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Retail: Shifting Towards 360 Degree Distribution

From the floor of Licensing Expo Las Vegas, Amazon is demanding an outsized role in the licensing business. Its VP Nicholas Denissen, this year’s keynote speaker, opened the show with the claim that the ecommerce giant will balloon licensed retail sales to $1 trillion over the next 10 years.

The online retail giant is pushing its Merch Collab service to licensors, licensees, and others in a bid to make the business more accessible and transparent for both producers of licensed merchandise as well as consumers seeking to support their favorite brands and manufacturers.

And while many on the floor cited Amazon as a valuable partner that has helped them achieve high double-digit growth in ecommerce sales, clearer heads warned against putting all of one’s eggs in the digital basket. Now more than ever, it is critical for brands to have a presence both online in ecommerce as well as offline in brick-and-mortar stores.

The same wisdom applies to streaming versus traditional linear content distribution, ebook versus physical publishing, mobile game apps versus traditional board games. Even the biggest steaming players like Netflix and Amazon, certain producers warned, are too small to support a broad consumer products franchise.

Mass retailers like Walmart, Target, and even Kohl’s are expected to fill the gap left by Toys ‘R’ Us. To a lesser extent, off-price retailers like Kmart, Ross, TJ Maxx, and Marshalls will also get some play with exclusive lines. Specialty retailers, such as book, video game, and infant goods stores are seeing higher returns, but are necessarily limited by lower sell-ins. Certain smaller evergreen, high-end properties are looking to department stores and eschewing mass, drug store, and even certain ecommerce channels (e.g., electing to sell only through one official website).

Wild cards in the toys/games space include previously defunct brands like FAO Schwartz and KB Toys, which are relaunching as store-in-store and mall-based pop-up activations throughout the U.S. this holiday season and into 2018. FAO Schwartz is additionally re-opening a flagship location at Rockefeller Center in New York as well as branded airport shops nationwide. Any comeback from these two players, however, is not large enough to support the scale demanded by major toycos like Hasbro, Mattel, and Jakks Pacific.

Very few licensing executives I interviewed said that they are considering looking at discount or off-price distribution, despite the fact that those retailers are the fastest-growing segment for brick-and-mortar distribution in the U.S./Canada—the most common concerns were a reduced number of SKUs, physically smaller and lower quality goods, and decreased margins. As these stores continue to crowd out and bankrupt specialty shops; however, we predict that they will begin looking towards licensed products in part as an effort to raise prices.


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