Floor Topics: Quality not quantity for licensees
August 10, 2001,
New York — The role of licensing in the area rug industry is shifting among manufacturers and importers looking to keep production costs and price points down.
On average, licensed product comprises only 10 percent of most manufacturers' and importers' offerings. Keeping that figure lean, many vendors have spent the last several months paring down —both purposely and in some cases, incidentally — their licensed programs into a more elite core group of collections.
"Being selective keeps your assortment more manageable, especially since most licenses are so trend-oriented," said Larry Mahurter, director of advertising/sales promotional department for Fort Lee, NJ-based Couristan. Couristan first started working with licenses in 1991, focusing on juvenile, but has since moved to the mainstream sector with five main licenses, including Joseph Abboud and Forbes.
Shaw Rugs has taken one of the most aggressive positions in licensing program downsizing. Jeff Meadows, division vp, said that since he was assigned to the rug division one year ago, he has worked to trim down its license program to five from 30 licensed collections.
"People think licensing is the end all, be all," Meadows said. "But there are a lot of people dropping licenses out there. It's better to focus on a core and make them work for you than have a bunch that just do okay."
The five licenses Shaw works with include Kathy Ireland, Nourison and most recently, Tommy Bahama.
Since it signed a partnership with Ralph Lauren this past spring, Atlanta-based Karastan has adopted a renewed focus on its licensing initiatives and is working to keep its licensed programs to a minimum.
"For our distribution base, we don't feel multiple licenses are necessary," said Phil Haney, senior vp, marketing and sales, Karastan.
Karastan's sister company, Mohawk Home, which is also a division of Mohawk Industries, is in the process of cleaning house in its licensing department.
"We have a lot of designer agreements/licenses that we are looking at very closely and figuring out how productive they are," said Pat Moyer, vp of marketing. "We've got 30 right now, and I'd like to cut that number in half, if possible, over the next year."
Moyer stressed that Mohawk Home is still open to working with more "big-name" licenses similar to the entertainment and designer licenses with which the company currently has running deals, including Warner Bros., Fox, Disney, Thomas Kincaid, Cheri Blum and Croscill.
"But we are trying to narrow our licenses down in order to be more important to the ones we have," Moyer added. "We want to invest more in the product development and marketing initiatives and not be spread too thin."
At Sugar Valley, GA-based Mohawk Home, licensed product makes up a significant percentage of sales for throws, decorative pillows and bedding, but not for its area rug category.
"Rugs is an area we are continuing to grow within licensing," Moyer said. "Now it's not too significant, but it could be later."
Dallas-based Feizy's Ray Ehsani, vp, sales, said that after three years in partnership with Waverly, Feizy dropped the license because "people seemed to have a resistance to pay more money for a licensed product."
As a result, Feizy has restructured its position on licensing partnerships. "We don't have any, and we don't want any," Ehsani said.
Other licensing contracts Feizy recently opted not to renew are Mount Vernon and Natchez.
Similarly, Orian Rugs Inc., based in Anderson, SC, earlier this year let its partnership with Nick & Nora expire without renewal. Even though the license did allow Orian to do business with new retail partners it hadn't worked with in the past, it was not profitable, said David Starr, national sales manager.
"It's just the nature of our product category — it's tough to successfully license," Starr said. "We did licensing before, and it didn't work out. We still talk to some other licenses, but we haven't found the right mix yet."
White Plains, NY-based Trans-Ocean is banking on not having the same experience as Orian with its most recent licensing partnership, the Ernest Hemingway Collection, to produce area rugs that coordinate with the existing furniture line at furniture retailer Thomasville.
Allan Wagenheim, chairman, said Trans-Ocean signed on as a Hemingway Collection licensee because "it gives a unique look and a design area for the furniture world that will be extremely important, and we felt we should be a part of it."
Wagenheim added that he hopes the license, for which Trans-Ocean will introduce product for the first time in October at the High Point, NC show, will enhance the company's current lines.
"You need licensing which produces for the company in areas where it can add to your area of expertise," he said. "It needs to add designs or styling for customer bases you don't normally do a great job with. If the license is exciting and works, then it pays off. If it is just another name to add to your roster, it's meaningless."
Wagenheim said the company's current core includes Hemingway, Pat Hornafius and Liora Manne. But the Gear license was not renewed when its contract was up recently.
"We don't move to streamline. It's not conscious," he said. "If something sells it's a plus for our business. It's the consumer that forces that issue. What sells we keep. What doesn't, we don't."
The costs and risks involved in licensing partnerships can be "pretty steep," noted Deborah Powell, director of marketing, Cecil Saydah affiliate Design Network, based in Los Angeles.
"If a buyer gives you four feet of space, the question is what do you put in there — something that could sell or something more timeless that more aptly represents your product line," Powell noted.
Many licensors, especially the more prominent, require an upfront fee from manufacturers as a guarantee to the program. As a result, many manufacturers have to reflect the added costs in price points.
"And in the rug business, where there are pretty fixed price points, the added costs are hard to try to tuck away, so generally it appears in the price," Powell added.
Similarly with inventory, especially in the case of importers, there is a risk involved in over-stocking product or not having enough, depending on consumers' receptions.
"As a stance, we've decided to choose to work with more non-licensed product, especially in the juvenile category," Powell explained. "We felt it was devoid of selection of non-licensed product and timeless product. For example, with juvenile, parents still have to make the purchase. And while kids may want it, sometimes parents don't go for it."
Speaking with the benefit of almost 20 years of experience as a licensee for numerous properties, Kea Capel, director of marketing and creative services for Troy, NC-based Capel Inc., offered some thoughts regarding the role of licensed area rugs in the retail marketplace.
"What we have learned since 1982 and since working with some very talented people and top-notch concepts is that our product remains strictly an accessory for licensing programs but not the backbone — it can't be," Capel explained. "And that's because of the way the product is driven at retail. It needs to be supported by a major furniture or bedding collection. And without a major player taking up the license in furniture or bedding, you simply don't make an impact. The consumer never really understands the license."
Capel's first license partnership was 20 years ago with American Legacy, which Capel said was successful because the licensor put together a package that coordinated a full line of home textile categories.
"The sale of the product is based — now, for the most part — on furniture vignettes or bedding programs. From there, the consumer wants to build on that look and wants to accessorize that lifestyle, and to do that she goes on to pick wallcoverings and floor coverings."
Capel explained that, to the advantage of area rugs as an important component of a license program, the category is available at more retail outlets where furniture or bedding appear than other components such as wallpaper or lamps. "Rugs are the category most often used on retail sales floor to prop bed ensembles or furniture vignettes," she added. "The consumer is more likely to find the rug merchandised with the rest of vignette."
Capel's most recent licensing agreement — its first partnership in four years — is with Dick Idol.
Ed Vairo, director of creative marketing for Saddle Brook, NJ-based Nourison, noted how important it is to the life of licensed rugs that manufacturers partner with licensors "that know what they are doing" with the property.
"At Calvin Klein, for example, they have very specific ideas about how the product should look and be marketed," Vairo said, regarding Nourison's recent partnership with Calvin Klein. The initial launch of product will be introduced in October at High Point. "As a licensee, we look to them as having a lot to bring to the table."
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