While the changes in market share changes are mostly very small, the dollars involved are not. With retail sales of licensed merchandise in the U.S. and Canada accounting for just a hair under $100 billion in 2014, a one-tenth of a percent change represents $100 million.
Sales of licensed products in the e-commerce/online channel, including mobile, are growing at almost twice the rate of overall online sales. This channel saw its share of market increase 1.5 percentage points, from 8.5% to 10.0% of all retail sales of licensed products. That translates to a 17.6% relative increase in both market share and dollar volume.
According to Forrester Research, overall online retail sales account for about 9% of U.S. retail sales, and are expected to grow at a compound annual growth rate of 9.5% between 2013 and 2018. Key factors in this growth include the increased penetration of smartphones and tablets, and a continuing share shift to the e-commerce channel as shoppers follow aggressive promotions by online merchants.
Brick-and-Mortar Channel Sales
After e-commerce, the most dramatic share change came in the department store/mid-tier segment, which fell from 13.0% in 2013 to 12.6% in 2013.
That share lost by department stores was largely picked up by the lowest-priced retail tier, consisting of dollar/ value/outlet stores. This channel saw its share of market grow 0.3% in 2014, mirroring its performance of 2013. The channel rose from 8.5% to 8.8% of all retail sales of licensed products in the U.S. and Canada. That translates to a 3.5% relative increase in share.
Entertainment properties in particular are expanding into the dollar channel, as licensors expand their licensee pools. “We do sell there,” says one licensor of an entertainment brand. “But we can do more. You have to have the right price point for that consumer.”
“You have to have different types of licensees in place to open up this market,” agrees another licensor, who has signed new licensees for low-priced toys distributed exclusively in the dollar channel.
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, more
Mass, Grocery/Drug Edge Up
Mass/discount chains also saw their share edge up, from 31.8% to 31.9%. While that translates to relative growth of only 0.3%, it is significant in dollar terms since this channel has by far the largest share of market of any distribution tier. “Mass accounts continue to dominate licensed merchandise,” notes one respondent. “Specialty stores cannot bring the volume even when you lump them all together.”
Nevertheless, shrinking shelf space at mass merchants remains an ongoing issue for licensed products. Target, Walmart and Best Buy continue to reduce space for licensed goods in store, while promising a corresponding increase in licensed merchandise offered through their e-commerce sites, according to one licensor.
Grocery and drug stores continued to rise, creeping up from 12.2% to 12.3% in 2014. One respondent described a strategic move to diversify product assortments as making grocery and drug an increasingly important channel for licensed goods.
“Grocery continues to expand their product assortment evolution to be a one stop shop for consumers,” says this licensing agent. “Drug chains such as Walgreens and Rite Aid have redone several stores to include fresh food and increase their product assortment to keep pace with competition from mass retailers in urban areas such as City Target.”
Also feeding the grocery channel is a healthy increase in sales of licensed food and beverage products. The category grew 6.0% in 2014, according to the TLL Survey, thanks, in part, to increased licensing of non-food brands for food products and improvements in frozen food technology.
Specialty stores’ share remained flat at 19.3%, amid conflicting opinions from survey respondents. This is likely driven by the wide variety of retailers in the specialty sector. While respondents noted an increase in licensed merchandise carried by fast-fashion chains such as Forever 21 and H&M, and sporting goods stores, other specialists like book stores, stationers and gift and novelty purveyors have contracted in recent years.
Amazon’s dominance in e-commerce cuts two ways, similar to the way Walmart is dominant in U.S. brick-andmortar retailing, and the way “Frozen” dominated entertainment licensing in 2014. All of these brands expand the retail business; but at the same time, they make it tough for smaller competitors and new products.
One licensee described creating variations of products specifically for Amazon as a way to minimize “showrooming.” With slightly different products on Amazon, it is more difficult for consumers to make a direct price comparison with the products they are browsing in stores.
A licensing agent who reported his brands’ e-commerce business was down in 2014 pointed to the failure of some brands to move swiftly enough to optimize their own sites for mobile purchasing.
According to the 2015 Shop.org/Forrester Research Inc. State of Online Retailing Report, the development of mobile sales is a top priority for retailers in 2015, with 58% of surveyed retailers putting it at the top of their marketing priority list (up from 53% a year earlier).
The survey also found that smartphone sales as a percentage of online sales grew from 8% in 2013 to 12% in 2014, an increase of 50%. Sales via tablets also grew from 13% of online sales in 2013 to 16 % in 2014.
Even as e-commerce continued to grow over the year, both mail order and TV shopping saw their shares decline significantly. Mail order’s decline of 33.3%, from a .3% to 0.2% share, follows a multi-year pattern as e-commerce has largely replaced shopping by mail, and virtually all players would be considered “multichannel” today.
The decline in TV shopping was smaller, with the channel’s share dropping from 1.4% to 1.3%, a 7.1% decline. While there is an abundance of licensing activity on QVC and HSN, these outlets are also increasingly driven by e-commerce.
The variety/convenience channel also lost a fraction of a share point, falling from 3.0% to 2.9%.
Distribution Channel | Share of Market, 2014 | Share of Market, 2013 | % Growth in Share, 2013-2014 | |
---|---|---|---|---|
Discount/Mass | 31.9% | 31.8% | 0.3% | |
Online/E-commerce | 10.0% | 8.5% | 17.6% | |
TV Shopping | 1.3% | 1.4% | -7.1% | |
Mail Order | 0.2% | 0.3% | -33.3% | |
Specialty Stores | 19.3% | 19.3% | 0.0% | |
Department Stores/Mid-tier | 12.6% | 13.0% | -3.1% | |
Grocery and Drug | 12.3% | 12.2% | 0.8% | |
Variety and Convenience | 2.9% | 3.0% | -3.3% | |
Dollar/Value/Off-Price | 8.8% | 8.5% | 3.5% | |
Other | 0.7% | 2.0% | N/A |