LICENSED TO THRILL

Entertainment-related licensed products can tie in with popular children's videos to create in-store excitement while increasing sales and customer loyalty.Making the investment in licensed apparel, toy figures, plush animals and novelties related to popular children's video titles triggers impulse sales months after the video has reached store level, nonfood buyers said. They also are strong during

Entertainment-related licensed products can tie in with popular children's videos to create in-store excitement while increasing sales and customer loyalty.

Making the investment in licensed apparel, toy figures, plush animals and novelties related to popular children's video titles triggers impulse sales months after the video has reached store level, nonfood buyers said. They also are strong during a movie's theatrical run, some noted.

Moreover, an assortment of these licensed goods further hones a supermarket's nonfood image and creates a synergy that keeps customers from going to the competition for these products, they stressed. Retailers' attention traditionally turns to licensed products this time of year in anticipation of the American International Toy Fair this week in New York.

As licensed items linked to children's videos continue to roll out with almost no respite, "there's an opportunity, especially with figures, more so than with cups, plates and saucers," said Mike Meyer, director of nonfood at Homeland Stores, Oklahoma City.

"These programs are not barn-burners, but some do better depending on how well the movie does," he said. Meyer plans "to hit every new kid video release that comes out." "[Homeland will] absolutely consider going into future children's licensed general merchandise when they're presented and as long as the timing is right," Meyer explained.

In addition to Homeland's some 40 video rental departments, the cereal and cookie departments are also ideally suited for supplemental displays, Meyer said.

Overall retail sales of licensed merchandise in the United States and Canada rose 1% from 1996 to 1997, reaching a total of $73.2 billion, according to the Annual Licensing Business Survey published by The Licensing Letter of EPM Communications, New York, last month. But the entertainment/character part of the business was down 3% to a total of $16.1 billion, said the survey.

The survey attributed the drop in entertainment/character sales to three factors: retailer trepidation following softer than expected sales in 1996; a glut of event movies in 1997; and a change in release patterns where movies were released on a larger number of screens, but for a shorter period of time. This decreased the window of opportunity for selling licensed products.

The video release does not necessarily reinvigorate sales of the licensed items unless there is a new coordinated licensing effort, said Carol Francesca, president, Broad Street Licensing Group, Montclair, N.J. She is a member of the board of directors of the International Licensing Industry Merchandisers Association, New York. However, the licensing of food and beverage products is picking up and increased 4% to $6.4 billion in 1997, according to The Licensing Letter's survey.

Francesca confirmed this trend. Food licensing "isn't hot, but it definitely is a new growth area for licensed products," she said. This is especially true for products that can carve out an ongoing store presence, as opposed to the promotional nature of most movie releases. "There is a growing awareness of licensing on the part of manufacturers, whether they be from the cereal market, frozen food or snacks," she said.

But retailers should see some incremental sales of licensed items, whether food or nonfood, linked to upcoming children's video releases, said industry observers. Among the key titles in the months ahead will be "The Little Mermaid," "Peter Pan" and the just-released "Hercules" from Disney; "Anastasia" from Fox; "Batman & Mr. Freeze: Sub Zero" from Warner; and two direct-to-video sequels from Disney: "Pocahontas: Journey to a New World" and "The Lion King: Simba's Pride." Licensed items linked to children's video lines like "Barney," "Winnie the Pooh," "Arthur," "Rugrats" and a new series of Beatrix Potter titles, should also provide merchandising opportunities, the observers noted.

"There is nice steady demand for these items keyed to the videos," said Ron Dubuc, drug and general merchandise manager at Harold Friedman Inc., Butler, Pa.

During the fourth quarter, licensed children's tie-ins at Friedman's featured, among other selections, freestanding displays of "Little Mermaid" merchandise. These included plates, cups and small cereal bowls, priced at $1.99 to $2.99 and located near the sell-through titles, video rentals and in the cereal aisle. "They sold very well," he said.

A strong believer in licensed children's properties that tie in with video, Dubuc said he "buys everything that comes down the pike because I know my competition will have it. Despite a program that might turn out to be a slow mover, licensed products still contribute to our general-merchandise image."

Carrying a limited amount of licensed merchandise hurts a chain's nonfood image, said Dubuc. "People will think you're not in the ball game. If they can't find [the licensed selections] in your store and go elsewhere, the next time they'll think, 'I'll go to that other store again,' " he said.

Nonfood managers also are using markdowns for clearing out leftover merchandise or reducing inventories of slow sellers.

In Friedman's case, 30% margins on licensed stock are maintained for about 60 days. Grosses on unsold items are trimmed after that time.

How much the margins are trimmed "depends on how quickly they sell out completely at regular prices, and the popularity of the particular video title. We cut margins to near zero after that to clear out the remaining items," said Dubuc.

Friedman also moves some remainder licensed goods to other display areas. For example, in January the retailer shifted some "Winnie the Pooh" children's flatware, plates, travel mugs, drinking glasses and cereal bowls to a general -merchandise display area. Previously they were displayed in floor shippers near video rental.

Dubuc said video titles and the related nonfood items that appeal to younger kids outperform items linked to movies with adult audiences. Pooh tie-in items were the biggest winners for Friedman.

"We had better luck with 'Winnie the Pooh' and 'Anastasia' items that appealed to kids under 12 years than with 'Star Wars,' which didn't do anything for us," said Dubuc.

Friedman "had the worst trouble with 'Star Wars' school supplies in binders and notebooks tied to the summer release of the video. I figured these stationery products would be a natural for the back-to-school period, but the items had to be reduced and there are still some left," added Dubuc.

He rated the cereal aisle the best for licensed nonfood tie-in displays, as well as near video sell-through. "While the mother is trying to decide if she wants it or not, the kid is already rooting through the display to see if he wants the plate or cup or all of the above," he added.

Price points for licensed merchandise so far have been at reasonable levels, according to Dubuc. "[A price of] $5 is still the magic number and anything under that goes really well. You pick up a video and you also pick up a related licensed product, which is enticing to the consumer," said Dubuc.

"Hercules" toy figures and "Star Wars" sold well in the fourth quarter at Associated Grocers, Baton Rouge, La., said Claude Millet, general merchandise category manager.

"We like to keep our licensed general merchandise priced no higher than $4.99," he said. Associated's retailers had good sell-through with "Hercules" tie-in merchandise at $1.99 to $4.99.

" 'Star Wars' [merchandise] priced from 99 cents to $4.99 also worked well cross merchandised in the cereal aisle and at video rentals," he said.

In the past year, "Hercules" tie-in products were the best licensed items, Millet said.

The display area for these tie-in items is with video rentals, Millet said. "Checkouts, and cereal, cookie and candy aisles, are also good for secondary placement of licensed stuffed animals or toy figures. Kids usually pick out their favorite cereal, making that aisle very good for displaying licensed tie-in items."

Family Thrift Center, Rapid City, S.D., plays up mugs and straws, but avoids toys and movie characters "since they don't usually do particularly well," said Ted Honke, general manager.

Based on past experience, the retailer doesn't go deeply into themed toys. For example, it stocked "Hercules" and "Pocahontas" mugs and straws, and "Pocahontas" characters were promoted, "but the products weren't good [performers] for us. 'Lost World' tie-in products also had only average results, and 'Star Wars' die-cast vehicles and the figures and larger vehicles for Christmas were only so-so," said Honke.

" 'Space Jam' apparel and toys were our worst licensed program. The apparel did poorly because Michael Jordan wasn't on them. Basically the theme was 'Space Jam' and Looney Tunes, but the kids wanted Michael Jordan, and the $25 price point was too high," said Honke.

Honke said his best-ever licensed program "was probably 'Lion King,' which did well based on the appeal of the movie."

Some store locations at Harding's Friendly Markets, Plainwell, Mich., carried tie-in items for "Lion King," "Anastasia" and "Hercules," "which did well and sold out fairly quickly," said Dave Lynam, nonfood buyer.

Some licensed items move faster than others, he said. Their sales pace is often predicated upon several factors, ranging from advertising by the supplier, the quality of the licensed items and the title's acceptance at the box office.

Lynam said some past licensed items generally were of a lesser quality than he'd have preferred or lacked ad support, which he was unaware of until after the fact.

Pricing levels depend on the specific item. Lynam limits prices of sweatshirts to a maximum of $15. "On anything over that, they don't do very well," he said.

Lynam expects the children's licensed nonfood market to continue to grow. "And if a product comes out that our competition has, we've got to be competitive," he said.

Raley's Supermarkets, West Sacramento, Calif., has had fairly good response to children's general merchandise tied into displays of the related videos, said Bill Roatch, general merchandise buyer.

"Children's licensed products are trendy and fashionable. Certain ones, like 'Winnie the Pooh,' have been hot this past year," he said.

But with other products related to specific movies, "you hit some and you miss some, which is part of the risk in licensed goods," he said.

Roatch cited the "101 Dalmatians" movie of last year as "a big license that did great. When the movie was hot everybody was thinking about it. It just seems that when a new Disney license comes out, the old one drops off and the new one hits."

He added that Disney and Warner Bros. licenses seem to stand the test of time. The amount of marketing activity carried in the media can make a big difference in making a program a success, he said.

"When a program is good, it does well. When it's bad, it does poorly," he said.

Licensed general merchandise linked to better-known movie titles stands a better chance of succeeding at store level, said Dan Barnwell, director of retail technology at Piggly Wiggly Memphis Inc., Memphis, Tenn.

"The Lion King" was the best-ever licensed program for Piggly Wiggly retailers, he noted.

Where's Your License?

Total retail sales of all licensed products were about level from 1996 to 1997 with 1% growth. Entertainment and character properties declined 3%, but licensed food and beverage products increased 4%.

Total Licensing Market

1997$73.2 billion

1996$72.3 billion

Change+1%

Entertainment/Character Properties

1997$16.1 billion

1996$16.7 billion

Change-3%

1997 Share of All Properties22%

Food/Beverage Product Category

1997$6.4 billion

1996$6.1 billion

Change+4%

1997 Share of All Product Categories9%

Source: Annual Licensing Business Survey, The

Licensing Letter, EPM Communications, New York.