Everyone’s Shopping, but No One is Taking Risks

Licensing is always complicated by the number of different parties required to get a branded product into a consumer’s hands – at a minimum it requires a brand owner, a licensee, a retail buyer/retailer, and consumers themselves. When the economy is booming and consumer confidence is high, retailers and consumers are hungry for novelty. But the economy has wobbled over the last year or more, and the resulting uncertainty has left both retailers and consumers are in a risk-averse phase. Launching new brands and products in licensing is more complicated than ever.

Retailer Risk-Aversion

You can’t get retailers to take a chance on a new idea if they aren’t confident about the economy and their ability to deliver sales. A year ago, most major retailers were overconfident about the economy, loaded up on inventory, and fell far short of their goals. They spent the last 12 months discounting product to sell what they had, adding inventory only sparingly. While it appears that they corrected the mistakes of 2022, it means that they are now less willing than usual to take risks on something new.

And let’s remember that the events of 2022-2023 followed several bumpy years when COVID disrupted both consumer purchasing (boosting some categories while depressing others) and critical supply chains. The new normal sometimes feels like no normality at all.

Now, when you add concerns about a recession (and a majority of both consumers and CEOs now think a recession is likely in 2024), you understand why retailers just want to get through 2023’s holiday season without a lot of unsold inventory or disruption. In this mode, any sensible buyer would rather make no new decisions, which means they are asking more questions and looking to reduce risk with every decision they make.

What to Do in a Risk-Averse Economy?

If you are a brand licensor (or their agent) looking to create or grow a licensing program in late 2023, what can you do?

The best news is that overstocks have moved through the system and retailers do need product to sell. But that doesn’t mean they’ll be jumping at new opportunities without evidence that they will succeed. At times like these, a new brand in the market will have to invest in research to build its case.  The surest way to get a retailer (or a licensee – they are seeking more security as well) interested in a new idea today is to conduct and share research confirming that consumers want to buy it. In the old days, licensees would take a chance that a well-presented idea would connect with retailers and consumers, and retailers would often follow. Today, they have shifted that risk back onto the licensor.

Another option to overcome risk-aversion is a co-branded product. Co-branding doesn’t just offer the benefit of two brands, mitigating the risk that either brand alone would not generate sufficient consumer appeal. But partnering a new licensed brand with a brand with established appeal to a given retail buyer also offers security in the form of the brand already established with retailers. Clamato was a small clam juice brand without major shelf presence, but it partnered with Budweiser to deliver retailers and consumers a compelling Chelada. Separately, in a deal that IMC created and manages, Sweet Baby Ray’s was a brand so beloved by the Walmart jerky buyer that they asked us to build a deal around it with our licensee partner, Bridgford Foods. In both cases, partnering a smaller brand with a powerhouse brand at retail was enough to win over both buyers and consumers.

I’m as optimistic as ever about brand licensing and licensed products, but consolidation of retailers, combined with waves of economic change that have left them more cautious than ever, means that it takes more patience, more investment, more research, and more creative partnerships than ever to make it succeed.

Interested in licensing your brand? Check out our services, or reach out to our team to see how we can help you navigate the new licensing landscape together.