CHARACTER STUDIES

STEPHANIE LOUGHRAN

Despite the thriving box-office receipts this year, retailers are hesitant to give second chances to licensed entertainment properties that disappointed them in the past.

While retailers polled by SN said they have cut back on licensed nonfood products because the risk of a licensing dud is too high, they still incorporate a modest array of the latest licensing trends in stores.

"We've tended to cut back because some of the licensed products didn't perform as well as they should have," said Dolores Chewning, general merchandise director, Ukrop's Super Markets, Richmond, Va. While the retailer carried an assortment of licensed toys in years past, slow turns on these licensed products caused Ukrop's to discontinue selling them, she said.

However, Chewning noted, the retailer chooses licensed properties based on what matches its family-oriented consumer demographics. That means more of "Dora the Explorer," and less of "Star Wars."

"We're focusing on our values," she said. Licensed entertainment properties like Nickelodeon's "SpongeBob SquarePants" are a better fit at Ukrop's, said Chewning.

"If it adds additional business, that's great," she said. Licensed party goods featuring "SpongeBob SquarePants" and "Dora the Explorer," another popular Nickelodeon network character for young children, ship to stores next month.

Sales backlash for blockbuster movies like "Star Wars: Episode I - The Phantom Menace" resulted in fewer licenses for "Star Wars: Episode II - Attack of the Clones," according to recent published reports. While 85 licenses were produced when "The Phantom Menace" was released three years ago, 50 licenses have been issued for this year's installment.

Charles Yahn, vice president, nonfoods, Associated Wholesalers, York, Pa., agreed. "We are reluctant [to order licensed product]," he said. "We're not trying to be as well-rounded and complete as we once were." Harry Potter back-to-school supplies last year also were a disappointment, he said.

Associated Wholesalers used to have several displays of licensed goods, complete with cross-merchandising initiatives in the candy aisles, Yahn told SN. But with the recent product failures, the wholesaler has trimmed its licensed offerings to basics, he said. "A lot of retailers are taking a wait-and-see attitude," said Gordon Thompson, seasonal category manager, Associated Food Stores, Salt Lake City.

"A lot of people got burned on 'Star Wars.' Retailers are a little gun-shy."

The best-selling licensed goods at Associated Food Stores have been coloring books featuring character properties, such as those from Disney's summer release, "Lilo and Stitch," as well as other Disney properties, said Thompson. The wholesaler plans to merchandise licensed children's dinnerware from Zak Designs, Spokane, Wash., for spring 2003.

Woody Browne, principal, Building Q, a marketing and consulting company based in Voorhees, N.J., confirmed that retailers have been hesitant to invest in licensed goods.

"The scars aren't totally healed yet [from past sales disappointments]," Browne said. However, he noted, "There's always going to be a home for movie merchandise. The problem is when people get so excited, they lose their sense of business and fail to control expectations."

Analysts told SN that low price points (to spur impulse purchases) and a mix of evergreen and trendy licenses were especially important for supermarkets' success.

"If you can get a nice price point on a cool licensed item, grocery stores can make some money," Browne said. Impulse items should be priced under $5, he said.

"Supermarkets are only going to win if they understand that they cannot get the same margins out of licensed products that they can with unlicensed goods," said Jeff Manning, managing partner, F&M Merchant Group, Lewisville, Texas. While mass merchants only want 15% to 25% margins on licensed items, supermarkets want 40%, he said.

Instead, grocery stores "should look at it as incremental sales in the dollar profit that the item would return," said Roy Fossum, managing partner, F&M Merchant Group.

Supermarkets can also further capitalize on personal care categories, like bandages, hair care and sun care; publishing opportunities, such as licensed children's' books; and licensed school supplies, said Charles Riotto, president of the International Licensing Industry Merchandisers' Association, New York.

"You have to be a little discerning about what you can carry, like action figures and other toys like Matchbox cars," he told SN. "Lower-end, smaller packages would work very well in supermarkets."

The right formula in offering a balanced mix of classic evergreen properties and hot, trendy properties depends on timing, said Bill Cross, vice president, Broadstreet Licensing Group, Upper Montclair, N.J.

"If you get in before the wave or just as the wave crests, you're in good shape," he said. Otherwise, "people become sick and saturated with the property or they move onto the next item."

Evergreen products "provide steady growth and returns year after year," Cross said.

However, shutting out new properties stunts sales growth, Riotto said.

"If you don't try new items, you're really limiting your potential growth," he said. New, licensed products could open up a new category or attract a new demographic base, he said.

At this year's Licensing 2002 International trade show, new offerings in licensed sun care, general merchandise and children's books sprinkled the show floor.

Mattel introduced licensed sun block lotion, lip balm and a sun block stick under the Hawaiian Tropic brand.

Yottoy Productions, New York, acquired rights to produce plush toys based on the Little Golden Books brand.

Movie studios touted the sequels to "Spider-Man," "Men in Black" and "Austin Powers."

Corporate-brand licensing also showed strength at this year's show, said Stan Madaloni, president, Mada Design, New York.

"Investing in corporate brands is a little more long term, a little less flash-in-the-pan," he said.