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TLL Survey

Apparel Fuels 3.1% Growth in U.S./Canada Fashion Licensing—Global Growth Is Even Higher

Growing competition; continued decline in the brick and mortar backyard; currency devaluation in Europe and Asia; a fourth quarter retail fiasco. 2015 was a tough year for the fashion industry. Yet, for all of the challenges, fashion licensing prospered in not only in the U.S./Canada but worldwide, according to The Licensing Letter’s Annual Licensing Business Survey.

Global Sales Grow 3.5%

Global retail sales of licensed fashion goods totaled $39.3 billion in 2015, most of any property type at 24.1% market share (corporate/trademark is next at 21.4%). This year’s 3.5% growth is even more impressive when you compare it to the:

  • 2.4% growth in global GDP in 2015;
  • 2.7% growth posted by the entire licensing industry for the year; and
  • 2.4% growth by the fashion sector in 2014.

Only one sector posted higher growth than fashion—entertainment/character at 6.3%.

U.S./Canada Up 3.1%

Performance was only a bit more modest in the U.S. and Canada where sales of fashion goods totaled $20.9 billion. But at 3.1%, growth still exceeded the overall 2.7% regional growth rate. As in 2014, all growth came from the U.S.; fashion sales were actually down in Canada, especially in the high-end luxury market.

Property Types: Strong Growth Across the Board

All three core property types in the fashion sector enjoyed strong growth in 2015. In the U.S. and Canada, apparel, which accounts for 85% of all sales, had the lowest growth at 3.0%, or just under $17.8 billion.

As in other sectors, most notably entertainment, “A-list” properties enjoyed most of the success. “If you have a Jessica Simpson or Kate Spade, you’re doing great; if you have a new and unknown label, you have no shot,” notes one fashion executive. But even established brands struggled, especially in the luxury sector, including stalwarts like Ralph Lauren, Burberry, Coach and Prada, as well as juggernauts of recent years like Michael Kors.

After declining 1% in 2014, footwear came roaring back with 3.6% growth, highest of any fashion property type. As on the product category side, athleisure was the primary driver. “Fashion labels are finally becoming responsive to consumer demand for athletic and less dressy shoes,” a licensor observes. “At the same time, athletic brands like Nike and Adidas are getting more skilled at adding a fashionable element to their offerings.”

For several years, Survey respondents have been telling us that the fashion designer home products trend is “played out” and “glutted.” But the numbers tell a different story: in 2014, home fashion reversed three years of stagnation by posting 3.5% growth. This year, home properties kept up the momentum with a 3.4% increase. However, while reports of the sector’s demise might be premature, at $668 million home goods still account for only 0.6% of the overall market and 3.2% of all fashion-based for licensed merchandise.

Retail Sales of Licensed Fashion Merchandise, by Property Type, U.S./Canada, 2014-2015
Note: Numbers may not add up exactly due to rounding.
(Figures in Millions)
Property Type Retail Sales, 2015 Retail Sales, 2014 Change, 2014-2015 Share of Overall Market, 2015
Apparel $17,795 $17,277 3.0% 17.2%
Footwear $2,480 $2,393 3.6% 2.4%
Home $668 $646 3.4% 0.6%
Total Fashion $20,942 $20,316 3.1% 20.3%

Product Categories: Apparel Drives Growth

Unlike the property side, where growth was evenly distributed, performance on the product category side was fairly lopsided. Only two of the core categories for fashion licensing exceeded the 3.1% sector-wide growth rate: apparel, which grew 7.0%, despite the warm weather that depressed U.S. sales of outerwear in the first and fourth quarters; and footwear which increased 3.8%. Both categories benefited from the year’s hottest fashion trend: athleisure, which, by wedding active wear to style, was perfect for licensing. Exhibit A: StellaSport, the collaboration between Stella McCartney and Adidas on a line of low-price fashionable athletic apparel for young women that debuted in January.

All other product categories based on fashion properties were either flat or down for the year. Accessories, which accounts for $7.9 billion of the $20.9 billion U.S./Canada licensed fashion market, was up a disappointing 0.6%. However, sales of accessories based on all property types, including not just fashion but entertainment, celebrity and sports brands, were up 1.8% at $14.9 billion.

Eyewear, the largest fashion accessories subcategory with sales of $2.4 billion, hit a wall with 1.2% growth after increases of 5.5% in 2013 and 3.9% in 2014. Again, that number reflects sales of eyewear based only on fashion properties. When you throw in the other property types, growth triples to 3.6%. Within the fashion realm, Luxottica, licensee of major fashion brands like Chanel, Armani, Prada, and Michael Kors (not to mention owner of Persol and Ray-Ban) remained the dominant player.

The next two largest accessories fashion subcategories were actually down in 2015, including handbags at -1.7% ($1.2 billion) and jewelry/watches at -0.2% ($1.8 billion). As one veteran consultant explains, “the downturn in the luxury market came at the worst possible time for high-end houses like Chanel that had invested heavily in timepieces.” But while luxury struggled, jewelry wedded with personal electronics like Apple Watch Hermès thrived.

Outside accessories, sales of HBA products based on licensed fashion properties were up 1.6% to $2.5 billion in 2015. Fragrance, which accounts for 83% of HBA sales, reversed last year’s 1.0% decline with 2.2% growth despite growing competition from celebrities and artisan fragrance makers. Cosmetics and other beauty products fell back 1.5%.

All three of the relatively small home-based fashion product categories posted modest growth, including (in order of market size) furniture/home furnishings (1.9%), domestics (2.9%) and housewares (1.7%).

Retail Sales of Licensed Fashion Merchandise, by Product Category, U.S./Canada, 2014-2015
Note: Numbers may not add up exactly due to rounding.
(Figures in Millions)
Product Category Retail Sales, 2015 Retail Sales, 2014 Change 2014-2015 Share of Market, 2015
Accessories $7,915 $7,871 0.6% 37.8%
Eyewear $2,433 $2,405 1.2% 11.6%
Handbags, Backpacks, Messenger Bags $1,156 $1,176 -1.7% 5.5%
Headwear $709 $698 1.6% 3.4%
Hosiery $320 $313 2.1% 1.5%
Jewelry and Watches $1,815 $1,819 -0.2% 8.7%
Luggage and Travel Accessories $747 $732 2.0% 3.6%
Scarves and Ties $98 $100 -2.0% 0.5%
Other $637 $628 1.4% 3.0%
Apparel $6,862 $6,413 7.0% 32.8%
Domestics $412 $400 2.9% 2.0%
Footwear $1,487 $1,433 3.8% 7.1%
Furniture/Home Furnishings $822 $806 1.9% 3.9%
Gifts/Novelties $48 $52 -7.8% 0.2%
HBA $2,535 $2,496 1.6% 12.1%
Fragrance $2,101 $2,055 2.2% 10.0%
Cosmetics/Nail Polish/Other $434 $441 -1.5% 2.1%
Housewares $320 $315 1.7% 1.5%
Infant Products $331 $326 1.5% 1.6%
Publishing $49 $50 -2.2% 0.2%
Stationery/Paper $53 $56 -4.8% 0.2%
Toys/Games $49 $49 0.0% 0.2%
Other $59 $49 21.0% 0.3%
Total $20,942 $20,316 3.1% 100.0%

Distribution Channel: E-Commerce, Value Drive Growth

In 2015, Net-a-Porter became profitable and Amazon became the world’s eighth largest retailer (according to Forbes). At its current pace of growth, Amazon will soon overtake Target (No. 5 ) and even Walmart (No. 1) before long. That, in a nutshell, sums up the current retail landscape where discount/value owns the present and ecommerce the future.

Although everyone is struggling to adapt, the challenge is particularly difficult for the fashion industry, given that the channels that are thriving are the ones that have historically been deemed incompatible with fashion and what it represents. Meanwhile, the channels where the fashion milieu has traditionally resided, department stores and boutiques, continue to diminish.

Feeding the vicious cycle is how technology and social media have made it so easy for models, reality TV stars, YouTube sensations, athletes, artisans, Hollywood stylists and other celebrities and newcomers to launch their own labels. In addition to intensifying the competition for shrinking shelf space, the proliferation of brands feeds the growth of ecommerce and discount/value. Adding even more fuel to the fire is the unwillingness of department and specialty stores to take a risk on new and untested brands. “Retailers constantly say they want new and different,” laments one licensor, “but when offered the chance, invariably stick to the same old brands they know.” Of course, ecommerce represents the perfect home for the aforementioned aspiring brands.

Over time, the established fashion houses have come to accept and adapt to the new reality. Exhibit A is the growing number of collaborations between high-end designers and discount/value stores on limited edition exclusives. Notable examples in 2015 included Lily Pulitzer for Target (which sold out within hours of going online) and Balmain for H&M. “The stigma of selling at off-price is fading away,” notes a licensor. “The new challenge is not relying too heavily on off-price sales.” Or, in the words of one consultant, “licensors must not let their desire for immediate off-price revenue compromise the integrity of their brands.”

Another aspect of the if-you-can’t-beat-em-join-em approach is the growing willingness of old guard designers like Chanel to take their businesses online. “Ecommerce is disproving the old notions about the fashion shopping ‘experience’ and the customer’s unwillingness to buy before ‘trying it on,’” the consultant explains.


From Brand to Licensed Product—And Vice Versa

One long-term trend driving fashion licensing is the ongoing involvement of investment companies like Authentic Brands Group and Iconix in acquiring fashion labels (both current and defunct) and turning them into 100% licensed brands. Clessidra Capital Partners’s acquisition of Roberto Cavalli, Investindustrial’s acquisition of Sergio Rossi, and even Saban Brands’s decision to reposition its Paul Frank Kids label as a fashion rather than an entertainment/character brand were among 2015’s more notable transactions. “There is no shortage of struggling brands available for acquisition and resuscitation via licensing,” says one fashion executive. But, she quickly adds, licensing under this model means not just collecting revenues but managing the brand and it requires great partners.”

The yin to the above yang was the continued tendency of fashion companies to end licensing agreements and bring their brands in-house. Key deals of this genre in 2015 included Calvin Klein’s reacquisition of its licensing agreement for Calvin Klein Platinum label accessories, and Ashley and Mary-Kate Olsen’s decision to bring their Elizabeth & James fashion brand in-house.

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