-site experience is still the decision-shaping factor for 94% customers. This is far more influential than online ads, even in today's era of digital advertising. Thereby, smart retailers started to actively employ the retailtainment trend by collaborating closely with their licensing business. In so doing, licensors adopt new creative ways of engaging with the consumers on the points of sales. A hybrid of retail and entertainment, retailtainment provides users a reason to choose physical shopping over online. It also grants in-store retailers an opportunity to enhance the customer experience through the integration of products with the elements of the consumer lifestyle.
While the above presents itself as an advanced strategy, soon it'll become an indispensable condition for success in brand licensing. The reason for that is the ever-increasing need for personalization and localization in retail, whether traditional or online.
The consumers tend to choose retailers who succeed at engaging with them. Undoubtedly, this tendency will be steadily growing in the upcoming future. At the same time, when it comes to branded products, no other party knows the engagement triggers better than licensors. Therefore, the only way to improve the chances of a licensing program for success is to increase the effectiveness of communication between the two ends of the chain.
The enhanced customer experience, as a result of the improved collaboration between the brand and the retailer, is advantageous revenue-wise. With retailtainment as a competitive advantage of in-store retail over e-commerce, retailers face growth of profits. This growth also positively affects the royalty earnings of licensors.
Reinforcing the bond with the retailers isn’t as difficult as it might seem. However, there's no better way to ensure emotional satisfaction of the consumers that access your brand’s licensed products in retail. Your brand’s team can make the best effort in perfecting the brand’s image. The retailer, in turn, will try hard to improve the facilities at which the licensed products sell. Still, chances are, something will be missing. It is the unique consumer experience that the two sides can only create with joint forces.