DTR AND LICENSING
How DTR licensing is reshaping the global retail industry
By Yizan He, Founder & CEO of Alfilo Brands.
The rising level of competition among retailers in recent years has sparked a significant rise in the number of private labels launching, as retailers look to attract young shoppers to their stores. According to AC Nielson, sales from private labels grew 3 times faster than national brands in 2017. The challenge for brands is that we’re now reaching a saturation point in the private label arena where more innovation and creativity is needed for private labels to stand out from the crowd. This is particularly challeng-
ing because private labels are traditionally less developed and less creative than fully-fledged brand counterparts, as the primary focus is on cutting costs rather than creative marketing or design. One big trend we’re seeing is for brands to remodel direct-to-retail (DTR) strategies by incorporating licensing partners, given them access to creative IP and marketing resources that brings innovation and unique stand-out to their products, while keeping the retail model flat. European fast fashion retailer Primark have been champions of this kind of DTR licensing strategy, which has allowed them to become the largest retailer partner for Harry Potter-themed products in the world. The knock-on effect of this partnership has been to boost Primark’s cultural relevance and appeal, while giving the Harry Potter franchise access to a huge mass market. Similarly, international Japanese retailer Uniqlo has made deals with the likes of the Museum of Metropolitan Art (MoMA), Museum of Fine Arts, Boston and iconic graffiti artist Futura, whose cultural IP elevates the fashion retailer to a whole new level and allows them to reach new consumer groups. For Uniqlo, these deals add layers of sophistication and, again, cultural relevance, reaching new audiences and adding aspirational weight to the brand.
If Primark and Uniqlo had followed a more traditional model of creating private labels in-house, they would have only reached the consumers already shopping in their stores. Instead, strategical DTR licensing deals, where unique cultural IP provides increased appeal, brings the brand to more consumers and broadens the appeal of the brand through association with partner brands. The increased sophistication that these kinds of relationships are bringing to brands is changing the whole dynamic of the private label sphere, signalling what some are calling the shift from ‘private labels’ to fully-fledged ‘private brands’. This is a welcome change because in the past private labels have often been seen as the ‘poorer cousin’ to primary brands, as quality and creativity was perceived to be lesser. However, new DTR licensing strategies enable them to compete at all points of the market, from budget lines continue to be in demand, to more aspirational product lines that have the potential to be market leaders. DTR licensing can also be a lucrative way to enter new markets, both emerging and established. While private labels account for up to 40% of retail sales in Europe, in the US that statistic is much lower, at 15%, while in China it currently stands at 5%. Despite the lower penetration of private labels in these markets, demand for them there is growing. At Alfilo Brands, we’ve secured exclusive licensing rights to some of the most well-
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