Golden Goose’s Adam Bass offers some pointers on how licensees and licensors can adapt to the new reality to survive.
As the saying goes, “It was the best of times, it was the worst of times”. Yes this is more like the tale of a thousand cities but just like the French revolution, Black Friday, the dotcom crash, or the many other recessions throughout history there will be winners and losers and business will recover. Putting aside the shutdown, the personal health issues and all of the other many distractions, the key focus for your business should be to ‘Stay in the Game’.
Just like COVID-19 infects everyone differently, no two businesses will be affected the same by the shut-down. The key to staying in the game in a period of contraction is to understand which rules have changed and which rules have stayed the same.
For those channels that are still open it is business as better-than-normal, consumers are continuing to buy products – especially food, home decoration, fitness and gardening equipment – from brands and retailers that they trust. For some food brands, all of their Christmasses have come early, but without the usual flurry of promotions.
Food sales are up 22% year-on-year in the week to March 14, driven by an additional 15 million supermarket trips. For other sectors, the story is not so full of joy. The impact of closing of all non-essential stores have led to forecasts that retail sales could fall by as much as c.£13bn in 2020. Business disruption has already forced Carluccio’s and Laura Ashley into administration and will take its toll on many other businesses with underlying health issues.
But… there is still light at the end of the tunnel and licensees and licensors need to adapt to the new reality to survive. Here are some pointers…
Cash is king
The impact of this titanic shift will mean a lot of bills are going to remain unpaid. Whether that’s genuinely because of the market conditions or just because companies have decided to take advantage doesn’t really matter. Based on previous downturns, you can safely assume that only profitable, sustainable businesses will pay their bills; any other income will be a bonus. Regardless of the current market conditions it has always been true that if nobody pays, everybody dies, that’s why the government is putting in so much support. So if you want to use a service after this is all over and you can afford it, you had better pay for it.
Move towards the hotspots
Ultimately, you should only worry about what you can control and that means moving your business focus to any area that is showing signs of life. Whether that’s international markets that are still open or likely to open before the UK, booming categories or channels or segments that are likely to show signs of vitality once this downturn has ended.
For Golden Goose this means adding digital content to our product categories, it also means relaxing our expectations in the short-term. For our hummus brand Providence Deli, it means looking at additional retail channels and marketing plans. For any business that is planning to be around when this is over, the focus will need to be on an 8-12 month recovery plan because those stores that are closed are sitting on stock and many manufacturers are sitting on a lot of debt.
Take advantage of the new marketing landscape
Your investment in digital marketing is probably worth double what it was two weeks ago: your target audience is at home and constantly connected to their phones and computers. There has never been a better time to market to them digitally. If your product is currently available then now is the time to invest in marketing, especially with so many other brands staying silent.
As we have seen with big brands developing ‘stay at home’ versions of their logo, there is a need to react and be relevant. Even if you don’t currently have stock available, some smart marketing may not go amiss to generate demand once market conditions return to normal, or to carry out some market research. However you use it, there has probably never been a more connected world to reach out to.
Take calculated risks
The good news is that licensing is a long-term industry and that the gifting element of Q4 is often the biggest part of any revenue forecast. With all this time spent together families will have grown closer (or have more reasons to make amends) so hopefully the gifting season will be bigger than ever. For the moment, at least, no one has cancelled Christmas. Retailers will eventually lift up their heads and turn their attention to the future and they will desperately need relevant stock.
With Chinese manufacturing back online the question is how much stock are you prepared to risk laying down without a confirmed order? This is a very difficult calculation to make but if your golden rule is to ‘stay in the game’, my advice for what it’s worth is that you should probably take the risk and order enough stock to get you back on your feet if it sells.
Business will re-emerge. Expect consolidation once this is over and a swathe of mergers and acquisitions with opportunities for anyone in the stock clearance business. One final pointer, if you want a new winter coat, I’d recommend buying it now because A/W 2020 stocks are probably going to be hard to come by.