HFN Staff Report
NEW YORK–Captive brands—well-known licensed brands that are exclusive to specific retailers—are the latest chapter in a long history of licensed products in home furnishings.
As is often the case with history, the angle of the current licensing story depends on who’s telling it.
Captive brands—think Martha Stewart at Macy’s, Chris Madden at J.C. Penney and Better Homes & Garden at Wal-Mart—are often a godsend to retailers, some sources said, as merchants have total control to differentiate and develop products. With exclusive brands, retailers immediately benefit from a well-known name without the start-up costs associated with building a brand.
Not all exclusive retail brands are successful, and retailers must proceed with caution and watch for pitfalls. For every Michael Graves, there’s a Philippe Starck. At the same time, some vendors said exclusive retail partnerships limit distribution and curtail potential sales.
Steve Ryman, a consultant with retail stints at Sears and Kmart, said retailers should have a mix of national brands, opening price points, private-label brands and exclusive designer brands.
“It’s important to have national brands to have credibility because some shoppers are looking for those big brands,” Ryman said. “There are too many important names out there that you can’t afford to be all private label.”
Last August, Macy’s rolled out the biggest launch in its history with the 2,000-SKU Martha Stewart home collection. Macy’s said the affordable luxury line, developed by Martha Stewart Living Omnimedia and Macy’s Merchandising Group, has the potential to generate $400 million in sales.
The line has the biggest presence in home textiles and the second biggest presence in housewares. Other categories include furniture, rugs and Christmas trim. This year, Macy’s moved to harness Stewart’s bridal clout with the recent expansion of the collection to upstairs tabletop from Wedgwood.
At the mass end, Martha Stewart also markets the Everyday home collection at Kmart. But that program will likely end when her contract with Kmart expires in 2010.
The upscale bridal designer Vera Wang brought her tony aesthetic to Middle America with an exclusive line of home and apparel for Kohl’s. The Simply Vera home program, inspired in part by fashion and jewelry, “speaks to a modern sensibility,” Wang said. The line is positioned at the upper end of Kohl’s home mix as a luxury offering.
The home textiles business has seen much movement toward exclusive retail brands. Two of the most venerable textiles brands, Cannon and Fieldcrest, have become proprietary brands. Both are now the properties of Iconix Brands, which has made a deal to give Sears the exclusive rights to Cannon and a similar agreement with Target for Fieldcrest.
Target is also the exclusive retailer for Woolrich-branded home textiles. “This program has given the brand greater recognition and a broader distribution in terms of consumers,” said Sharon Kepley, Woolrich’s licensing manager for home furnishings. “It also helps focus our work in designing these products with our licensees by keeping the parameters of our looks in mind.”
In the rug category, licenses are more typically made available to multiple retailers, although there are some cases: for example, the case of Martha Stewart’s product assortment at Macy’s, where a select number of designs are exclusive to that retailer. Even the Stewart rugs, however, have a much wider reach, and the rug companies behind the brands said it’s that wide appeal of each name that makes licensing a lucrative business in the rug sector.
“The advantage to these particular licensed collections is that the names are strong enough to appeal to a broad range of retail segments, from department stores to dealers to designer showrooms,” said Arash Yaraghi, principal of Safavieh, of the company’s Martha Stewart and Thomas O’Brien lines of rugs.
Ken Kallett, executive vice president of Dale Tiffany, which has the Antiques Roadshow license, said exclusive retail brands are a win-win for lighting manufacturers and retailers.
For lighting manufacturers, “Getting a brand that you can distribute nationwide is getting harder and harder to do, so if you can find one key player to do it, it’s worth it,” Kallett said. “I think it’s OK to give exclusivity to retailers. It’s the best of both worlds.”
In housewares categories such as cookware, licensing has been a strong player for many years, as the kitchen is a natural place for manufacturers to partner up with chefs and other food-friendly brands for consumers.
But while some manufacturers like partnering exclusively with retailers, others are more hesitant. Other than offering its Tim Love Collection of cookware in a limited way to HSN, “I don’t have much experience with licensing niched that way,” said Jeff Norling, chief executive officer and co-founder of Outset. “I don’t like them, as they require similar efforts [of regular licensing programs] with limited distribution,” he said. “It seems like a model with limited long-term viability.”
TTU, on the other hand, has a number of exclusive brands at retail, such as Philippe Richard at J.C. Penney, Espana at Macy’s, Corsica at Kohl’s and Invitations at Bed Bath & Beyond. “Retailers are under a tremendous amount of pressure to differentiate themselves from the pack and the private labels seem to be the answer in their opinion,” said Rami Izadyar, brand manager. Pros of this strategy include giving “the manufacturer/designer freedom to customize the products to fit the tastes of a smaller segment of the market [the retailers’ consumer base],” she said, and, if “customization is done correctly, it can enhance the brand positioning among consumers.”
David Zrike, president of tabletop manufacturer The Zrike Company, said that stores owning licenses “is dangerous. More often than not it has been unsuccessful because stores generally are not able to spend the time to immerse themselves in an overall brand strategy,” he said. “Further, the fact that the brand may be distributed in only one venue hurts bottom-line sales due to limited exposure.”
Colonial Williamsburg, one of the nation’s oldest licensing programs, has broad retail distribution, which has “allowed it to grow and thrive,” said Jim Easton, vice president of Williamsburg, the product division for the Colonial Williamsburg Foundation. “To tie your brand’s fortunes to one retailer these days is very risky,” he said. “When you’re tied to one retailer, that retailer’s problems become your problems.”