Retailers reprise licensing with Capsule Collection

Limit your supply and the demand grows. This is where the art of marketing lies and this is what seamlessly suits the nature of capsule collection - a practice that the licensing fraternity is swearing by these days. Capsule collection originally popularized by Donna Karen in 1980, is a practice limited supply of desired products is pumped in to the market to drive in quick sales.

Researches prove that private label brands are 10-15% more profitable than wholesale lines. Departmental stores and retailers are often working with famous designers, celebrities and entertainment properties to carve a niche for themselves, increase their appeal, attract more consumers, and hence drive in the retail sales.

With ONLY launching collection for Marvel, Popeye etc. Veromoda doing a capsule for Mickey Mouse, Forever 21 launching Coca-Cola collection, Nush x Suppandi, the trend of licensed capsule collection seems to be far from over. In words of Sumit Dhingra, VP & CEO – Arrow, Aeropostale & Izod (India), Arvind Lifestyle Brands Ltd said, “Doing a capsule collection works very well with consumers and it is a good way to marry two great brands wherein success of one brand brings in success for other brand too. It helps them reach new consumers and amplify the values which both the brands share."

An attractive business proposition Often touted as a marketing strategy, capsule collection has become the most preferred mode of licensing established retailers. For instance puma capsule collection for Ferrari, the fast fashion brand H&M launched a limited edition collection with Karl Lagerfeld. While the Idea here is to not just offer consumers a great product, it also acts as a Win-Win situation for both the licensors as well as the license. And it is the retailers who opt for search association most of the times.

Jiggy George, Head of LIMA India and CEO of Dream Theatre asserted, "Capsule collections are a great intersection of fashion and licensing, leveraging best of both worlds. With greater focus on private brands, capsule collections are allowing retailers to bring the latest from the world of entertainment and lifestyle into the world of fashion. This not just gives them the opportunity to tap into hot trends, but offers loyal customers unique collections that echo international trends.” Dream Theatre has had two sellout capsule collections with Pokémon and Smiley with Jack and Jones and ONLY. Touting capsule collections as a strategy to create buzz amongst the consumers alongside banking on the fandom of the IP; Anand Dubey, GM – Bradford License India said, “Capsule collection is more about a stimulus rather than creating a separate identity for a brand.”

An edge over conventional collection Generally carried out for apparel, capsule collections offer an edge over the conventional ones in a way that the former is a miniscule of the entire collection, whereas latter has to be launched in form of an entire end-to-end range. While the conventional licensing agreements offer a wider spectrum for the licensees, with comparatively longer durations, in case of capsule collection the durations range somewhere between six months to a year or two seasons. “The royalty rate is comparatively higher in case of capsule collection, somewhere around 10 – 12 per cent. It goes even higher in case of brands like Ferrari.” shared Dubey.

Also another advantage of capsule collection is that a licensee is entitled to launch even a few pieces; as minimum as one. Mango did a limited edition capsule collection with Art Ask Agency and launched just one Freida Kahlo T-shirt. However, in case of a full-fledged licensed collection, there is a lower limit of at least 90 SKUs. Clearly, licensed capsule collections are gaining popularity among the licensing fraternity.

Therefore, for brands that have limited production capacity, but have tremendous potential to come up with quality and long-lasting products, they can make use of the Capsule strategy to mark a presence in the industry and then slowly compete with the leading players in the same industry line once they have a huge consumer base.