During much of the past year, the licensing community, like everyone else, scrambled to adapt to a new remote reality. Internal discussions turned into meetings on (fill in your preferred platform); hopping on planes to visit a client, licensee/licensor or anyone else became a question of “your platform or mine?”; and processes such as product approvals went almost totally online.

Staying Power
As business slowly returns to normalcy – the Sweet and Snacks Show last week in Indianapolis was one of the first in-person trade shows in the U.S. in over a year — there are signs that some changes wrought by necessity may have staying power.

For example, entertainment licensors, most of whom are still operating largely virtually, seem to still be approving at least a large percentage of products without requiring physical samples. Meanwhile, apparel brand owners, whose core product has an inherently tactile element, are again requiring pre-production and physical samples to better judge a product’s feel and quality, licensee executives said.

Time and Money
It’s a matter of both time and expense.

The cost savings from switching to an all-digital process can be substantial for licensees. For example, a homegoods executive estimated his company saved about $250,000 – it bears 100% of the cost, with shipping being the largest component — during the past year when its China office uploaded digital images rather than shipping physical samples. The cost of developing a pre-production prototype for digital submission is around $50,000, he said. And the turnaround time for approvals shrank to a week or less when shorn of shipping, he said. With shipping added to the equation it can take 2-3 weeks.

But old habits die hard and the traditional process may be hard to break.

For example, Polaroid’s approach “hasn’t change that much” from pre-pandemic, with pre-production samples and designs filed digitally followed by two physical samples of each item, says Jason Sutton, VP of Business Development.

However, if you’re working with a videogame brand, for whom virtual business has long been a way of life, a digital approach is embedded in the process, says Bill Graham, Chief Business Development Officer at licensee PhatMojo. About 80% of PhatMojo’s approvals are now done virtually. The same also holds true of Egan Escape Productions, which develops escape rooms and uses 3D renderings of props and rooms to get approvals from Lionsgate for Saw and Blair Witch rooms.

“When you get to the conversation and pitch and all the things that go into procuring a brand, getting approvals and getting into a room and pitching a retailer, there was a way that was definitely done up to Toy Fair 2020, and then there is everything after,” says Graham. “Things have certainly been Zoom heavy, but there is an ease in doing things when you don’t have to travel and there are some interesting takeaways such as going from one focused meeting to the next without having to walk down the aisle to another room. These are all things that are more efficient and effective.”

Whether all-digital approvals fully take hold will likely vary by the agreements and the parties involved.

“The standard day-to-day [business] is becoming more digital, but I think licensors still want to see products if it’s a new licensee or they are having trouble understanding the differentiation,” says Trevco CEO Trevor George. “I think the core business is definitely going to go a lot more digital for trusted partners, but licensors will still be a little more careful with licensees they know nothing about.”

In Latin America there’s been little shift to virtual approvals with exception of Argentina, which is saddled with a projected 48% annual inflation rate this year that is driving higher costs, especially for shipping, says Elias Fasja Cohen, Founder and President of the agency Tycoon Group.

“In the end, most licensors want to see pre-production samples, but there has been some movement toward virtual,” says Fasja. “But we know the companies that we work very well and with a certain level of trust, virtual approvals will increasingly become the growing way of doing business.”

Yet it remains to be seen how much of the approval process moves to digital once companies fully return to offices (hopefully) this fall.

“Companies are going to want to go back to physical product samples and a normal review process once they are all back in the office,” says Sam Hafif of licensee Concept One. “We have always negotiated how many samples we need to provide, since obviously its less expensive to provide one instead of six. There may be a little bit of wiggle room” with how many samples are needed, but “I highly doubt that it [physical samples] will be eliminated completely.”