Back in 2011, several retailers began launching licensing programs in which they lent their brand names or proprietary labels to outside manufacturers, who were allowed to distribute the products in other, non-competitive retail channels. Chains including Kitson, Eddie Bauer, Fred Segal, Frederick’s of Hollywood, Ann Taylor, Bombay Co., and more have signed such deals in the last couple of years, with various degrees of success (or failure).
Many of these ventures are still in place, including PetSmart’s line of Toys ‘R’ Us pet products and Dorcy International’s batteries under Sears’ DieHard brand, both the result of licensing deals signed in 2011. And retailers continue to announce new agreements of this sort occasionally, as is the case with Dylan’s Candy Bar pairing with Claire’s for an exclusive line of jewelry, tech accessories, and beauty products available only at Claire’s and Dylan’s locations. The partnership expanded in early 2014.
For the most part, however, retail-brand licensing has settled into two primary categories. The first consists of retailers that closed their bricks-and-mortar stores, usually after bankruptcy; licensing has become their (or more likely the new IP owner’s) primary business strategy. Examples include The Sharper Image and Wild Oats; the latter partnered with both Walmart and Fresh and Easy for organic and natural products in 2014.
The second group is comprised of retailers licensing manufacturers for non-core categories to be distributed primarily in their own stores. In December, Interparfums secured the rights to the Abercrombie & Fitch and Hollister brands for fragrances to be sold only in A&F and Hollister outlets, as well as duty-free shops, in the U.S., with broader distribution globally.
While retail-to-retail licensing remains a viable strategy in many cases, it has not taken off to the degree that many analysts expected. In fact, a more active realm of retail-to-retail partnership of late has been concentrated on alliances to create shop-in-shop concepts. Recent examples include Claire’s shops in Toys ‘R’ Us, the defunct chain J&R Music World in Century 21 department stores, Build-A-Bear Workshop in five Macy’s locations, Crumbs Bake Shops testing a concept in a Mariano’s supermarket in the Chicago area, and jewelry retailer James Allen in 16 Sears outlets.
While this is not a new trend, the frequency of such partnerships has increased in the past year or so. Retailers continue to struggle in many ways, as announcements of significant store closures from Wet Seal, JCPenney, and others in the past week indicate. Like retail-to-retail licensing, a shop-in-shop strategy represents an opportunity for retailers to eliminate risk, attract new customers, and create new revenue streams.
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