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Twin Studies Predict Strong Recovery For Licensing and Retail

By Gary Symons

TLL Editor in Chief

Two key reports released over the past two weeks illustrate the devastating impact of COVID-19 on the licensing and retail industries … but they also paint an encouraging picture for the economic recovery of both sectors as vaccination programs roll out in America and around the world. 

License Global released its report—COVID-19: What Happens Next—on the impact of COVID-19 on the licensing industry, with survey respondents showing the industry as a whole suffered declining revenues and layoffs. The good news, says the License Global report, “Industry professionals on average expect business to stabilize and return to broadly pre-COVID-19 levels by December 2021. Most notably, 45 percent of respondents anticipate a rise in annual revenue, while 28 percent anticipate an increase in headcount and company staff by the end of 2021.”

However, the report also states that senior management in the US are more optimistic about the recovery than their European colleagues. Americans predicted an increase in annual revenue from pre-COVID-19 figures in 2019 to the post-COVID recovery in 2021 of nine per cent, vs. an expected increase of three per cent for European executives.

A similar story is unfolding in the related retail sector, which was dramatically impacted by pandemic lockdowns.

A new report, The Resilience of Retail, from the retail audit and process company Cotiviti on the outlook for the retail industry post-pandemic shows businesses in the sector may be bloody and beaten, but they remained unbowed by the challenges in front of them. 

The report, penned by Cotiviti, it’s eTail division, and WBR Insights, says most retailers are optimistic about the outlook for their sector as America recovers in the post-vaccination period. 

“The pandemic sent shockwaves through the retail industry,” the report says, but adds, “Thankfully, retailers appear to be bouncing back, as 97% of retailers have a positive outlook in terms of macroeconomic conditions and growth over the next three years.”

The data was garnered by surveying C-suite executives throughout the retail sector, and one quote from a respondent summed up the industry’s mood of cautious but strong optimism. “Employment and the markets healing will uplift the purchasing abilities of customers and eventually help retailers.” 

COVID Accelerated Existing Retail Trends

Most licensing industry execs said their companies were already dealing with trends that were later accelerated by the pandemic.

While the pandemic created unique challenges, retailers also say that the changes forced upon them were for the most part already happening. The major change was the ongoing shift to ecommerce and omnichannel customer experiences. In fact, 70 per cent of retail organizations said they “were either substantially or completely changing their organizational structure before the COVID-19 outbreak.”

That said, the pandemic and the requirement for social distancing or outright lockdowns came down like a hammer on an industry that, at the time, was still dominated by an in-person, brick and mortar experience. In response to the pandemic, 64% of retailers embraced social distancing measures and 53 per cent enhanced their ecommerce and digital shopping channels.  

Almost half (48%) enhanced self checkout systems, enabled contactless payment technologies, or modified their stores hours, but not just because of the pandemic. Rather, retailers cited the fact that consumer behavior trends were shifting rapidly, and the retailers adapted swiftly to consumer demand. As a result, a small majority of retailers (53%) believe that “many of the consumer behaviors embraced during the pandemic represent permanent changes. Half believe there will be greater consolidation within retail markets as well.”

In spite of the challenges, however, the industry is reporting an extremely positive view of the future, with the report stating “97% have a positive outlook in terms of macroeconomic conditions and growth over the next three years.”

Poll results showed the pandemic either accelerated changes to retail practices, or was the main reason for those changes.

On the licensing side of the industry, respondents to the Licensing Global survey say they remain optimistic, despite the challenges that continue to face them during the recovering. In North America, respondents said ongoing disruption of the supply chain, from manufacturing through to retail, will remain a key disruptor for the sector through 2021. In Latin America, executives pointed to the limited availability of investment and credit as a major challenge. In Europe, while disruptions due to COVID-19 remain a major concern, respondents pointed to the unrelated issue of the Brexit deal as a top challenge. That situation is already raising challenge, as suppliers and shippers on both sides of the Brexit divide reported a variety of supply chain issues that go well beyond the problems associated with the pandemic. 

Impact of COVID to Continue Through 2021

The Licensing Global survey concludes the industry is in recovery mode, but licensors and licensees alike are not underestimating the challenges ahead in the wake of the pandemic. 

A large majority of 73% concluded 2021 will still see impacts from COVID-19 and the same number predicted the shift in consumer spending habits caused by COVID-19 will continue, and will pose challenges to companies that fail to adapt. Like the Cotiviti report, two-thirds of respondents say there will be a major shift in ‘retail footfall’ due to the shift to ecommerce. 

As well, 11% of respondents, mainly from Europe, say Brexit will hamper the recovery, while in North America 33% of respondents say they are concerned about the impact of worsening trade relations between the US and China.

If there is a central theme to both reports, it is that many of the changes wrought by COVID-19 were already beginning to occur due to market forces, and for that reason, many of those changes are permanent and will require retailers and licensing companies to adapt to a new reality. 

A Canadian Case Study in Adaptation of Retail Services

On the retail side, however, the Cotiviti report makes an interesting point that for brick-and-mortar retailers, the key will be in establishing and maintaining strong relationships with the local community. While many are adopting processes like ecommerce and curbside pickup, they are also working to create an experiential strategy that creates a direct relationship with their client base. 

A perfect example of this approach emerged in the small but popular Canadian wine region in the Okanagan Valley of British Columbia, where a study by the BC Wine Institute found that one in 10 of the 300-plus wineries in the region were in danger of doing out of business due to COVID-19. Most wineries in that region sell most of their wine at the winery itself, and relied almost exclusively on the in-person experience.

“We had to react very quickly and continue to connect with our customers,” said Jeff Harder, Proprietor and Managing Director of Ex Nihilo Vineyards. “We have a loyal following, and we wanted to still be able to keep in touch with them, give something back and say we know you’re at home, we wanted to reach out and say we’re still here.”  

BC wineries came up with a variety of strategies, including online wine tasting; direct meetings online with their winemakers; group tastings with limited numbers of guests; curbside pickup; and enhanced ecommerce. 

Ex Nihilo, for example, launched an online concert and wine experience that would normally attract about 100 people at the winery, but online, it attracted 1100 people, many of whom ordered wine online. Others brought in panels of sommeliers and launched online wine seminars, and most created intimate group events with few people, but a better experience. 

At the end of the season, according to Miles Prodan of the BC Wine Institute, most wineries saw their sales rebound to 2019 levels, and some actually saw an increase in revenue. 

In general, Prodan says it appears most wineries have fared far better than they  expected when BC went through its first lockdown. That was no accident, he said, because winery owners, the BC government and the BC Wine Institute worked hard to create a workable situation to prosper despite the pandemic.

“Initially of course wineries were closed, and as they reopened we worked with them very closely on how to handle tastings,” Prodan said. “It was quite restricted at 50 per cent of capacity, but as it turned out it was a quantity vs. quality issue, and the quality (of the experience) was up.”

Prodan explains that most wineries went to a reservation system, giving them more time to spend with each customer, and that effort paid off.

“It gave people time to sit down with those guests and talk about the wine and the winery and that resulted in an increase in sales,” he said. “So, less people buying more wine, it all netted out to be about the same.”

Similar strategies were employed throughout North America to deal with the loss of in-person visits to retail outlets, giving retailers in general more confidence that they can deal with the challenges facing them as the world slowly emerges from the COVID-19 pandemic. In a sense, retailers and the licensing companies supporting them have gone through a trial by fire, forced to adapt far more quickly than expected to ongoing changes in the industry, but coming through the fire with the experience and know-how to adapt to the shifting retail economy. 

You can access the full Cotiviti report The Resilience of Retail by CLICKING HERE.

Access the report by License Global and Opsec Security, COVID-19: What Happens Next, by CLICKING HERE.

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