The licensing and brand merchandising industry has numerous issues just like the rest of retail industry. The good part is that this industry is at the growth trajectory in India while promising y-o-y growth of approx 8.4 per cent.
But as the experts speak, this industry is still in its embryotic stage reason being first the brand owners are unlearning and learning the nitty gritties in accordance with Indian sub-continent. Second, licensing has not yet been accepted as an integral part of retail. Amidst all the success stories, are the grey areas impeding the growth of the industry.
- Minimum Guarantee
Except a few names, most licensors are brands well-established in terms of licensing in global markets, hence the expectation of the minimum guarantee and revenue is dollar based under looking the fact that there nation of operation is a rupee dominated country where the average ticket size ranges from Rs 800 to Rs 1,000.
One of the key issues is managing these expectations with the licensors and expecting them to support it to build a brand together. Ultimately, the licensors make money only when licensees make money. It’s not the margin game but it is about royalty.
- IP protection laws
In the times when this industry is promising growth, the licensers are in a catch-22 situation due to the bottlenecks in operation in India, driven by the poor IP protection rights. According to an index released by the U.S. Chamber of Commerce, four members of BRIC group - Brazil, Russia, India and China received worst scores for protecting copyrights, patents and other intellectual property. While the United States received the highest tally followed by Britain, India was last reflecting its low scores in each of the categories.
- Terms and Conditions applied
The contracts are sometimes too universal in India and are not customized to suit this side of the world. For instance, the product liability insurance has relevance in the US, but not in India. The licensors have universal templates which are circulated across without modifying the contract as per local regulations.
- Lack of awareness
This is one of the major reasons which lead to piracy and counterfeit as a huge percentage of those doing such practices are unaware of the fact that what they are doing is illegal. Moreover, retailers tend to take this practice as ‘offering visibility to the IP owner’.
Moreover eRetailers have entire gamut of character inspired products on their portals without an iota of information about if the manufacturer or retailer listed on portal had any agreement with the IP owner
- A handful of licensees
In the west, IP protection is a key part of the L&M industry and that level of efficiency is yet to come through in India. This leads to reduced number of genuine licensees thereby reducing the available options with licensors and hence decreasing the competition. Moreover a handful of licensees across each category reduce the options for licensors. Be it Disney, Warner Brothers or Viacom, all are left with a very selected set of licensees.