Pockets of the global licensing business are facing significant financial impacts due to political fights, trade spats, and social protests around the world. Unlike cases where companies take a stand on a political issue and prepare to face the expected backlash, these are situations that have nothing to do with any individual company’s actions. But some marketers must face the consequences nevertheless.
A few examples:
- Global luxury brand owners such as Richemont and Prada are among those seeing year-over-year sales declines in Hong Kong this summer due to the protests there against the Chinese government. The current unrest began as a rebellion against a bill that allows the extradition of Hong Kong residents to face the legal system in mainland China. It then broadened into a pro-Democracy, pro-independence movement protesting Chinese control and excessive force by the police. Overall, many Hong Kong retailers have reported double-digit drops in sales this summer compared to last, and tensions continue to intensify as of this writing.
- Japanese brands such as Uniqlo are seeing a hit in sales because of a boycott of Japanese products and services in South Korea. The consumer reaction can be traced to Japan’s recent restriction of imports to South Korea, including of the chips Samsung and other South Korean companies need for consumer electronics manufacturing. Japan’s move in turn follows South Korea’s implementation of export controls of its own and comes after South Korea’s court system enabled the Korean government to seize Japanese business assets to compensate Korean victims of forced labor during Japan’s occupation of the Korean peninsula from 1910 to 1945. The disagreement does not seem to be having a similar effect yet on Japanese consumers and their purchases of South Korean goods, including of pop culture exports such as K-Pop.
- French companies, especially small retailers and other businesses in inner city areas, have seen sales and profits fall due to the “yellow vest” demonstrations in Paris and other French cities. Big international brands, particularly luxury labels with retail outlets in the affected areas, also struggled for a time. (Richemont, owner of Cartier, Montblanc, and many other brands, again was one of them.) But the impact on the latter appears to be more short-term as they have been able to recover since the peak of the protests late last year and early in 2019. The yellow vest movement was sparked originally by a protest against higher gas taxes but expanded to encompass other concerns by working class and middle class citizens about declining incomes and rising costs.
- U.S. and Chinese companies have been affected by the trade war between their two governments. Walmart, Target, Kohl’s, and Macy’s have been among the U.S. retailers citing impacts from May’s 25% tariff hikes on $200 billion worth of Chinese-made goods ranging from handbags to bicycles. In September, another tariff increase of 10% on $300 billion worth of products is scheduled to go into effect, extending to many categories at the core of the licensing business. These include toys, apparel, footwear, children’s books, and consumer products.
It is difficult to say how long the ramifications of some of these situations on the licensing business will last, or how widespread they will be. But it can be assumed that other political or social situations will arise around the world and cause headaches for companies that find themselves in the middle of the action. One to watch: Brexit, which will have serious implications for companies both in Britain and the European Union, with much depending on the post-separation deal, if any, between the two governments.