With increasing competition in the retail sector, it is licensing that can get both the licensor and the licensee an extra edge in scripting a successful business story while also taking care of the many pitfalls that may come their way. Consider this: the sale of licensed merchandise has transcended to USD 280 billion globally, indicating that brand licensing has come out of its niche cocoon and is rapidly transforming into a full-fledged segment. In fact, it is today the most efficient growth strategy for both the licensor and the licensee, given the nature of investment and rate of returns. In the due course of its expansion, the magnitude of opportunities it has to offer is enormous. Brand licensing is now integrative of entertainment and character icons, sports, fashion, and corporate. Ruling the ranks when it comes to market-share in India is fashion with an estimated USD 594 million, followed by entertainment and character icons at USD 406 million. Sport follows with USD 30 million. In this context, Indian brands only contribute about 10% to licensing and merchandising activity in the country with a majority of the market-share commanded by Hollywood and US pop culture. But, with indigenous intellectual properties (IPs) in tow, the Indian market may soon be on the sunny side of the hemisphere. Brand licensing brings in its wake several perks for both parties. Therefore, it is imperative for a brand manager to understand the full context of the segment. Let’s discuss in detail what brand licensing has in store for licensors and licensees.
The Licensors Market
Revenue generation is the primary goal of every organisation and the correlation between investment and rate of return determines the risk and success parameters. Licensing yields dual returns in the form of sales and royalty. Apart from the quantitative aspects, licensing also helps in protecting a trademark and increases brand awareness. There are several benefits to brand licensing, some of which are:
- Brand Positioning: Licensing creates avenues for brands in multiple domains, enabling them to establish their presence. It helps in significantly increasing brand awareness and enhances brand image. It allows people to connect with the brand and encourages loyalty among both existing and potential buyers. Also, it serves as a means to protect the brand and its values.
- Expansion: An additional bonus to being a licensor is that you can have first-hand expansion experience without actually having to invest a lot. This not only helps you determine the category you want to foray into but also provides you with a systematic report on the flow of your goods.
- Counterfeit Prevention: Counterfeit products are the biggest plague to any distribution channel. They not only threaten the brand but also bring down the value of an IP. According to Forbes, in 2018 counterfeiting was the largest criminal enterprise in the world. Sales of counterfeit and pirated goods were valued at USD 1.7 trillion per year, which is more than drugs and human trafficking. Licensing significantly reduces the chances of counterfeit products hitting the markets.
The Licensee Market
Licensing is one tool that has the potential of quadrupling your market-share and increasing incremental revenue. With careful execution, it will be your gateway to competitive superiority. And it will significantly change people’s perception about your products. The benefits of licensing include:
- Shelf Space: Gaining and sustaining shelf space are the most important factors in retail of licensed goods since their demand prolongs their shelf life. This bombards the licensee with added exposure and awareness. It also helps the licensee in increasing sales through a wider assortment.
- Competitive Advantage: Thanks to the ever-growing economy, competition is on the rise. There are always new players popping up in every segment. Licensing not only helps maintain an upper hand but it also paves the way for you to enter into unexplored retail channels. Thereby, the scope of distribution increases manifold.
- Credibility and Customer Base: Licensed merchandise is all the rage these days. Thus, getting a marketing advantage with an established brand for partnership will increase the credibility of a brand in every respect. This will also promote brand loyalty in the existing consumer base and lure new ones.
In conclusion, it can be said that with proper marketing strategies and licensing development programme in check, there’s no stopping your products from finding a position in the limelight. Licensing corroborates for a win-win situation for both, the licensor and the licensee, if developed in accordance with each of their demands.