Dealing in exclusivity

Look closely at the packages in big box retailers. There's a better than average chance that the licensed whozits or whatzits are exclusives.

With so few big chains now, retailers are looking to licensors and licensees for something to set them apart. "Discount stores like Wal-Mart and Kmart have brands; 20 years ago they didn't," explains C. Woodrow Browne, principal at Building Q, a marketing and licensing consulting firm. "(Today), Kmart and Wal-Mart may support the same license, but the designs are exclusive."

A licensed exclusive gives the retailer a) a recognizable face (depending on the equity of the property) and b) something to promote to consumers. And generating foot traffic, after all, is the name of the game.

An exclusive is particularly beneficial in a mall "where your competitor is two doors down," says David Imhoff, New Line's executive vice president of worldwide licensing and merchandising. It's a point of difference. It's a chance to differentiate the product mix. Exclusives also drive sales, says Classic Media's director of domestic licensing, Brad Fazarri, by "creating a collectible component to the merchandising program."

Such opportunities provide incentive to retailers in the way of placement and special promotion, agree Holly Stein, senior vide president of global consumer products for Hit Entertainment, and Joy Tashjian, president of Joy Tashjian Marketing Group. Retailers need to create unique events in their stores, adds Tashjian. "Licensors cannot expect the retailer to do this if all of them are carrying exactly the same product because it simply becomes a price competition." An exclusive should be special, however, cautions Gullane's senior vice president, consumer products, David Jacobs, or else you risk "undermining your ability to generate revenue."

A continuing obstacle in the licensing biz is, as Imhoff terms, "the incredible fragmentation" in terms of the number of options a consumer has. Coupled with the retailers' desire to turnover product selection quickly to keep people coming back, it is increasingly difficult to get traction in the stores.

"Retailers are only going to take core categories," says Universal's senior vice president of merchandising and marketing, Timothy Rothwell. Publishing, toy, apparel and interactive game categories are core for most properties. The old rule of thumb, he says, still holds true: 80 percent of the business is in 20 percent of the SKUs.

Traction comes easier with evergreen properties and classic characters that have something approaching universal appeal. "Consumers and retailers are looking for classic, timeless, perennial brands that have withstood the vicissitudes of the market," says Jeffrey Orridge, vice president, worldwide licensing, Mattel Boys/Entertainment. With the oversaturation of licensed products, Orridge adds, retailers' ever-stingy criteria focus on new product applications and fresher graphics.

Moreover, with the tentative, risk-averse retail environment and a finite amount of shelf space, Al Ovadia, executive vice president of Sony Pictures Consumer Products, follows the maxim "less is more. We manage the license so we don't fall into the trap of over-shipping and over-anticipating."

The toy and apparel categories are still strong licensing categories, but Imhoff sees apparel slipping in favor of video games and collectibles. The price points for prop replicas are "so high, the royalty stream is significant."

In the end, as Jennifer Robinson, vice president domestic sales and worldwide publishing, licensing and merchandising, sums up, it's about "giving a reason for the customer to come to the store."