Licensing in Fashion Industry
One of the latest trends in our lives is fashion;
I run a hair salon, and I’ve been considering expanding my expertise to include selling shampoos, colognes, and other personal care products. However, it will take a long time for my own brand to become well-known. It’s easier than starting your own business, people keep advising me to license shampoo brands with a strong reputation in the market. I worry because another company’s reputation is in jeopardy.
Additionally, I don’t believe it will be particularly helpful to me. Is it superior in comparison? Why would a business grant me a sales license? If a product has a problem, am I responsible?
What are the payment terms?
Negotiating with another party to obtain and use rights, in this example, intellectual property rights, in exchange for a fee is known as licensing (a fee or royalty). In a licensing agreement, the owner of the trademark (the licensor) grants permission to another party (the licensee) to use the trademark in commerce. Simply said, a license grants access to the asset without transferring ownership to the licensee. Fashion brands can develop, expand into new markets, strengthen their brands, and enhance their reputation through licensing.
To protect the brand licensing products, the license agreement must be carefully drafted and negotiated because licensing inevitably entails the fashion company giving the licensee responsibility for producing goods bearing the fashion brand’s trademarks.
Fashion Industry is Moving Toward Wholesale Clothing
Background
The performance of businesses engaged in the European fashion sector in 2008 led to a total market sales volume of about €55.4 billion. The German fashion industry publication “TextilWirtschaft” releases an annual list of the top fashion brands. 134 European fashion brands were recognized in the 2008 ranking. The top 10 fashion firms featured in this ranking, however, produced about 40% of the revenues in the European fashion business in 2008, according to an analysis of the ranking.
Only 57% of fashion firms managed to boost their sales, according to data compared to the ranking from 2007. But in 2007, approximately 70% of the clothing companies saw a rise in sales. This could indicate a decline in performance. There could be a number of factors preventing fashion firms from increasing their sales. Nevertheless, it is important that the industry as a whole was able to grow its market volume by 2% in 2008. (PressePortal, 2009).
The German fashion market is one of the most alluring segments within the European fashion business for retailers and fashion brands from all over the world. The top ten fashion shops in Germany made over €21.5 billion in sales in 2008. (PressePortal, 2009). A number of surveys of European retailers have been done. Basically all of those polls have revealed that, as of the most recent data, 47% of European retailers intend to increase their presence in Germany (TextilWirtschaft, 2009).
Licensing is a subject as a vital and useful tool for fashion firms. The licensing market has proven to be a highly lucrative and revenue-producing business sector. According to the Licensing Industry Merchandiser’s Association (LIMA), the licensing market generated more than $5.9 billion in sales in 2007. However, these figures only reflect the income generated as a result of the royalties and licensing fees paid to brand owners as recompense.
The current sales figures for licensed goods in the fashion and clothing sector highlight the availability and potency of this marketing strategy. More than $80 billion worth of merchandise is sold under license across the whole fashion and clothing sector (LIMA, 2010). Around €22.4 billion in licensed product sales were made in total in 2005 in German-speaking nations like Germany, Austria, and Switzerland (Hartmann, Sattler, & Völckner, 2005, p. 1). This demonstrates that those nations account for more than a quarter of annual fashion sector sales in Europe.
The current sales figures for licenced goods in the fashion and clothing sector highlight the availability and potency of this marketing strategy. More than $80 billion worth of merchandise to sell under licence across the whole fashion and clothing sector (LIMA, 2010). Around € 22,4 billion in licenced product sales were made in total in 2005 in German-speaking nations like Germany, Austria, and Switzerland (Hartmann, Sattler, & Völckner, 2005, p. 1). This demonstrates that those nations account for more than a quarter of annual fashion sector sales in Europe.
Brand owners believe brand licencing agreements have the greatest potential for expansion because the majority of sales were produced with items resulting from these agreements (Hartmann, Sattler, & Völckner, 2005, p. 6). The rising amount of contracts and the market also influence expectations of growth. From 750 agreements with a market share of more than € 6 billion to over 1,000 agreements with a total market volume of over € 8.5 billion in licencing payments, the number of brand licencing contracts signed in Germany increased.
The fashion industry is a hub for bargain hunters
Licensing Definition
The term licensing, which its roots is from the words license and marketing, refers to the use of intellectual property protected by copyright for commercial purposes. It might be a historical figure, a fictional character, a real person, or even an organization.
Projecting the licensed brand’s image onto third-party goods or services is one of the objectives of licensing. A license agreement often comprises two parties. Although it is currently a common industrial tool, licensing wasn’t always the case. Actually, when Christian Dior started advertising his stockings in the US, it established the licensing system for hosiery in the late 1940s . The following year, the Paris-based design company started licensing their ties.
Innovative brands cater to both individual and societal interests, opening up novel cross-promotional opportunities. It is possible to employ apparel and accessories with recognizable logos or prints from the gallery’s collections to make eye-catching store displays and marketing materials, such as glossy magazine ads and feature-length articles.
The Reason to License a Brand Name
In the modern marketing economy, businesses have a wide range of tools at their disposal to broaden their horizons and tap into untapped markets. Among the many options available to businesses, licensing is as one of the most effective tools for enhancing and expanding their operations.
A brand can grow by entering new markets and geographic areas through licensing, which would otherwise be impossible for it to do. A company may be able to expand its current operations into new markets or commercialize its intellectual property more effectively and commercially with the help of licensing than it could on its own.
A successful original brand and a well-run licensing deal with distinct functions for each party involved are the foundations of success in fashion licensing. To protect the crucial brand image and maintain its long-term productive value, strict design and quality control are crucial.
Further information is available here:
https://legamart.com/articles/licensing-agreement-in-fashion-industry/
Licensing Advantages
Like other businesses, the fashion industry is aware that correctly executed licensing offers a potent approach to increase brand awareness and establish image, both for the core items that were originally intended and for the expanded offerings in other segments. Since the initial expenditures in the core products have already been made, some expense outlays for additional licensed product lines are no longer necessary. Brand creators can access another entity’s knowledge and methods of distribution, including hitherto unexplored international markets, by licensing to a third party manufacturer.
In terms of product licensing transactions, some product categories perform better than others, reflecting broad market trends and providing designers with benchmarks to use when evaluating their own licensing possibilities. The licensing of perfumes and fragrances, clothing, and accessories were the three industries that performed the best in 2013. 1 Major brands may grant licenses to producers of unrelated goods that only expand the brand name’s reach into previously unreachable markets. Licensees gain from associating their goods with a well-known, strong brand and benefiting from the associated benefits.
Cautions and Risks
Designers should be aware that when they enter into licensing agreements, they are ceding some of their control over their brand for the particular services and goods concerned. They should carefully analyze each factor that will have an impact on the brand and core company before developing an agreement. It’s critical to note:
- which particular goods to include;
- whether there will be a mix of domestic and foreign distribution;
- which stores will sell the goods, and whether they’ll will also be online;
- what the contract’s duration is and whether it is renewable or not;
- How to preserve the quality assurance
When assessing the partner company to see if they can produce and market the items and impose quality control, the licensor must conduct rigorous due diligence. The potential partner should be able to provide evidence of a strong track record of performance in their industry sector, including timely inventory deliveries and top-notch client interactions.
To maintain control over any future licensing prospects and the freedom to bring on new partners, it is crucial to keep the agreement’s scope as small as possible. The scope of product rights should be as limited as practicable.
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Why Would a Business License Its Name?
Today, licensed products make up an increasing portion of the goods bought in the fashion and apparel sectors. The cornerstones of fashion licensing success are a strong, distinctive brand and a well-run licensing agreement with clearly defined responsibilities for all parties involved.
Strict craftsmanship control is necessary to maintain an overall brand image and its productive value over time.
The fashion and luxury industries’ eyewear and cosmetics product categories have the most licenses
While L’Oréal and Coty rule the cosmetics (including perfumes) industry, producing for Armani, Saint Laurent, and Gucci, Luxottica and Safilo are monarchs of the eyewear licensing market, making eyeglasses for Dior, Chanel, Marc Jacobs, and others. Though licensing is less common in the watch industry than it is in other sectors, firms like Fossil nevertheless work with some well-known brands.
