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Rethink the Shrink: Three Ways Licensing Safeguards Against Retail’s Right-Sizing

by Carol Spieckerman, president, Spieckerman Retail

CarolSpieckermanTHAT DIDN’T TAKE LONG.

The rash of retail right-sizing and closures that I began warning my clients about early last year is reaching critical mass. The bulk of retailers’ attention is riveted on the mass shuttering of brick-and-mortar locations, and for good reason. After all, store closures are the common denominator between retailers such as J.C. Penney and Macy’s that are merely pruning their fleets, and others, like HHGregg, that are disappearing entirely (and taking their digital shingles down in the process, too).

Having fewer shops dotting the land will challenge brand marketers, since online store revenue still represents a relatively small portion of most retailers’ overall business. In other words, as fast as e-commerce is growing, in the short term, it won’t make up for volume shortfalls resulting from the massive reductions in store count.

Stores aren’t just money machines for retailers, though; they serve other important functions that benefit brand marketers. Stores serve as billboards for brands, so every store closure can nibble away at brand awareness. Stores also increase awareness of retailers’ e-commerce operations. That’s why it’s unrealistic to expect relatively sparsely located retailers like Macy’s to significantly grow their e-commerce businesses, even as they close stores. As stores’ physical presence shrinks, awareness and digital relationships can dwindle. A final but potentially accelerating headwind comes in the form of retailers’ click-and-collect programs, in which customers purchase items online and pick them up in the store. Fewer stores ding retailers’ convenience propositions, potentially driving customers away from retailers of smaller scale and toward others that are more convenient. In the near term, Walmart may benefit from this dynamic through its launch of a discount program that incentivizes shoppers to forgo home delivery in favor of in-store pickup. At the end of the day, the more convenience retailers can offer, the easier it is for consumers to buy the brands they carry. Out Of Business

As daunting as it may seem for retailers to counteract the dynamics that drive the domino effect, the licensing community does have a few tricks up its sleeve. In fact, licensing can present a unique hedge against downsizing in three ways.

PORTFOLIO

Remember when the “category killer” retail model was all the rage? One reason some retailers have had to pare down is because Amazon is opportunistically attacking specific categories, often showing a willingness to buy business at little to no profit to grab market share. As a result, retailers that are mired in a narrow-and-deep assortment strategy have never been more vulnerable. The same holds true for brand marketing companies whose fortunes are tied to narrow niches. These days, survival relies on the ability to branch out to keep brands front and center with consumers. The portfolio structure inherent with licensing allows both licensors and licensees to explore awareness-driving brand and category extensions with relative ease. Single-brand companies are in a pinch, yet licensing is a diversification engine that enables the presence of multiple brands to proliferate across multiple channels, retail tiers and geographies.

PRICE

It’s no secret that price transparency is an everyday retail reality nowadays. Shoppers are a click away from making price comparisons on everything from tee shirts to cars. Some retailers have found that they have little wiggle room, as sliding too far either “down market” or “upscale” can compromise their brand positioning. (by contrast, as an online marketplace, Amazon can sell everything from cheap tchotchkes to luxury goods with impunity). When a retailer carries brands that are widely available elsewhere, the vice tightens further every time a shopper begins a comparison journey. The very brand identity that defined retailers’ worth in the past may threaten their relevance today, yet licensors and licensees are unfettered by such constraints. Through licensing, companies that take a deliberate and diverse approach to portfolio-building and can participate in “good,” “better,” and “best” value propositions across multiple retail tiers. More good news comes in the form of branding itself. With all things being transparent at the price level, branding is often the only differentiator and price driver.

PARTNERSHIP

After years of attempting to do so many things for themselves (including, of course, creating and marketing their own brands), retailers are embracing a spirit of partnership as never before. Retailers are bolting on digital bench strength through strategic alliances and acquisitions and partnering with innovation leaders to ensure that their remaining stores provide a compelling shopping experience. Retailers may have had to be humbled by digital disruption to see the advantages of alliance building, yet the licensing business has been predicated on partnership from its beginnings. Retailers’ shift in sensibility favors licensing’s partnership-building pros, particularly those who are adept at crafting multi-stakeholder propositions that flex to direct-to-retail, wholesale, owned retail, digital, and store experience opportunities.

Retail is in the throes of a multi-wave period of compression. Those who step out to creatively leverage licensing’s unique advantages will encounter new opportunities and create a shelter against the winds of change that are gusting in retail.


Carol Spieckerman is an internationally-recognized retail thought leader, speaker, strategist, and author. Since 2001, she has helped global brand marketers and solution providers successfully navigate retail “from now to next” and position for high-volume opportunities across a wide variety of categories, channels and consumer touch points. Carol may be reached directly at carol@spieckermanretail.com.

 

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