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Faded Department Store Brands Search For New Identity Online

Brands and the licensees that make their clothes are rewriting the rules of retail as they work together to court the modern consumer and compete online.
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By
  • Cathaleen Chen

NEW YORK, United States — Decades after its rise to cult status and subsequent fade into obscurity in the aisles of Bon-Ton and Boscov's, Gloria Vanderbilt, America's pioneer designer jeans, is finally going digital.

One Jeanswear Group, which owns the brand along with other department-store jeans labels, aims to launch an online store — Denim Nation — next year. Direct-to-consumer sales would be a major departure for the company, which got its start as a licensee, manufacturing jeans for third parties. But such distinctions are irrelevant these days, said Jack Gross, One Jeanswear’s chief executive.

“It’s up to us as manufacturers in a business that has been around for a long, long time to really start to change, because you either become distinct or you become extinct,” he said. While he is still lining up funding for the sales portal, “I already registered the name,” he added.

Gross’ online foray is emblematic of recent shifts in the licensing industry, where the lines are blurring between brands and the anonymous companies that manufacture and distribute their products. These brands historically relied on department stores for marketing, but now face competition from fast-fashion retailers and direct-to-consumer brands. As a result, licensees are getting savvier about how they reach potential customers, and brand owners are taking the lead on marketing as department stores alone become less effective in driving sales.

“Before it was much more hands off, it was all about ‘here is my brand, you guys build a product, and send me the check every quarter,’” said Karen Murray, chief executive of Sequential Brands, the owner of brands including Joe’s, Ellen Tracy and Martha Stewart. Sequential contracts with One Jeanswear and other licensees for manufacturing and distribution.

“Now we’re saying, 'do they have infrastructure to sell online?' If not how do we ... help them build out a site? How do we figure a way to help them be more relevant?” Murray added.

In 2016, global sales of licensed products of all kinds rose 4.4 percent to nearly $263 billion, according to the International Licensing Industry Merchandisers’ Association. Apparel was the biggest product category, capturing 15 percent of the total licensed retail sales.

The licensing model has long been dependent on department stores to deliver sales. This means that as brick-and-mortar retail continues to decline, licensing companies and their manufacturers are feeling the squeeze as well. Unlike their fast fashion counterparts, the companies behind these faded department store brands lack the agility to respond to shifting consumer behaviour.

We're all in the same situation. The only way for us to survive is to work together to increase our bottom line.

The Zara's and Everlane's of the world can design, produce, market and roll out new merchandise through their vertically integrated business models. Brands and licensees, on the other hand, must go through layers of approval by multiple parties. If a brand owner decides to take a label online, for instance, it must ensure that its licensees are capable of fulfilling digital orders. Similarly, if a brand owner creates a new campaign, it must work with retail partners to keep brand presentation consistent across physical and digital channels.

With one side owning the intellectual property and the other taking on the risk involved in manufacturing and wholesale distribution, agreeing on a new approach can involve contentious negotiations.

For example, licensees have little incentive to invest in digital marketing, as most of the benefit will accrue to the brand, rather than the manufacturer.

"You'd be spending money in what will become brand equity, but you are a renter and not owner of that brand," said David Katz, chief marketing officer of Randa, the largest manufacturer of men's accessories. Randa produces merchandise for an array of brands, including Levi's, Nautica and Tommy Hilfiger.

Randa operates the direct-to-consumer platforms for some of its brand partners, in exchange for higher rates on each sale. The company also plays a role in marketing — something that licensees traditionally strayed from — splitting the costs of a campaign with their brand partners and retailers.

“We’re all in the same situation,” Gross said. “The only way for us to survive is to work together to increase our bottom line.”

Authentic Brands Group, which owns Frye, Juicy Couture and acquired Nine West out of bankruptcy in June, meets with licensees and retail partners every couple days, said Nick Woodhouse, the company’s chief marketing officer and president.

“There are so many pieces of the puzzle now that needs [immediate] reaction, and we are closer than ever to our licensees and our retailers,” he said.

With Frye, ABG collaborates with its licensee, Global Brands Group, to maximise online sales. The final call on marketing decisions falls to ABG, however.

Likewise for brand licensor Iconix, which used to rely on its licensees and sole retail partner, Walmart, to sell its Starter sportswear brand, which supplies fan merchandise for multiple US sports leagues, including the NFL and NBA. However, Iconix ended its relationship to Walmart about a year ago and signed on with Amazon, with plans to release a fashion-forward collection as well as a collaboration with streetwear designer Daniel Patrick.

Iconix is now playing a bigger role in marketing its products, including boosting Starter’s social media presence, said chief marketing officer Jamie Cygielman. The company is also testing e-commerce capabilities by operating an online shop for Pony, its sneaker brand.

Some licensees like One Jeanswear are going a step further in integrating operations, now managing brands of their own. Randa owns the belt brand Trafalgar, for which it operates an e-commerce shop, and Exact Fit, a belt brand that's mostly wholesale. The company made a bid for Perry Ellis International, which owns a portfolio of brands. Perry Ellis on Tuesday said it ended the negotiations.

Last year, Randa created a division devoted to honing its digital offerings and optimising data collection for its direct-to-consumer operations as well as to assist retail partners. The Randa Digital Lab is responsible for, among other projects, online content for each of its products to give to retailers free of charge so there is a basic standard for visuals when a website sells a Randa-made product.

“If someone is putting Levi’s belts as a third-party seller and taking horrible photography, Randa Digital Labs would make sure that those pages are populated with wonderful storytelling and great photography,” Katz said. “We also give them [editorial] copy that we know will generation SEO traffic, and we help them write tags and search terms.”

For these licensing companies, going digital is just the beginning, and the rules of the game is bound to evolve. The shifting nature of retailer relationships can create friction, such as over who owns customer data. “The question is who is acquiring the customer, and who should own that customer information and data… and that’s all being figured out now,” Katz said.

But if Randa’s bid for Perry Ellis is any indication, the licensee is aiming to write the rules itself and remain on the prowl for M&A targets that could further elevate its enterprise to beyond just manufacturing.

“There’s an awful lot of unknown out there,” Katz said. “What’s not healthy is trying to hold onto an old model.”

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