Several states have lifted shelter-in-place orders and retailers are in the process of reopening stores. But it isn’t clear whether consumers will shop those aisles, which most expect to be stocked largely with discounts and closeouts, or continue to do much of their purchasing via keyboards and phones.

But even with the return of some semblance of brick-and-mortar, new habits may be hard to break for consumers, retailers and licensees when it comes to ecommerce. 

Ecommerce Increasing
For example, pet products maker Fetch for Pets, expects ecommerce to generate 35-40% of revenue within 12 months of returning to full inventory, up from the low-20% percent range, says CEO Steven Shweky. And a fabric licensee says his ecommerce sales have doubled during COVID-19 to 40% of total revenue, not surprising given the number of people who took up mask-making, and accompanied by a sharp spike in sewing machines sales.

The sharp rise in ecommerce, however, hasn’t been enough to offset a steep decline in sales of seasonal products — especially spring and summer apparel collections, which are primarily sold through physical stores — due to locations being shuttered and retailers canceling orders. This has especially affected apparel specialty stores and off-price retailers such as Ross Stores, TJ Maxx and Burlington, which have little or no ecommerce business to offset store closings.

Container in a parking lot
We were told of one home textiles licensee said to be paying $8,000 a month to store a container full of goods in a parking lot; the merchandise had been  bound for off-price when the order was canceled in mid-March amid the pandemic outbreak. Many off-price retailers have cancelled orders through mid-June.

“In seasonal apparel and home goods some people are sitting on $20-$30 million in inventory and these things are going to put people out of business,” says Shweky. “It’s not a question of ‘if’. It’s going to happen.”

Waivers and deferrals?
The heavy inventories are expected to carry through the balance of the year, according to several licensing industry executives. That said, many licensees are having ongoing discussions with licensors about waivers and deferrals of guarantees – in some cases due to the general retail collapse, in others because major films they’d licensed had been postponed into next year. The issues around guarantees are expected to peak in July, once Q2 sales figures are in.

“A lot of our brand businesses are on pause until we get back up and moving again,” says an executive at one company that owns multiple brands. “It has been tough for our licensees to pay and it has not been good for royalties. We are willing to give relief on a case-by-case basis, but don’t give it very often. But that said, we are amending some agreements and some licensees are going on payment plans.”

The negotiations come as retail starts to re-open, albeit at different times, under varying restrictions, and only in certain places. For example, Five Below is opening 117 of its 750 stores across seven states, while Macy’s will throw open the doors at 68 stores today (May 4), plans to add another 50 a week later and have all 775 up and running within six weeks. And three labels operated by Authentic Brands Group  inched back in the U.S. starting this past weekend into brick-and-mortar: 39 of Aeropostale’s 800 U.S. free-standing, shop-in-shop and outlet locations, three of 590 Forever 21 stores and eight of 936 Nautica stores will be the first to open with a further roll out expected, an ABG spokeswoman said..

But those stores and all others will operate under a “new normal.” For example, Forever 21 will limit store traffic to one customer per 50 square feet, customers will be required to wear masks (as will employees, some of whom also will don gloves), and there will a ready supply of hand sanitizer, the ABG spokeswoman said. Nautica and Aeropostale will follow Forever 21’s lead.

For many, the current year is one to be gotten through, with eyes firmly focused on future business. “There is an appetite for new opportunities and new brands, but no one is necessarily thinking for 2020,” says Ilana Wilensky, President of Jewel Branding & Licensing. “We have quite a few programs in store and online. Anything that can be pushed online is going to be the bigger opportunity for the rest of the year.”

Says Shawn Harned, Director of Sales at art licensing agency Wild Apple: “Licensees are still trying to get orders out the door to whomever they can, but they are carrying small inventories in their warehouse; it’s not the kind of volume orders that go to the big retailers. Is it ideal? No, but they need to be ready for January 2021, so they can get those volume orders.”