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Mass & Ecommerce Grow Licensed Distribution

Retail sales of licensed merchandise surged through online/ecommerce channels in 2017, according to TLL’s Annual Licensing Business Survey. The channel moved by 0.3 percentage points to make up 12% of all licensed sales—outpacing department, off-price, and convenience stores.

Discount/mass led with 32.3% share, followed by specialty stores (19%) and grocery and drug (12.1%). 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./Canada accounting for over $100 billion, a one-tenth of a percent change represents more than $100 million. Although most channels saw little to no movement in terms of share, just by remaining constant, retail sales of licensed merchandise necessarily grew.

The biggest distribution trends cited by Survey respondents for 2017 were the rise of ecommerce and the expanding importance of “lower” retail channels like discount/mass, dollar/value/off-price, and variety and convenience. This trend held true internationally as well.

Many licensees noted that brand owners have been more willing over the last year to sell into a broader range of channels, such as through discount stores, ecommerce sites like Amazon, and even directly through social media—translating into more sales.

On the other hand, that same openness has led to some properties being diluted, reducing their “premium” value and price. As it is, however, licensors may not have a choice—channels like high-end department stores and upscale gift shops are becoming increasingly difficult to enter. And as price wars between giants like Walmart and Amazon escalate, there is increasing pressure to lower margins.

Department and specialty stores in particular have tightened up their retail strategy, buying in less licensed inventory and developing their own store brands. More generally, retailers have been hit hard by lower foot traffic and store closures over the last couple of years. In the past, buyers looked to licensed merchandise to boost sales quickly and easily—but throughout 2017, they saw disappointing returns from “sure hits” like Cars 3 and Despicable Me 3.

That, in turn, fueled a feverant conservatism amongst retailers seeking “guaranteed returns” and greater profits per square inch. The good news is that they are not necessarily moving away from licensing; half of those surveyed reported that direct-to-retail sales were up, while half did not reply and a small minority reported that instances of DTR deals were either flat or down. The bad news is that retailers are increasingly closing the doors on new licenses which can challenge the dominence of “A-list” brands—leading, ultimately, to consumer fatigiue and apathy.

Going forward, all of the above will be pressing concerns for the licensing industry in 2018—with the added stress of uncertainty over the future of retail chains like Toys ‘R’ Us.

Retail Sales of Licensed Merchandise, by Distribution Channel, U.S & Canada, 2016–2017
Note: Numbers may not add up exactly due to rounding. Download an image of this chart here.
Distribution ChannelShare of Market, 2017Share of Market, 2016Percentage Point Change, 2016–2017Growth in Share, 2016–2017
Specialty Stores19.0%19.2%-0.2%-1.0%
Department Stores/Mid-tier11.9%12.0%-0.1%-0.8%
Grocery and Drug12.1%12.1%0.0%0.0%
Variety and Convenience2.4%2.4%0.0%0.0%
TV Shopping1.0%1.0%0.0%0.0%
Mail Order0.1%0.1%0.0%0.0%

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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