Summer 2009
A License to Profit By Emily Lambert

A Word on Markup

Opinions on markups of licensed products vary. Here's a sample:

    • At Faye Snodgrass Gallery, licensed products have roughly the same markup as anything else, notes Snodgrass.
    • Shelli Lissick from Midwest says retailers can often mark up licensed products higher than others, especially ones from well-known artists, because of their demand.
    • Pete Malone of Demdaco says the cost of a licensed product from a wholesaler needs to factor in a royalty fee, thus making it higher, but they also take into consideration what the market can bear before deciding on a figure.
    • Because the manufacturer builds the additional cost of licensing into the product, if you don't use your licensed product intelligently, it will cost you more money, notes Kay Degenhardt.

 

Licensed Products: Everything and Anything

Imagine walking into a store and everything was white. That’s what the world would be like without licensed products, says Ketra Oberlander, founder of Art of Possibility Studios in Santa Clara, CA, an art publishing and licensing brand for physically disabled artists. Licensed products are everything and anything.

“I have a book filled with hundreds and hundreds of categories,” says Kerry Glasser, founder and president of Concept Marketing Group, Inc., a licensing and marketing agency in New York. And with a myriad of wholesalers offering licensed products, you can bet there are hundreds of categories there, too. For example, Midwest/Seasons of Cannon Falls in Cannon Falls, MN, a wholesaler of decorative gift and holiday items, offers everything from licensed ornaments and wall decor to licensed nightlights and aprons. At Legacy Publishing Group, designer, manufacturer and wholesaler of stationery gifts located in Clinton, MA, licensed products come in the form of calendars, cards, coasters and stationery pads, to name a few.

As to the reason licensed products are so popular in the gift market today, familiarity appears to be a big part of it. It’s the artist behind the card, mug or figurine that speaks to the consumer, and many times, it’s one the customer already knows. For instance, Jim Shore’s (folk art) products are popular with tourists at Faye Snodgrass Gallery, an art and gift store in Franklin, TN. “Our tourists love to come in because we carry almost [the whole line], and if they’re a collector, they have to have it,” says Faye Snodgrass, owner. The birth of a licensed product The licensing process is anything but routine. An artist or a manufacturer can create a licensed product in a number of ways. Either party can use a licensing agent or go it alone. For artists who prefer to stay creative and let others handle the finer nuances of business details, licensing agents are key, says Glasser, who not only negotiates the finer points but comes pre-equipped with a database of contacts.

“As an agent, you’re building this world of possibilities,” says Kay Degenhardt, licensing agent, president of Kay Degenhardt, Inc. in New York, NY. Once an artist is paired with a manufacturer, a contract is established “giving manufacturers the exclusive right to a design or property for use in a restricted area,” says Degenhardt.

The manufacturer or licensee pays the designer an upfront guarantee, on signing the contract and/or completing the work, she says. It is a modest amount but one that ensures manufacturers don’t take designs off the market and just sit on them. The guaranteed fee is applied against a standard 5% royalty, Degenhardt adds. This means that if a vendor pays an artist a $2,000 guaranteed fee, and the artist make $2,500 in royalties the first year, then he or she will get $500 because the vendor subtracts the guaranteed fee from the royalties.

Licensing parameters

Licensing contracts also specify exclusivity. Exclusivity clearly states product parameters—for example, that one design can be used across a variety of products or that only one category of products can be used with a certain design. Mary Pat Heelan, marketing director for Legacy Publishing Group, says that some artists work exclusively by product. They might be able to do a calendar for Legacy, for example, but not a list, she says. Other artists prefer to work with only one stationery company, and yet others might have contracts that are based on specific designs. “Most contracts made at Legacy are exclusive by design for an average of three years,” she says. “Bigger companies can secure a whole product category,” she adds.

Because many of these areas are negotiable, an agent can be of great assistance, representing the designer’s best interest, and the best interest of the potential licensee for a solid long-term relationship, says Degenhardt. Artists can also go directly to manufacturers, without the help of a licensing agent. Four licensed artists currently work at Midwest who began in this fashion. Licensed artists at Midwest are paired with product development managers to brainstorm formats and designs as a team effort.

While Midwest still employs in-studio artists, there are seven, licensed artists. Suzy Toronto, Wendy Addison and Penny McAllister are a few of these. “They bring their own viewpoint, style and their name, especially those that have built up a following,” says Shelli Lissick, brand communications specialist.

Licensing’s leg up

DEMDACO, wholesaler of gifts and home decor in Leawood, KS, has approximately 50 active licensed artists, the majority of whom work directly with the company (and not through a licensing agent). The company also has one in-house artist, says Pete Malone, vice president of product development. Top selling artists include Susan Lordi, Kathy Andrews Fincher, Marjolein Bastin and Lori Siebert. Working with artists who can “quickly meet a trend in the market” offers the company more flexibility, Malone says. “Licensed artists help the company stay fresh,” he adds.

“We obviously think about trends in advance, then contact artists that meet these trends,” says Malone. While artists have final approval in the process, “we want to have the ability to make it commercially viable. We hope we have additional knowledge that helps them to be successful in the marketplace. It’s a good partnership and collaboration,” Malone says. Peking Handicraft, Inc. in San Francisco, CA, an international manufacturer and wholesaler of home textiles, decorative accessories, and giftware, uses approximately 50 licensed artists. Some design the entire product from start to finish and others provide artwork or inspiration that they adapt to fit various product categories and price points, says Derrick Lo, vice president of home decor.

For manufacturers and wholesalers who do a great degree of licensing—such as Legacy, which works with roughly 30 different licensing agents—it can be a challenge to keep artistic categories from overlapping. “We have to look at every picture and balance it from the portfolios we see,” says Heelan. Midwest chooses artists who have very different styles, such as Susie Toronto, who is very bright and modern, and Wendy Addison who uses a vintage craft, says Lissick, to meet this challenge.

No matter how the idea is born and carried out, licensing is beneficial for both sides of the party. “Licensing helps build my brand in ways I can’t myself. I don’t have the resources or means to bring certain categories to life,” says Suzy Toronto, licensed artist and owner of Suzy Toronto Studio in Mt. Dora, FL. Manufacturers in turn, benefit by taking on well-known names consumers are familiar with, without having to spend money developing a brand.

The name game

Promoting the name behind the product becomes the key in selling it. For this reason, all of Legacy’s products carry an artist signature, as well as a bio, if room allows. “The bio page on the wall calendar really tells the story of the artist. You get to know about the person who painted it. Those kinds of things really reach out to people. It’s like an extra gift,” says Heelan. Artist backgrounds are also outlined in Legacy’s catalog, as well as on their website, for retailers to learn about and share with their customers.

Midwest also places great emphasis on communicating the background of their artists through product hangtags and the like. “With so much technology day to day, and people not dealing face to face anymore, knowing the artist behind the product you’re purchasing makes a difference,” says Lissick. “With all of our artists, we include hangtags on each piece that have the artist’s name, logo and bio/story,” she says. Midwest also provides bio cards with snapshots of the artist and their collection.

These postcard-sized cards can be placed in stores alongside the products. By promoting the artist behind the product, retailers can bring a personal connection to their merchandise, as well as draw in customers already familiar with the name. “It’s very helpful for a store to be associated with a name. It gives a customer a reason to come in,” says Marcia Ceppos, owner of Tinsel Trading Company, a retail store that sells appliqués, trims, ribbons, giftware and more, in New York.

“When there is brand recognition or a compelling story to attract the consumer, the retail attraction to the product grows exponentially. People like to identify with the products they buy and it is easier for a consumer to identify with an established brand/license over a generic product,” says Michael Baruch, director of sales, North America, for Giftcraft, designer and marketer of artist-driven products in Williamsville, NY.

Some licensing companies have their own story to promote, as well, as is the case with Ketra Oberlander and her company, Art of Possibility. “I have a unique brand in that it’s cause oriented,” says Oberlander. Oberlander is a disabled artist herself, having become blind in her late thirties. The products the company represents, not only tell the story about the individual artist behind each, but also carry information about her licensing company. Art of Possibility has a mission to help the physically disabled participate in society rather than depend on it. Not all products have room to accommodate this message, but it is communicated whenever and wherever possible.

Oberlander encourages retailers to use in-store signage as well, to relay the message. Signage is important for “retailers who want people to know what differentiates one pretty thing from the next pretty thing and what is meaningful. It’s a huge point of differentiation,” Oberlander says. “I think what we’re going to see, people are going to want their stuff to mean something, because their dollar means something. They want a product with dignity and integrity,” she adds. Playing up the artist who created the products is important, agrees Glasser. “It’s a waste when retailers don’t actively promote what they have . . . Today you need to stand out. It’s very competitive,” he says.

Bring them to life

How better to play up an artist than an appearance by the artist in person. This is one of the many attractions of an in-store signing event. “Right now events are a big thing. Customers think, ‘Oh we’ll just get our book signed,’ and then they come out with a bag,” says Toronto, who has two self-published books, in addition to her licensed products available from Midwest and Suzy Toronto Studio. Toronto has had signings from Trump Plaza in Atlantic City, NJ with 1,000 plus women in attendance, to small shops in remote areas. “Nothing is too big or too small. It’s important to build at a grassroots level,” she says. Betty Scheid, owner of Market Street Gallery in Celebration, FL, found Toronto’s products at the Atlanta Market, and has been amazed by how fast they fly out the door. “People come looking for her stuff and buy 3-4 products at one time,” she says. When she heard Toronto was releasing her second book, she requested a signing, both because of her following and the fact she’s “a local Floridian,” says Scheid.

For Ceppos of Tinsel Trading Company, licensed artist Wendy Addison makes a splash. “We specialize in vintage, and Wendy Addison is perfect for us. Everything she does has a vintage twist,” says Ceppos. Addison has done trunk shows in the past for Tinsel Trading, bringing one-of-a-kind items to the store and signing them. “It draws a lot of people. People always want to meet someone talented,” says Ceppos. Artists also come to life at trade shows. Midwest brings in licensed artists so retailers can meet them, take pictures with them and hear their stories, and in turn, share them in their stores. At gift shows, Toronto, who wholesales her own line of paper products, and her larger licensors—Midwest and Blue Mountain—cross-merchandise products from each other’s companies. “The bigger and better it gets, the better for everybody,” says Toronto.

Vendors and retailers agree it doesn’t matter how you bring the artist to life for the customers—it’s just important that you do so. As Lissick points out: “It’s what’s behind the products that will carry licensing into the future.”

The More, The Merrier

Kay Degenhardt, licensing agent and president of Kay Degenhardt Inc. in New York, says that stores that cross merchandise their licensed products reap the most benefits. If you carried, say, Chuck Fischer ornaments, you would want to carry his books, too. “The likelihood is [customers] pay more for the ornaments because it’s by the very famous pop-up book author Chuck Fischer,” she says.

Mary Pat Heelan, marketing director for Legacy Publishing Group, agrees creating a display of a number of products from one artist is important, and notes wholesalers support retailers in locating other licensed products from popular artists they carry, such as Deb Strain. Artists such as Suzy Toronto, encourage retailers to stock multiple products by listing their various licenses on their web site, so retailers can easily find other companies to buy products from.

Mouse over images below to view.

Emily Lambert

Lambert, a regular writer for GIFT SHOP, resides in Philadelphia. She can be reached at emilylambert@comcast.net.




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