In the vibrant world of kidswear, fashion is not just about fabric and style; it’s a magical journey filled with imagination, colors, and, often, beloved characters that capture the hearts of children. Character licensing has become a powerful force in shaping the landscape of children’s fashion, creating a dynamic synergy between entertainment and apparel. From iconic superheroes to animated companions, these characters not only adorn clothing but also play a pivotal role in influencing the choices parents make when shopping for their little ones.
Character-driven apparel has evolved into a significant phenomenon in the ever-evolving world of children’s fashion. Brands ride on the back of trends and strategies to create an undeniable impact on the kidswear industry.
As per Licensing International, India ranks 18th in the world in the licensing industry with $1,864 million in retail and a 0.6% share of the global market. The global licensing industry was estimated at $292.8 bn in 2019 at retail, and it is growing at 12% annually.
So, what makes character merchandizing score above other merchandize? An association of a product with a known personality/ character elevates its value and makes it easier for the product to seamlessly reach the top-of-mind of its target audience. For a lesser-known brand, character association means being more easily accepted by customers. Also being associated with a character eases all aspects of marketing for brands – designing the product, packaging, and promotion.
Jibi George, C0-Founder & COO of Dream Theatre, says, “The licensed merchandise business is no more a nascent market. It is a mainstream business where retailers, manufacturers, and licensee businesses have seen a huge surge in numbers amidst greater consumer acceptance. In short, character licensing makes brands extremely relevant to consumers.
Dream Theatre is an entertainment company that uses the power of licensing to build in-house brands, create content, represent companies on syndication/licensing, and consult on retail and licensing projects thereby creating delightful experiences for its audience. It has created a niche as an independent agency in the Licensing and merchandising space.
The company represents some of the most iconic brands in the entertainment space including:
- Warner Brothers-Tom & Jerry, Looney Tunes & DC comics
- Angry Birds (Rovio) • Discovery & Animal Planet
- Sanrio – Mr. Men & Little Miss
- Dreamworks Animation – Kungfu Panda, Madagascar, Shrek
- WWE
Licensing in Different Genres
- The International Licensing Industry Merchandisers’ Association claims that globally, the largest portion of the entertainment and character licensing business is aimed at children through a broad range of merchandise categories such as toys, apparel, publishing, food and beverages, videogames, and electronics, among many others.
- The whole idea of character merchandising sprang from Walt Disney Studios, which created a separate department to license the rights to use its popular toon characters such as Mickey Mouse, Minnie, and Donald on various consumer products.
- Along with the evolution of the market in India, an inevitable change in trends has also been witnessed. Till some years ago, it was only international characters that were in prominence but now, Indian characters are topping the popularity charts.
- Popular fast fashion retail chains like H&M and Target in the West do round the year entertainment licensing tie-ups with brands to improve visibility.
- There has also been a thrust on franchise building with Disney via the Marvel and Star Wars franchises and Warner Bros with the DC franchise.
- Sports is too is translating into business on the licensing side. Brands like FIFA, Real Madrid, Barcelona FC are all available via licensing in India.
How Licensing Works
George explains that standard license agreements operate on a minimum guarantee royalty model. Essentially, the proposed licensee partner undertakes a Net Sales Value (NSV) business projection for a proposed standard tenure of 2-3 years. A royalty rate of 10% – 12% is applied on the NSV turnover to arrive at the minimum price guarantee payable to the brand owner.
“Should the sales during the tenure exceed the minimum committed NSV turnover, there will be excess royalties that will be reported and paid by the licensee to the licensor (i.e. the brand owner),” he explains.
Apart from aiding to create brand salience in a crowded, competitive market, creating products inspired by popular and favorite characters helps brands add to the storytelling experience. While kids find these products fun, adults get to wear their attitude.
Revenue Generation & Visibility
Navigating through the threads of creativity and childhood wonderment aside, commerce is an essential part of character licensing. The quick recognition and affinity provide a ready platform for monetization. The most sold categories apart from apparel are accessories like bags, luggage, fashion accessories, back-to-school products, mobile accessories, personal electronics accessories and the emergence of ‘good for you’ food & beverage and personal care products.
George says that character licensing works well as a revenue-generating strategy for brands – aside from building visibility – since consumers are usually willing to pay a premium for a product featuring their favorite character.
“In the last three years or so, the trend has been to premiumise licensed products and sell them to consumers making full use of the licensed brand. This trend has come about with the emergence of strong D2C players and targeted aspirational communication to consumers. A basic premium is charged depending on the retail format and target consumer thereof,” he explains.
“E-commerce,” he adds, “has played a huge role as a distribution channel now and will continue to grow exponentially.”
Managing Intellectual Property Rights
Compared to organized retail which is process-driven and brand-conscious, unorganized retail thrives on piracy, and spurious products with inferior quality, which not only harms brands in the organized sector but also causes a dent in their revenue.
“Infringement continues to be the biggest challenge for businesses, although irrespective of exclusivity, strong players with distribution across all channels continue to do well,” says George. Another challenge, says George, is poor quality and unapproved designs. “This usually ends in termination of contracts, which can also happen in case of general breach of agreement in cases where royalties are under-reported.”
What’s encouraging is that there is a genuine demand for licensed products and Dream Theatre’s portfolio has profited from making the right mix of products, pricing and ease of availability. The company works with licensees very closely to ensure that what we have on trend designs should address the sensibilities of the Indian market to stay a step ahead of the pirated market.
