Upbeat, but still fettered!

The challenges of the Indian market are many. However, there are positive trends like the burgeoning Indian economy – with projections of more than 50 per cent growth in retail sales to nearly $550 billion between now and 2014 – a youthful population that’s highly brand conscious, and the fact that the ‘organised’ retail sector is expected to continue growing at 40 per cent annually for the next several years, which are important to consider for a balanced perspective.

Taking an overall view, it is noted that the product licensing business in India is largely dominated by fashion brands from elsewhere in the world, with much of the merchandise sold in licensed single-brand retail outlets or shop-in-shops. For instance, the huge Indian film industry has not really leveraged the licensing business in a meaningful way, whereas celebrity licensing – primarily involving actors and cricketers – appears to be a growth area. Few Indian brands and characters have had limited success via licensing, but more or less, right now the name of the game is ‘Western brands’, which dominate the business because they have brand equity, are a novelty, have deep assortments, have credibility, are news worthy, and are aspirational, amongst other reasons.

 

STRATEGY & DISTRIBUTION HITCHES

Industry insiders help us gain a better understanding as to what are the first hand experiences and what are the actual ‘on-the-ground’ issues that the licensed merchandise market faces in the country. While for retailers, licensed goods are still a small segment of attracting people to their stores, limited knowledge of buyers is also a constraint. “There is limited training of visual merchandise at the retail front and what goes on shelf is largely the influence of what the buyer sitting on the retail side likes personally,” comments Nitin Kalra, Director – Licensing at AI Licensing India Pvt Ltd. It can be said without doubt that piracy has its roots deep into the market and Kalra interestingly points out that retailers are not worried about checking the authenticity of the supplies. “All they are keen to know is how much more margins they can make, and pirates certainly offer them much more than an officially licensed vendor,” he adds.

 

Licensees need to fulfill their end of the bargain by pricing correctly, delivering and replenishing on a timely basis, and being transparent in reporting to licensors. Devendra Chawla, President – Food & FMCG at Future Group, also shared his take and said one of the major problems in India is that the retail infrastructure is in its development stage. Since organised retail is still nascent and in the ‘growth stage’, it is very difficult for licensors to find a distributor who will reach bulk of the market and understand advantages of licensed merchandise. “High property cost and thin margins also pose a challenge and a wrong pricing decision will result in dead inventory,” he says.

 

There is also a huge trust issue. “I know of horror stories where licensees may only pay the negotiated MG, but nothing else; or where the licensee may sign up for one category, and suddenly release five categories. The savviest of businessmen in India know that anything is better than going through the legal system, so they take advantage of that in their associations, often at times leaving the brand out to dry,” opines Sid Shah, President, The Wild East Group. It is important to develop an ecosystem of business partners that want to do good business, that want long term relationships, and believe in a healthy working relationship. “We don’t need to address the issues that necessarily come with a developing economy, as that will naturally work out; we need to address the issues that preclude business from being done,” he adds.

 

Addressing the point of localisation, the main question which strikes is – how to localise the licensing model to make it work in India? It is believed that even though the standard licensing framework will work for certain large brands, it won’t work for all brands. Shah points out the need to innovate and think about new structures for licensing deals, engage in creative back-to-back agreements with relevant partners, and develop different types of distribution platforms that ensure a win-win situation for everyone.  

 

LACK OF AWARENESS

Undoubtedly, for a majority of the manufacturers, the concept of licensing is still an alien one, with little respect for Intellectual Property Rights (IPR). A lot has also got to do with the Indian laws and enforcement. “Indian manufacturers are yet to learn how to run successful licenses. The essence of timing for designing, product development and launching is still a matter of concern. Sometimes, the licensee is not able to launch the product due to this lack of knowledge, resulting in completion of the term,” states Amit Chhabra, President – Sales & Marketing, Dhananjai Apparels Pvt Ltd.

However, at the same time, the focus need not necessarily be only on the manufacturers. The ecosystem of brand-licensee-retailer needs to be thoroughly analysed and it must be understood that the final output of licensed product is via the retailer. It is more about figuring out a way to ensure that the manufacturer succeeds in the current retail environment and ecosystem.

 

Chawla brings forth a different viewpoint and shares that Indian manufacturers are getting inducted to the value that licensing brings, which is still a relatively new technique in the territory. “Understanding of the licensing process is evolving very quickly amongst manufacturers and Indian marketers. They are now not averse to trying out licensing to generate excitement amongst the target consumer group and take the risk involved,” he adds.

 

BRANDING & COMMUNICATIONS

Keeping licensing in mind, any brand that is introduced into the market should have a very clear brand style guides that ensures that all packaging and communication is done in a standardised, coordinated, and relevant manner. “The style guide must communicate the pantone colour codes, typography, dos and don’ts, packaging requirements, and other style elements,” avers Shah. 

 

Yet another important hurdle, which is faced by retailers, is the placement of product and branding. It is also a sensible initiative if the franchisee signs or associates with a brand or license that a customer can recollect or identify. “Advantage to licensee in this situation is that it becomes easier to convince the retailer for product placement. Secondly, the retailer provides space for in-store branding easily. Under the shadow of this known license, the retailer sells its private label,” comments Chhabra.

 

IMPORTANCE OF PACKAGING

Any product, licensed or not, needs to be packaged well, given that there should be as much focus put into packaging and display as the product – that is the first communication of the brand’s attributes, relevance, and value to the consumer. “Licensors do not pay much heed to this as they think that TV or movie content is more than enough to create awareness among customers. Retail story about the brand has to be shown and talked about to the customer. Licensees make the same mistake as they think that they are paying royalties and the cost of visuals should be borne by the licensor,” points out Chhabra.

 

Retailers need to display well, understand that a strong brand sells 20 per cent more than a more generic version of the same product, and pay within realistic credit periods. Interestingly, Chhabra also shares his take and highlights the trend that he has recently noticed in the country wherein licensees give more attention to tags instead of packaging. “Tags are becoming bigger in size and are being developed in many shapes. The perceived value of the merchandise increases with attention to packaging. Threat of counterfeit products can also be subsidised by providing attractive packaging and licensees can even charge an extra price to the customers for providing good packaging,” he adds.

 

EMERGING PRODUCT CATEGORIES

New and unconventional categories do face resistance from retailers but the best way to overcome this situation is to have a big spread of sales channels, especially the licensee having EBOs will be an added advantage. 

Kalra shares that licensing is all about innovation with the best licensing deals happening in the most unusual of products – something we never imagined – maybe an everyday item, which we don’t even give so much importance. For example, very recently AI Licensing launched the world’s first printed aluminum foil for kids with Doraemon and Housefoils. Yet another example that could be cited is Armani designing high-end flats, which shows that the right connection in the right category can help tilt the consumer towards your product. 

 

IN STORE AND UP NEXT

Banking on the fact that the demand for licensed products is growing and the retail landscape changing, there is huge potential for growth for the industry. It is also understood that in certain categories, licensing is no longer at a fledgling stage. 

 

“You will frequently come across licensed products in categories such as apparel/fashion, accessories, toys, stationery and chocolates, which do not face any issue related to demand. Personal care is one category where licensing is still at a nascent stage and is now evolving. The landscape would certainly change in the next two-three years,” says Chawla. He comments that events (like birthday parties), food courts, multiplexes are some of the new channels where licensing could be used extensively.

 

Kalra says, “The next big segment would be e-commerce, which is a fast emerging market apart from traditional retail.” Shah feels that sports merchandising will become extremely large in India, especially once sports teams figure out how to develop the buzz and loyalty off-season. “I also think pet related categories will become quite big in India over the next few years, as we are seeing pet ownership grow categorically across tier I to tier III cities,” says Shah.

 

“Gyms could be an amazing distribution channel for a lot of ‘action’ branded products. As the market develops and matures for other types of sports like skate-boarding, basketball, racing, etc, concessions at these venues will be an important channel for selling branded products,” adds Shah.

 

It is all about identifying your target consumer – understanding where they go, shop, etc. All these locations become potential touch points, adding multiplexes, which are still largely unexplored as a sales channel.