Research from the NPD has revealed that like-for-like sales of licensed goods are down 11 per cent in the first half of this year.
Frédérique Tutt, licensing industry expert for NPD said: "Since the closure of Woolworths, the licensed market is still finding its feet and the competition is fierce. At the same time, parents want to please their children but they are tightening their belts and watching what they spend."
Tutt said that 20 per cent of the consumer spend on children's goods is spent on licensed product.
NPD data shows that promotions have played a more important role in the licensed market this year. Online sales of licensed product without discounts were down 19 per cent while those with went up by 3 per cent as consumers become more "tech savvy".
Tutt reserved special praise for the UK market, which she said "is very dynamic and creates more licenses than any other country in Europe."
She added: "It's an area where new characters keep coming through and there is constant innovation; for that reason we remain confident that the kids licensing industry will pull it through."