Expansion beyond domestic boundaries is essential for any brand wishing to grow. Developing a strong international basis can help hedge against economic downturns and currency fluctuations as well as developing brand recognition. Historically, license agreements were the main method used to expand into international waters and also complementary products. Most new fashion companies lack the resources, expertise and capital necessary for international expansion. The needs and tastes of consumers can vary from country to country as can the legal landscape. By teaming up with an experienced partner in a foreign territory, fashion companies can mitigate some of the risk involved.
Sounds good? Then why In recent years have the fashion industry fallen out of love with licensing deals? At last week’s Vogue festival, Victoria Beckham went to great lengths to stress that she did not use licensing agreements and controlled everything in house. Ralph Lauren has in recent years reacquired its licenses in order to exert greater control over its branding and Burberry has trebled in value since taking the decision to buy back its licenses. So why are licensing deals out of fashion? The answer is control. In signing license agreements, fashion designers relinquish a certain amount of control and in extreme situations this can result in the destruction of the brand.
In the 1970s and ’80s, Halston was one of the first luxury designers to embrace licensing. Having designed First Lady Jacqueline Kennedy’s pillbox hat for her husband’s inauguration in 1961, Halston was dubbed by Newsweek as “the premier fashion designer of all America” Seeing an opportunity to expand his label, he signed a licensing deal with themed market store JC Penney. His designs were now accessible to women at a variety of income levels, a somewhat controversial move at the time. Although his designs for the JC Penney line were a huge success, the availability to the mass market downgraded the Halston brand in the eyes of elite New York stores like Bergdorf Goodman, who, along with others higher end department stores, stopped selling Halston in its store. As the companies who licensed his name grew, Halston was unable to control the many license deals in existence. Agreements for products including eyeglasses, towels, luggage, and even uniforms for the Girl Scouts completely devalued the once exclusive label. Halston’s experience is a cautionary tale for designers seeking to expand by using license agreements. The value of their trademarks is not just in the quality, creativity and execution of their products, but in their exclusivity in the marketplace.
Another issue to consider is the reputation of a licensee. When entering into license agreements, a licensor may be exposed to both reputation and financial risks by its association with the licensee. Last week’s factory disaster in Bangladesh which killed over 400 workers has been a PR nightmare for the companies that manufacture clothing in the factory concerned. While you can monitor the standards and ethical practices of factories that you employ directly – this can not be said of those used by your licensee. Do you want to open your brand to these risks? Have you the resources in place to monitor the licensee’s compliance practices?
So if licensing is no longer the primary tool in building brand awareness and market extension, how does a brand expand in the modern world? Well for one thing technological advances and the internet have resulted in a much smaller world. Potential customers on the other side of the world are now just a click away from your product. The fashion industry has in recent years witnessed a surge in collaborations between high end designers and high street shops. Stella McCartney used collaboration, rather than licensing agreements, to break into territories with low brand awareness, and where it was felt the more expensive mainline would not yet be viable. By collaborating with high street shops such as Target in Australia and C&A in Brazil, the brand was able to retain control whilst building its brand awareness in new geographical areas. Unfortunately most merging designers lack the clout of a big name luxury designer that is required to secure such a collaboration. What’s a modern emerging brand to do?
Start small, focus on quality and stay in control. Christopher Kane speaking at last week’s Vogue festival emphasised the importance of a quality product and staying true to your brand’s ethos. Don’t run before you can walk and when the time is right to consider taking on a partner, do your research and carefully consider its reputation and market position. And if you are a high fashion brand known for cutting edge design and luxury, the girl scouts possibly aren’t the right partner for you!