Worldwide retail sales of licensed merchandise increased 2% to $158.8 billion in 2014, as compared to $155.8 billion in 2013, according to The Licensing Letter’s Annual Licensing Business Survey. The increase was fuelled by strong sales in the U.S., U.K. and Asia, which offset the stagnation or decline in other big markets in and outside Europe.
Results by TerritoryU.S./CanadaLicensed sales in the U.S./Canada were $99.8 billion in 2014, up 2.5% from $97.4 billion in 2013. But the impressive continental totals belie what actually happened in North America. In the U.S., a recovering economy and lower oil prices helped sales rise 2.65% to just below $90.3 billion. It was such a good year that the U.S.’s global market share jumped 0.4% to 57%. But in Canada, licensed sales grew a lackluster 0.75%. The same low oil prices that boosted consumer spending in the U.S. hurt it in Canada by forcing layoffs in the key oil and gas sector. And because of high fuel taxes, Canadian consumers didn’t get relief at the pump. Cheap oil also weakened the Canadian dollar and made licensed goods from the U.S. more expensive. Retail suffered. Stores closed, with casualties including Smart Set, Jacob, Sears, and Target which pulled out of Canada entirely at year’s end. Things hit rock bottom in December when instead of spiking for the holidays retail spending fell 2%—the biggest monthly drop in 5 years.
[pieChart title=”Global Retail Sales of Licensed Merchandise, by Territory, 2014″] Western EuropeAt $31.3 billion, Western Europe licensed sales grew by only $20 million (0.1%). But after three straight years of decline, flat is the new up for Western Europe. Performance varies by country. The U.K., the territory’s biggest market for licensed goods (and number 4 in the world), grew a robust 3.0%. “Inflation is low, confidence has improved and the big retailers are relatively healthy,” explains one U.K. licensor. Many U.K. Survey respondents attributed growth to Disney and the Frozen factor. “Frozen dominated and became a category unto itself,” according to one. Other Western European countries making gains in 2014 include Germany (2.8%), where entertainment, corporate goods and electronics had strong years, and, surprisingly, Spain where a surge in holiday spending helped turn 2013’s 4.2% decline into a 2014 gain of 1.0%. A 1.5% increase of sales in the Netherlands lifted the Benelux countries to 1.0% growth for the year; Scandinavia was up 1.0%, thanks to 1.5% growth in Sweden. But most Western European countries were either flat or down. The financially strapped Mediterranean states continued to struggle, including the major licensing markets of France (-2.9%) and Italy (-2.75%), as well as Portugal (0.1%) and, of course, Greece (-15.5%). Once a bright spot, Turkey went from 5.1% growth in 2013 to 1.5% decline in 2014. High interest rates and new bans on credit card spending hurt sales. Things got so bad for retail in Turkey that homegrown electronics retail giant Vatan Bilgisayar scrapped plans to open dozens of new stores in 2014. AsiaAt $19.4 billion, Asia’s licensed goods market grew 3.1% in 2014, 50% above the global average and second highest of any territory (trailing only the Middle East and Africa at 4.4%). Asia now accounts for 12.2% of global sales. But while most countries and regions in Asia were up, the narrative differed across locations. One of the biggest stories is the continued recovery of Japan, Asia’s biggest market and the world’s second largest consumer of licensed goods. After years of decline, Japan posted a 0.2% increase in 2013. In 2014, Japan kept growing and at a 150% higher rate, i.e., 0.5%. A Tokyo-based licensing agent attributes the turnaround to “Abenomics,” or government policies to improve consumer confidence and promote spending. For all the recent talk about economic slowdown, licensed goods sales in mainland China increased at the second highest rate of any country (behind only tiny Macau at 9.0%). But there were red flags. 2014’s 8.0% growth rate was less than 2013’s 9.2% rate. Government “anti-corruption” policies slowed luxury goods sales. Chinese people saved more of their household income and, according to one respondent, directed more of what they did spend on licensed goods for local brands reflecting their own culture and heritage. Walmart closed 14 stores in China during the year. Tesco, Lotus and Metro Group also closed stores and/or called off expansion plans. Other western companies like Hermès, Ralph Lauren and Lalique are adapting by establishing local operations to create products for local tastes. Other Asian countries posting significant growth in 2014:
Central and Eastern EuropeCentral and Eastern Europe was the only territory to record a decline in licensed sales, from $632 to $598 million in 2014 (-5.3%). Blame it on Russia where licensed sales fell a dizzying 10% after increasing 6.1% in 2013. Although long-term prospects for licensing in Russia remain bright, this year it all went wrong. War in Ukraine led to U.S. and EU sanctions. The ruble collapsed, taking the Russian retail market with it—although, in an ironic way, the ruble’s fall may have prevented an even bigger meltdown. As one licensing agent on the scene explains: “Russian consumers went on a binge at the end of the year not so much because they wanted licensed goods but in an effort to dump their rubles.” Reverberations from Russia and bad economies and/or government policies hurt other countries in the territory, including Hungary (-2.0%), the Czech Republic (-2.0%) and, of course, Ukraine. The lone bright spot: Poland posted a 4.0% gain thanks to strong sales of licensed apparel, footwear, sporting goods and electronics. Other TerritoriesThe Middle East and Africa grew 4.4%, most of any territory (albeit on the smallest base). The territory’s biggest market, South Africa, posted 5.0% growth thanks to strong sales of entertainment properties, footwear and toys. But according to one local licensing agent: “the decline of the rand vis-àvis the dollar wiped out the increases in royalties generated.” Other Sub-Sahara countries like Nigeria, Kenya and Botswana did well (although their economies are too small to make much of an impact on the totals). Lower oil prices did little to slow consumption of licensed goods in the Gulf states of Saudi Arabia (3.0%), UAE (3.0%) and Qatar (2.75%). As in 2013, sales of licensed goods in Australia and New Zealand increased 2.0% in 2014 to $2.3 billion. Although the economies of both states remain fundamentally sound, challenges remain including the growth of piracy and the gray market. “Patchwork state intellectual property regulation is a major problem in Australia,” according to one licensing agency. Latin America, where just about all licensed revenues come from sales of entertainment and celebrities-based properties, was flat in 2014. After growing 3.9% in 2013, Brazil declined 1.50%. The expected bump from the 2014 World Cup didn’t happen. “Brazil’s political situation and economy are going in the wrong direction,” one regional licensing agent explains. Mexico’s 4.1% inflation rate essentially cancelled out its 2.25% increase in sales. Bright spots in Latin America included Chile with 3.0% growth and $191 million in sales and tiny (in terms of licensing revenues) but emerging countries like Colombia, Ecuador and Costa Rica. Property TrendsEntertainment/character increased 4.8% in 2014, highest of any property type. With worldwide sales of $27.0 billion, entertainment now accounts for 17.0% of the licensing market (as opposed to 16.5% in 2013). It’s the same story all over the world: dominance of Disney and other “A” properties—Frozen, Teenage Mutant Ninja Turtles, Spider-Man, Avengers, Minions, et al. But there are local variations. Thus, for example, Hello Kitty, Angry Birds and other brands that got hammered in the U.S. and U.K. did well in other regions, especially less developed markets like Africa and Latin America. Meanwhile, non-U.S. entertainment properties like Peppa Pig and Purple Turtle continue to emerge to challenge Disney. Sports had the second highest growth rate at 3.4%, generating just under $19.4 billion in sales and 12.2% in market share. Factors for growth include the continued popularity of pro sports in North America and expanded soccer team licensing—both national and club-based— around the world. The worlds are converging. Thus, for example, 35% of NBA licensed revenues now come from markets outside the U.S.; meanwhile, sales of English Premiere League and other foreign soccer goods continue to grow in North America. Fashion is still the biggest segment accounting for 23.9% of all worldwide licensed sales. Despite competition and shrinking retail space, fashion grew 2.4% in 2014 to $37.9 billion. Meanwhile, corporate/trademark properties, the second biggest property type, was flat at $34.1 billion (1.2%). On the downside, art continues to decline, falling 7.1% to $8.5 billion.
[pieChart title=”Global Retail Sales of Licensed Merchandise, by Property Type, 2014″] Product TrendsKey results in terms of licensed sales by product category:
[pieChart title=”Global Retail Sales of Licensed Merchandise, by Product Category, 2014″] |
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