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Discounters & Ecommerce Grow Licensed Distribution

Ecommerce is on the mind for this year’s batch of respondants to TLL’s Annual Licensing Business Survey. The distribution channel siezed its biggest share of the licensing pie yet, growing to 11.7% market share in 2016 in the U.S. and Canada. Ecommerce growth was the highest amongst all retail categories for sales of licensed merchandise at a modest 2.6%—most categories remained flat or declined. The (only other) winner of 2016? Discount/mass, at 32.2% share.

Following the trend from last year, ecommerce was one of the biggest concerns respondants cited, but the mania surrounding the trend has largely died down. The licensing industry has grown accustomed to the challenges of internet shopping, including the use of such tools as social media and search engine optimization. And the growth of digital retail marketplaces such as eBay, Etsy, Google Shopping, and Amazon’s own Marketplace has made it easier than ever for smaller players to get into the game.

That’s not to say that everyone is as even-headed over the radical change in distribution. For example, Urban Outfitters’ CEO, Richard Hayne, has compared the current retail enviornment to the housing market of 2008. Traditional retailers who had focused on agressive expansion (America has six times the retail space per capita of either Europe or Japan) are now downsizing in an attempt to salvage profits as the bubble bursts. But most haven’t made the types of investments in online that they should have over the last five years—and just 10% of all retail sales in the U.S. are online, according to the National Retail Federation.

A key concern amongst respondants is the monolopolization of hot, A-list properties (Disney’s Star Wars, Universal’s Minions) on retail shelves—in seemingly every category. While it is true that retailers are looking to bulk up on licensed offerings as a way to distinguish themselves, they aren’t reaching too far for inspiration. Even in their online retail arms, it’s unlikely that brands that don’t have a chance on selling on physical shelves will get any exposure. For smaller brands, their best bet for expanding is online—with large ecommerce partners like Amazon, niche specialty distributors, or their own dedicated website.

Note that while the changes in market share are mostly very small, the dollars involved are not. With retail sales of licensed merchandise in the U.S. and Canada accounting for over $100 billion, a one-tenth of a percent change represents more than $100 million.

Department stores and mid-tier retailers are slowely losing market share (down 1.6% to 12.0% share) as more brands have comfortably settled into expanding their image with lower-tier options like discount/mass and dollar/value/off-price. Discount/mass grew 0.6% to reach 32.2%, the highest share recorded since 2009. Meanwhile, dollar/value/off-price continued to enjoy the highest share that TLL has ever recorded for the category, at 9.2%.

Grocery and drug stores slipped down slightly to 12.1% in 2016, from 12.2% in 2015 and 12.3% in 2014. Survey respondents were split on whether the channel increased, decreased or remained flat. Those that reported an increase mostly dealt with food & beverage products, while whose reporting declines were split amongst other categories.

Specialty stores fared similarly, remaining flat at 19.2% share in 2016, amid conflicting opinions. This is likely driven by the wide variety of retailers in the specialty sector, as well as the omnichannel strategies of most specialty chains, which blur the lines between physical stores and ecommerce. While bookstores, for example, are seeking to up their licensed offerings, others like hardware stores seem to be taking a step back.

Surprisingly, some Survey respondants observed that catalog and other direct mail order was up in 2016 (it’s market share remains flat at 0.1% in 2016), thanks to the declining or flat growth seen in B&M channels (generally, the category has had its market share erroded by ecommerce). TV shopping also had a good year, remaining stable at 1.0%, thanks in part to agressive, exclusive partnerships.

Retail Sales of Licensed Merchandise, by Distribution Channel, 2016
Note: Numbers may not add up due to rounding.
Distribution Channel Share of Market, 2016 Share of Market, 2015 Percentage Point Change, 2015–2016 Growth in Share 2015–2016
Discount/Mass 32.2% 32.0% 0.2 0.6%
Specialty Stores 19.1% 19.2% -0.1 -0.5%
Grocery and Drug 12.1% 12.2% 0.1 -0.8%
Department Stores/Mid-tier 12.0% 12.2% 0.2 -1.6%
Online/E-commerce 11.7% 11.4% 0.3 2.6%
Dollar/Value/Off-Price 9.2% 9.2% 0 0.0%
Variety and Convenience 2.4% 2.6% 0.2 -7.7%
TV Shopping 1.0% 1.1% -0.1 -9.1%
Mail Order 0.1% 0.1% 0 0.0%
Other 0.2% 0.3% -0.1 NA

Representative Retail Stores By Distribution Channel

Mass/Discount/Club/Big Box: BJ’s, Costco, Kmart, Sam’s, Target, Toys ‘R’ Us, Walmart

Specialty Stores: Ace Hardware, Barnes & Noble, Bass Pro, Bed Bath & Beyond, Best Buy, Cabela’s, Cracker Barrel, Dick’s, Forever 21, GameStop, H&M, Home Depot, Limited, Lowe’s, Michaels, Modell’s, museum stores, PetSmart, Sherwin-Williams, Sports Authority, Staples, Zara

Department Stores & Mid-tier: Bloomingdale’s, Dillard’s, JCPenney, Kohl’s, Macy’s, Neiman-Marcus, Sears

Grocery and Drug: Ahold, Aldi, CVS Caremark, Giant Eagle, Kroger, Meijer, Publix, RiteAid, Safeway, ShopRite, Walgreen

Dollar/Value/Off-Price: Amazing Savings, Big Lots, Dollar General, Family Dollar, Ross Stores, Save Mart, Supervalu, TJ Maxx

Online/E-commerce: Amazon, Café Press, Gilt, Zappos, Zazzle

Variety and Convenience: 7-Eleven, Circle-K

TV Shopping: HSN, QVC, ShopHQ

Mail Order: Oriental Trading, Signals

Other: Kiosks, on-site, vending, and more


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