Luxury licensing is suffering from a bad reputation resulting from its over use by brands back in the 20th century. Specifically, luxury brand names often were linked to substandard, poor quality products that were marketed too widely. Quality and exclusivity are the traditional cornerstones of the luxury brand platform and the old ways of licensing frequently violated those principles.
Today, there still are luxe licensing deals – think Luxotica and Safilo designer eyewear – but more often instead of using the term “licensing,” luxury brands are “collaborating” in various types of partnerships that appear to be very similar to classic licensing arrangements, semantics aside.
These collaborations are often positioned as co-branding platforms. Some brands link up with celebrities and designers in partnerships that, in some way, seem more substantial than mere paid endorsements. Prime examples are the Kathy Ireland furniture line with Raymour and Flanigan and Sarah Jessica Parker’s partnership with Manolo Blahnik to develop a shoe collection exclusively for Nordstrom. In these cases, the celebrity often has an active role in product design and development.
Some collaborations are short term – capsule collections that many fashion designers do with off-price brands like Target and H&M – while others are more substantial, like Apple + Gucci, and Tag Heuer + Google + Intel for smart watches. Other examples are Valentino and Havaianas flip flops; Tory Burch and Fitbit wearables; Beats headphones by Dre and Fendi; and Cynthia Rowley and J.Crew wetsuits.
All of these arrangements result in some confusion about where luxury licensing ends and collaborations and partnerships begin. To help answer these questions, I sat down with my go-to licensing expert Ira Mayer to discuss the current state of luxury licensing and where it is headed in the future. For those who don’t know Ira or his work, he founded The Licensing Letter for which he served as executive editor for 25 years.
Fill a Gap
“Over the years I expanded from my origins covering the entertainment industry to sports, corporate brands, fashion, and other areas. No matter the brand, it always comes down to what the competition’s doing, what are they trying to accomplish and what are you trying to accomplish — and how do you find the white space,” Ira explains.
The ultimate question, he says is, “Who do you have to knock off the shelf to get on, whether that is a physical or online shelf. Online in theory is unlimited, but the reality is you still need to be high enough in the ranking in order to get attention.”
Limit Luxe Licenses by Channel or Stores
As for luxury brand licensing, Ira says it is really no different from any other licensing arrangement, except for the extra attention required to maintain luxe-quality control and heightened image and design. Today, he asserts, there are more sophisticated and effective ways of protecting the brand than there were back in the Star Wars licensing era – the late 1970s and 80s.
“Licensing came into a new era back then and yes, many companies were licensing everybody and everything, which became a huge problem for some brands and properties. But today the idea of exclusivity has come to the fore. Luxury brands can limit the channels and stores in which licensed products are sold or go direct-to-retail where the retail partner actually sources the goods,” Ira explains.
A recent example of an exclusive retail licensing agreement is between Bloomingdale’s and the Beekman Boys for the Beekman 1802 Heirloom Home Collection of bedding, furniture and rugs. This partnership is a win/win for both Bloomie’s and the Boys, who also sell their flagship goat’s milk beauty line on Evine.
Expand Brand into New Categories Without the Risk
Licensing gives luxury brands an opportunity to expand into new categories where their special design sensibility is essential, as Michael Kors has done in fashion accessories.
“Michael Kors clothing, for the most part, is not licensed. But the shoes and handbags, where the company makes the bulk of its money, along with jewelry and watches, fragrances and beauty and eyewear, is all licensed and those have been important brand extensions that have gotten the brand retail distribution that it might not necessarily have gotten just with clothing. The result: Michael Kors goes from a clothing designer to a lifestyle brand,” Ira says. Licensing arrangements have also helped expand distribution of Kors core fashion line into new international markets.
So for luxury brands, licensing is a relatively risk-free way of extending the brand, extending its distribution, adding new product lines and finding new revenue streams. That’s the thinking behind Tiffany & Company’s recent deal with Coty for a line of branded fragrances. How else would Tiffany find its way into Sephora or Ulta?
Use Tight Controls to Avoid Ubiquity
On the flip side of licensing is the danger of ubiquity where a luxury brand can find itself cheapened by becoming too popular, too common, too mass. To avoid that, Ira says brands have to maintain tight control of quality, as well as to be careful crafters of their brand image. An example of a luxe brand that has excelled at this, he believes, is Ralph Lauren.
“Ralph Lauren is one of the few brands that has truly managed to stratify the brand successfully into new product categories and multiple distribution channels. He does it by changing the label a little bit, like Ralph Lauren Black, so that each brand is different and the customer’s expectations are different. But each brand has a consistent design element with a certain quality level,” Ira says.
By contrast, Godiva has cheapened its once-luxe image by distributing too widely and not maintaining tight controls in the process. Ira says, “I was walking through Macy’s right before Christmas, and there was a cart filled with those beautiful Godiva boxes in a very high traffic corridor. With everyone with their bags and backpacks jostling through the store, many of those boxes were on the floor, crushed. Is it worth it to use that cart display that demeans your brand that way?”
Retail Licenses Allow Brands to Walk Away – Partnerships Don’t
On the question of how luxury brands affiliate with other companies through licensing, partnerships or collaborations, Ira says, “I think partnership is one of the most misused words in business. A partnership technically implies dual sharing of both risk and opportunity. But in most of these deals, the licensor or the owner of the brand is not taking risks. They have guarantees and advances so that if the whole thing fails, they can simply walk away. Other than the possibility that the brand has been damaged in some way with inferior goods, they can walk away clean and move onto the next licensee,” Ira explains.
A recent example of a traditional low-risk licensing arrangement positioned as a partnership or collaboration is the Disney Consumer Products deal with Ethan Allen for a Disney-inspired line of furniture and home décor. Ethan Allen, a vertically-integrated furniture retailer, takes all the risk, while Disney gets its hefty guarantees — and if the line doesn’t meet expectations, it can exit unscathed.
Experiential Licensing: Next Frontier for Luxe Brands
Ira views experiential luxury brand licensing as the next frontier. “Experiential marketing is obviously a hot button now. This is one area ripe for licensing as there has been little licensing here. Tours, cruise ships, hotels and airplanes all offer exciting new territory for luxury brands. For example, how about the Burberry London Tour, where Burberry brings a branded experience to a new audience. That transcends plaid scarves and raincoats.” Ira advises.
Research, Test the Waters and Build Safeguards for the Brand
Ira points to a significantly greater flexibility today for luxury brands to structure licensing agreements to take advantage of emerging opportunities, test new product lines and expand distribution through new partnership agreements. Research is key to reveal opportunities in the existing market, how to structure the deals and how to identify customers who will give “permission” for the luxury brand to expand.
In closing, Ira says, “Today there are collaborations, partnerships and exclusives, as well as traditional licenses, all offering a degree of protection for the intellectual property owner. The key is to build in the right kind of safeguards and oversight, which is much easier today thanks to technology. Brands need to work with licensees to ensure they test the waters and move forward in a strategically planned manner. But as I said earlier, the bottom line is, who am I going to push off the shelf to get my goods on?”