Amid a wave retail store closings, bankruptcies and liquidations, licensors and licensees are scrambling to make up lost revenue through new distribution channels, increased ecommerce and a broader assortment of exclusive deals.

The changes in strategy are being driven by a retail landscape littered with casualties. Licensing stalwart JC Penney has announced plans to close 138 stores, and Macy’s is shutting another 68. Wet Seal, Sports Authority, Sports Chalet, Hastings Entertainment and City Sports have all liquidated. And RadioShack, Gander Mountain and Vestis Retail Group (owner of Bob’s Stores and Eastern Mountain Sports) have filed for bankruptcy since the start of the year, the latter just seven months after emerging from bankruptcy protection.

The rising toll is forcing licensees and licensors to delve into once-overlooked corners of the retail market. Brand owners and suppliers who once might have turned up their noses at doing business in dollar stores and other “value retailers” such as Ross Stores, T.J. Maxx and Burlington Coat Factory, are developing programs for these channels.  Meanwhile, e-commerce retailers (including subscription box services such as Loot Crate) in some cases are being given exclusives on par with their brick and mortar rivals.

“We are going through a structural correction that will eventually right-size [the retail business], and there are just too many stores to service a market where people are increasingly buying online,” says Beanstalk’s Allison Ames. “But retailers will always need the right balance of brands and private label because brands are what drive people to the store in the first place.”

Replacing Lost Revenue

For example, apparel supplier Changes is trying to make up the loss of revenue from JC Penney, Sears, Kmart and other national retailers by expanding its business with specialty chains such as Hot Topic and Spencer Gifts, where it has exclusives, says Changes’ Will Thompson. Changes also is moving to expand its ecommerce business through Amazon and other e-tailers that currently account for 10-15% of its annual sales, says Thompson.

“Do they equal the loss of sales through a JC Penney, Kmart or Sears?” says Thomson. “Probably not. Only time will tell how the retail landscape will shake out and we are just trying to adapt” to a changing market.

The changing market includes increased demand from retailers for exclusives.  The hunger for image-building and margin-preserving exclusives has always been on retailers’ menu, but the pressure is ratcheting up.

Just in recent weeks, Target has told investors it plans to launch more than a dozen private label and exclusive brands this year in a bid to spur store traffic. Similarly, Dicks is sharpening its focus on a cadre of “strategic vendors… [who] will invest significantly in our business both online and in-store, and we will invest significantly in their business,” said CEO Ed Stack when the company released its earnings earlier this month.

Differentiated Product

“These strategic vendors will also provide us exclusive and differentiated products in the marketplace. We will overtly move market share to these partners in an effort to drive growth in our respective businesses.”

At the same time, Dick’s is trimming 20% of its vendors. Among the company’s more successful lines is the Calia apparel line, via a DTR licensing deal with singer Carrie Underwood, that is projected to generate a $1 billion in sales this year.

Among the other developments:

• Perry Ellis International struck an exclusive agreement with Target to supply Jack Nicklaus apparel – men’s and women’s shorts and sports shirts – that will be available in 1,650 stores starting in mid-summer. The collection will be part of a display in the performancewear section of the men’s department, a Target spokeswoman said. The new 10-piece line represents an expansion of a 150-store test with Target that began in Q3 2016 in “golf-centric” markets such as Florida, says the Target spokeswoman.
• Candymaker Perfetti Van Melle, as part of an effort to tighten it partnerships with a retailer, forged a DTR with Italian fashion retail group Calzedonia and its Tezenis chain. The result is a 20-piece apparel collection – underwear, bras, t-shirts and bodysuits – that launched at Tezenis’ stores in France and Spain in March and will expand to all of its 550 stores, says Perfetti Van Melle’s Christine Cool.

The agreement with Tezenis, which includes both apparel and events supporting Chupa Chups, underscores the need for deeper ties with retailers to insure a brand gets a high profile. For example, Chupa Chups apparel will be displayed at the front of the Tezenis stores the first 10 days it is available before being dispersed to other departments. The chain is promoting Chupa Chups apparel on social media and 19 flagship locations are hosting parties tied to the brand.

To attract consumers to brick and mortar stores “retailers increasingly need a theme around which they can build a marketing plan that can be serviced from many angles,” says Cool. “We need to be ready to provide that especially now where every retailer wants to stand out” not only in the products they carry but also the events they have.

Brand owners and licensees have long tried to come up with customized programs for specific accounts, tightening their relationships to those retailers. That seems to have increased exponentially.

“The bigger focus in this altered landscape is trying to come up with program solutions for specific retailers that address their specific needs and also speaks to their customers,” says Berkshire’s Donna Bruschi. For example, Berkshire is weighing combining licensed accessories such as headwear, gloves and socks in a combo pack.

Emphasizing Hot Market Opportunities

Sports apparel supplier ’47 is trying to maximize its ability to leverage the hot market business, and lessen its reliance on day-in-day out planogram business in standard retail, says ‘47’s Dave Zaleznick. In hiring contract manufacturers and stocking them with blank t-shirts, ’47 could increase “hot market” product to 50% of its annual revenue from 40%, while bringing down the amount tied to planograms, which currently accounts for 60% of its sales. ’47 expects to start the program in 2018.

As licensors and licensees change business strategies to cope with the struggling brick and mortar market, they are paying  even closer attention to retailers’ finances. For example, Sears’ recent disclosure in its annual report that there is “substantial doubt” about it remaining a “going concern” has resulted several companies halting shipments to the retailer.

“We’re dealing with it, and clearly we’re all going to be dealing with it a lot more,” says an executive at an entertainment licensor. “It’s a scary world out there. At some point, a licensor has to be aware that they’re not getting paid, and be smart about who they ship to, and how much.” It’s a point of concern to licensors as they figure out how to deal with licensees’ requests for relief from guarantees.

Licensors and licensees are developing programs to shorten product design and delivery cycles so department stores and mass chains can compete with the fast-fashion retailers that have been eating into their business. For a department store vendor, it may take nine months from concept to store shelves, Perry Ellis’ George Feldenkreis told analysts. But the company can cut several weeks out of that schedule by, for example, eliminating samples in favor of software-based online presentations that show how apparel will appear on a person,  said Feldenkreis, whose company serves as a licensor or licensee of brands such as Nike swimwear, Original Penguin, Jack Nicklaus, Callaway apparel and others.

“Retailers are realizing that working so far in advance no longer works and design will be done much closer to delivery dates,” Feldenkreis said. “Very good competitors like Zara, H&M and others have succeeded in this strategy. American retailers must adapt such methodology or it will be impossible for them to keep pace with worthy competitors.”

Contacts:

Beanstalk, Allison Ames, CEO,, 212-421-6060, allison.ames@beanstalk.com

Berkshire Fashions, Donna Bruschi, Dir. International Consumer Products, 212-221-1542 x554, donnab@berkshireinc.com

Changes, Will Thompson, VP,718-441-6464, wthompson@changesonline.com

Dick’s Sporting Goods, Ed Stack, CEO, 724-273-3400

‘47, Dave Zaleznick, NFL Brand Mgr., 781-702-2947,  davez@47brand.com

Perfetti Van Melle, Christine Cool, Area Mgr. U.S. Licensing, +34 937739316, Christine.Cool@es.pvmgrp.com

Perry Ellis International, George Feldenkreis, CEO, 305-592-2830, George.feldenkreis@pery.com