In the past, value retailers were often seen as having something of a detrimental impact on licensed products and were the last port of call for many licensees when seeking distribution for branded ranges. The recent economic downturn, however, has significantly changed consumer spending habits and in turn, has changed the way many licensees view such outlets. As the consumer moves more towards value purchases, licensees are following suit and as a result, value chain retailers are moving onto a level playing field with High Street and mid-market stores.
Stephen Gould, brand licensing consultant for Bear Conran, explains: “Over the last few years, there has been a whole re-alignment of the kudos attached to a value retailer. In today’s credit crunch economy, conspicuous consumption is ‘out’ and value frugality is ‘in’.”
Andrew Carley, head of licensing at E1 Entertainment agrees: “Value retailers are part of the distribution mix. It’s up to licensors and licensees to work together to adopt an approach that fits within the lifecycle of the property and that broadly enhances the licensing programme.”
A change in consumer habits has meant in many cases that their loyalties have changed and licensees and licensors have needed to follow this pattern in order to retain their market share.
Richard Hollis, head of UK licensing at BBC Worldwide, comments: “The so-called value retailers have built a solid customer base over the years and established their own house styles and marketing to showcase branded product effectively. Licensors and licensees therefore should be open to opportunities across the piece – what is more important for the long-term success of the brand is producing high quality and big value products and averting heavy discounting. "
So, in a challenging economic environment, all retailers are working to up their game, become more attractive to consumers and as part of this, to stand out in the crowd.
Gould continues: “Retailers are seeking heightened point of differentiation and licensed products effectively deliver this requisite in terms of ubiquitous and compound third-party branding.
“It’s all about how they can de-stabilise their more middle market competition on a perceived ‘like-for-like’ basis whilst increasing both store footfall and media spend per visit.”
The effect that the efforts of such retailers and their increased presence in the licensing food chain has on licensed products depends somewhat on the brand in question. Many character brands and children’s properties seem largely unaffected by the shift, but licensors are more cautious when dealing with luxury brands and those targeted at less mass market audiences.
Ian Downes, MD of Start Licensing, comments: “It really depends on the nature of the licence involved. For example The Beano has always been a value for money brand. The comic’s pricing has always been quite competitive so in this case I think there is no real issue, whereas if you had a brand that had originated from high end then it may be an issue.”
The target audience is often a factor in the way in which companies work with value retailers. Historically, many firms offered product to value retailers as a particular brand came to the end of its life cycle or as sales began to drop with higher end retailers.
More recently, value outlets have moved up the levels of importance and often hold equal weight as others in the market. Hollis explains: “For us, it’s about working with retailers that understand and see the potential of the quality and breadth of our content – from pedigree programming, to the development of top quality product for consumers to enhance their interaction with the brand.”
Andrew Kerr, executive director of consumer products and marketing, international at Classic Media, agrees: “It’s really a function of looking top to bottom at the ambition one has for a piece of IP and then deciding how best to tap into traffic and exposure at the mass and value channels, while retaining whatever cache the brand need in order to be seen to be desirable up and down the retail food chain.”
In many cases, licensees have begun to overcome any stereotypes held by High Street and higher end retailers about value retailers, by offering different ranges for the varying distribution channels.
Downes continues: “I think control and distribution of design is a key tool in licensing. With The Beano and The Dandy, we have been able to develop a range of designs allowing licensees to offer different design treatments to different retailers ensuring some control.
“I think different price points will mean different quality of base product, but ultimately it has to be of a standard that is acceptable and fits with the overall standards set for the brand. This is where a vigilant and commercially aware approvals process is a key.”
Gould furthers this: “Value retailers are becoming players in their own right as brands start to segment even at a licensing level. Brand segmentation is not new. Donna Karan for instance segmented to DKNY, then DKNY Menswear, etc, however such segmentation in licensing is becoming more common place as the window for recoupment on IP creation and investment becomes both smaller and shorter.”
The effect of this segmentation is perhaps an ingredient of value retailers’ success. As a whole, companies throwing their distribution net further afield has meant that the value retailer is regularly offered higher quality products than perhaps they were before.
Kerr explains: “The consumer is the real beneficiary here because the general standard of design and execution has rocketed since the High Street and value chains became destinations for these goods. While the quality of execution is still distinguishable by channel, it’s not nearly as defined and obvious was.”
It would seem overall, that as the value retailers have strengthened their business plan, won over an increasing number of consumers in an economic downturn and in turn, the licensing industry has had to stand up and take notice. One thing the industry seems to agree on is that this is just the beginning and the retail landscape looks to have changed irrevocably and it’s time for companies to work with a wider range of distribution channels.
Downes again: “I think it is part of the retail landscape and so has to be considered. Value is a component of the market in the same way online selling is a component – an approach has to be adopted.”
Hollis: “As a licensor, it’s always beneficial to have a variety of retail partners to work with. As a commercial arm of a public service broadcaster we target the broadest audience to reflect the programming so giving consumers choice to interact with product is paramount.”
Gould: “The value retailer is ignored or shunned at peril. The value chain is credible and relevant, however, there is now a need to make the licensed brand equally sector appropriate for this distribution base.”
Kerr has the final word: “As long as consumers adjust their spending patterns to seek out value pricing, licensors will need to follow the traffic and find ways to integrate value channel licensing into their broader plans for individual brands, and indeed, entire portfolios.”