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TOTAL LICENSING
EUROPEAN INSIGHT
DTR Deals: The Bee’s Knees or
The Emperor’s New Clothes?
When the idea of doing direct to retail lenges is the question of how to struc- is about guarantees. It’s more about
(DTR) deals was in its infancy we all ture a DTR deal? In our experience, an the way royalty structures are put to-
thought, ‘wow’. Then came the chal- ‘umbrella’ deal where a retailer signs gether and the retailer’s commitment
By Morten lenge of how exactly to implement up to a property, commits to market- to the brand, and the marketing and
Geschwendtner such deals. Now it seems DTR is firm- ing and promotion and then selects promotional spend. In the end a re-
Director
ly back on the radar but it’s my view pre-approved product from a variety tailer will do the exact same job with
Kidz Entertainment
that it’s still very much more talk than of suppliers is a relatively transparent or without a guarantee.
action; there is a lot of learning still to and straightforward one, with royalties So how best to make it work? The
do to make it into a winning formula. due on FOB buying prices. It’s a formu- upsides to DTR are massive because
Retailers are increasingly asking us if la that Disney has made work and one of the retailer’s role as gatekeeper to
they can go direct to sign the license. that we’re working on with some retail- the consumer; they can build and kill
The initiative comes mostly from cat- ers in Nordic and Eastern Europe, and brands. But your retail partner prob-
egory-specific retailers and in Europe ably needs to be a certain size to
has been successfully implemented
Although we’ve all been
implement it or it makes no sense.
so far by companies like Toys “R” Us,
talking about DTR for a
Unless it’s a chain with strong buying
C&A and H&M. But now lots of po- power, it’s probably better to source
tential partners want to do DTR and it
long time, it has, until now in
via a licensee. Where you source exist-
isn’t always as simple as it looks. Europe, been the preserve ing product like this and manage it well,
There appear to be three layers of
of one or two huge licensors
it’s all incremental business and brand
DTR emerging. Firstly, with major retail
and a few major retail chains.
support.
chains that have made the investment
to understand licensing and have their
Otherwise, it’s relatively virgin
It’s much easier to work with retailers
that are category specific, like H&M or
own in-house development teams to
territory. I believe it’s going to
Toys “R” Us. A deal we once tried to do
manage the processes and challenges. remain with big retailers that with a supermarket group highlighted
Retailers like C&A or H&M, for exam-
can handle big volumes and
the challenges involved – the house-
ple.
that it’s going to need
wares buyer, in this example, was faced
Secondly, there are retailers that use a with a minimum order quantity from
third party, such as Watermelon, or use
retailers to invest in under-
the factory that was just too risky to
a licensee/supplier to create product
standing licensing to
justify the branded buy. On the other
for them based on their style guide-
make it work.
hand, 25,000 pairs of socks to a chain
lines and to fit their profile. This is a as large as H&M is less of a risk.
great business model and it’s surpris-
that we are trying to implement with
Although we’ve all been talking about
ing that there aren’t more companies
many more in the months to come. In
DTR for a long time, it has, until now
doing it. It’s something licensees could
fact the push in this direction is leading
in Europe, been the preserve of one
take on - scanning the market, signing
us to now recruit a vice-president of
or two huge licensors and a few major
the deals, developing the product ac-
retail & brand management to manage
retail chains. Otherwise, it’s relatively
cording to a specific retailer’s pricing,
all activities with our retail partners,
virgin territory. I believe it’s going to
managing approvals, etc. This way the
such as permanent retail space, cam-
remain with big retailers that can han-
retailer gets the best out of licensing
paigns, catalogue placement, POS ma-
dle big volumes and that it’s going to
without the headaches.
terials, TV advertising etc. We all want -
need retailers to invest in understand-
At a third level (and most challenging
and need - to secure permanent space,
ing licensing to make it work. As an
for licensors) there are partners who
to enable year-round marketing cam-
agent, DTR it doesn’t necessarily make
want to exercise DTR deals but find
paigns to develop and build the brand.
life easier. While licensees understand
it hard to implement when they see
The 1-2-3-week campaigns are much
it (and that working with retailers on
what’s really involved. After all, for a re-
more difficult
this scale won’t conflict with their
tailer uninitiated in licensing there isn’t
So the structure of the deal where a
business) and licensors all want us to
just product development to get right
retailer sources existing product can
focus on it, the retailer doesn’t neces-
there is also the lengthy approval of
be straightforward. But the structure
sarily understand the difference be-
the manufacturing processes and the
of a deal where a retailer undertakes
tween listing a product and developing
samples at every stage.
its own product development and
one from scratch with the added issue
Running alongside the practical chal-
manufacture is where you have to be
of a license.
more cautious. I don’t believe DTR
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