U.S. merchants are decidedly optimistic about the upcoming holiday season. As they released their most recent earnings reports, retailer after retailer spoke confidently about sales prospects for the next quarter.

“There are just more positive indicators than we have seen in many years,” Target CFO Cathy Smith said during the analyst call accompanying the company’s Q2 results. In comments typical of others, Target forecast a strong holiday season with sales similar the 4.8 percent same-store gains the chain registered in the most recent period. It also pointed to a 6.4 percent jump in store traffic.

The National Retail Federation now forecasts that holiday sales will climb at least 4.5 percent; earlier in the year, it predicted a 3.8 percent-4.4 percent jump for the season. The more positive outlook is due largely to higher wages, gains in disposable income and a strong job market.

The licensing community is well positioned to take advantage of these retail tailwinds. After all, the business is built on leveraging the popularity and visibility of well-known characters, of-the-moment fashion labels, and trusted brands. Retailers thrive on having the right assortments of sought-after goods and brands at the right price.

But even as licensors and licensees note the positive general business environment and consumer sentiment, they’re also faced with a changing retail environment, in which major chains have been stepping up their private label programs at the expense of national brands, whether licensed or otherwise.

Historically, retailers’ reliance on private labels has risen and ebbed cyclically. They’re attracted by the higher margins, exclusivity and control over the goods when things are going well. But when lines don’t sell, they’re turned off by the markdowns and other costs of owning and getting rid of merchandise for which there’s no other natural home. At the moment, market momentum is definitively toward private labels, creating headwinds for brands and vendors seeking shelf space.

That’s created more competition among licensees for that valuable real estate and, in many cases driving property owners and manufacturers to step up their online merchandising, marketing and sales efforts.

“There is space being taken away from licensed business and moved to private labels, so the competition (between licensed brands and private label) has increased so much that licensors have to look at exclusive launches” during the holiday season or “allow that brand to live at one specific mass retailer as a means for getting in in the door,” says Robert Prinzo, Head of Global Licensing at Cloudco (formerly American Greetings Entertainment).

In the entertainment sector, the biggest pressure is being felt by properties that are below tentpole status or those that haven’t already shown strong results.

“If you have a very strong license, you are going to get in there,” says Nancy Fowler, president of The Licensing Shop, which represents Moose Toys brands including Shopkins and Pikmi Pops. “But if you are a new licensee or one that may take some time to get traction, you may have a hard time showing that you should be part of retailers’ programs.”

“This year the level of exclusively has stepped up. I see that as a continual thing going into 2019 because there is a lot of consolidation and competition for the same properties,” says Silver Buffalo’s Greg Alprin, whose company is a major supplier of drinkware and wall décor to mass retailers. “Everybody is competing against each other no matter what the property is.”

The battle for physical shelf space is offset somewhat by the ever-increasing role that eCommerce is playing in today’s marketplace. According the LIMA’s Annual Global Licensing Industry Survey, the share of licensing business in the U.S. and Canada being done online increased to 25 percent in 2017 from 23 percent the year before. For toy supplier Basic Fun, ecommerce now accounts for about 20 percent of annual sales, up from 5% two years ago, and online retailers have become among of its top customers, says CEO Jay Foreman. With loss of Toys R Us and other retailers, the Internet becomes “the new showroom for the toy industry” during the holiday season, says Foreman.

So all in the marketplace are poised to take advantage of the positive business environment, and consumers are poised to spend. The stage has been set. Let the games begin.

Contacts:

Basic Fun, Jay Foreman, CEO, 561-997-8901, jay.foreman@basicfun.com

Cloudco, Robert Prinzo, Head of Global Licensing, rprinzo@ag.com

Hybrid Apparel, Derrick Baca, EVP Global Licensing, 714-947-8347, dbaca@hybridapparel.com

Silver Buffalo, Greg Alprin, EVP, 212-268-4753, galprin@silver-buffalo.com

The Licensing Shop, Nancy Fowler, Pres.,416 322 7300 x2, nancy@thelicensingshop.com