Licensing bull's eyes: Exclusives - Children's - children's clothing licensing agreements

DSN Retailing Today, Feb 11, 2002

Targeted licensing is hitting the mark at retail. Fastidious focus on product and timing that fit each property is proving a driver of character and entertainment property-based merchandise volume.

Despite a decline of 10 percent in overall entertainment and character-based merchandise sales in 2001, according to The Licensing Letter, children's wear has been a strength in apparel sales overall, with licensed merchandise accounting for a significant part of the mix.

Exclusives appear to have finally come into their own. Recent hits include HIT Entertainment PLC'S Bob the Builder at Sears, which "has really been a phenomenal success and driven foot traffic," says chairman and ceo of Sears Alan Lacy.

Target and Canadian television studio Cinar are partnered for an exclusive line based on "Caillou," a PBS hit, later in 2002. While licensed apparel sales at Kmart were down last year, with similar results predicted for 2002, the exceptions are exclusives--like Sesame Street and Disney. Sesame Workshop's Margaret Pepe, director of licensing, says the line will be updated with fashion to keep merchandise successful; for example, colored denim versus last year's shimmer denim.

At Target in 2001, Sanrio's Hello Kitty-based exclusive line experienced a 25 percent to 35 percent growth in sales, and apparel is "a very important part of the program's future, as well as one of the largest categories," says Bruce Giuliano, Sanrio's vice president of licensing.

"Today's business is really about building key relationships with individual retailers," says Pam Lifford, vice president of business development for North America at Disney. "Apparel has been fair, business has been quite tough, but our business is up through the 2001 time frame based on changes made in the past 24 months."

Major initiatives for 2002 include Disney Princess, in a mass exclusive starting at Target this fall, that focuses on the fantasy dress-up aspects of the property. Wal-Mart and Disney have also partnered for an exclusive line for back-to-school called Main Street by Disney. This vintage Americana program will feature character art from the Disney vault, circa 1940. Existing programs also are being further developed.

"Our unique Disney 'It's a Small World' program has been very successful for us, and we're broadening our apparel assortment for next fall," says Tim Lyons, a JCPenney spokesman.

Exclusives can test run a property before vendors and retailers run with a broad-based program--like Nickelodeon's retail performer SpongeBob SquarePants, soaking up sales from its mass exclusive at Target.

"SpongeBob is booking unbelievably for 2002; it's been a nice surprise," notes Abe Chehebar, ceo of Accessory Network.

"We're backing SpongeBob with a major television event, 'SpongeBob's House Party,' this summer to further grow his popularity" says Hal Snick, Nickelodeon's director of consumer products and apparel.

The pattern emerging with long-term proprietary deals is that they showcase safe bets rooted in hit television properties, or classic imagery like Disney's Wal-Mart program.

Equity provided by one such long-time powerhouse, 4Kids Entertainment's Pokemon, is going to be mass exclusive at Kmart in all product categories starting this July.

"It's not as big as in its heyday, but it's still doing significant volume," says Stacey Wunsch, director of licensing and marketing for Pyramid, which will produce backpacks and other bags under the Pokemon banner.

The re-release of "E.T." for its 20th anniversary will introduce a new generation to Spielberg's hit. Apparel, in a Kids "R" Us exclusive, is experiencing 10 percent to 15 percent weekly sell-throughs, according to Tim Rothwell, senior vice president of licensing merchandising and retail development for Universal Studios.

Exclusives are a natural regarding many children's licensing opportunities; however, a widespread release is sometimes the best way to capitalize on a property--especially national film releases.

Retailers are being eased into programs, with the promise of exclusive or differentiated product, even if they don't have an exclusive on the property itself.

This strategy has worked well for Harry Potter, with very differentiated lines that allow for retail variety. The next movie is already news for fall: Those who delved into Warner Bros. wunderkind were pleased with spellbinding results from the first film.

"In boys' wear, Harry Potter was the best license this year," says Susanne Decker, a Wal-Mart spokeswoman. Harry Potter rugby shirts did especially well at Kmart.

"The apparel and accessories that depicted action scenes, like playing Quidditch, performed extremely well. And certain characters, like the three-headed dog Fluffy, were extremely popular with boys who love monsters," notes Maribeth Towers-Toth, vice president of apparel and accessories for Warner Bros. Consumer Products. The phoenix and serpent are key images for sequel-based product.

Wal-Mart's Decker believes, "For 2002, Star Wars [Lucasfilms] and [Sony's] Spider-Man should both be good." Boys' business was slightly better at backto-school--an improvement that should continue.