The licensing and merchandising industry, as it exists today, is reliant on inter-dependent relationships that the brand owner (licensor) must be prepared to accommodate within its business operations.
Complications arise from the international nature of some of the major licensing and merchandising activities, such as the England Team licensing program for the World Cup this year, which bring their own set of problems and issues particularly with respect to counterfeiting, passing off, trade mark and copyright infringements.
Over the past five years, retailers -- and in particular supermarkets -- have become the principal players in the licensing business.
As the final link with the consumer, retailers have always enjoyed a strong position in the licensing value chain and increasingly they have come to occupy a central role in the success or failure of a licensing programme.
But retail consolidation over the past decade -- through acquisitions, mergers, store closures and bankruptcies -- has concentrated more power in fewer hands.
With each successive contraction of the retail market, the position of retailers has become more important for brand owners looking for promotional impact at store level.
As a result, this kicked off a stampede amongst brand owners to offer ever more exclusive deals in the hope of getting prime shelf and floor space for their brands.
However, having slashed their overhead costs, retailers have turned their attention to squeezing extra margin from these exclusive relationships.
What's more, this is taking place against a background of increasing profits for superpowers. For example, Tesco just announced record profits in excess of £2bn.
Brand owners and suppliers are now expected to put their hands in their pockets and divert resources in order to buy distribution for their products -- or face certain brand death. And it's perfectly legal.
For example, superpower Wal-Mart recently demanded payments totalling £368m from Unilever, Kellogg's and others based on turnover and in-store shelf space devoted to selling their brands through its Asda chain in the UK.
As superpowers exert more pressure for ever increasing contributions, it's likely that direct-to-consumer brand communication activities in support of sponsorship, for example, could be cut as a result of this type of predatory behaviour.
But this isn't restricted to brands. It's also sweeping through the own-label world.
For example, Marks and Spencer announced in March it was imposing a 0.5% "marketing allowance" on all its suppliers to help fund advertising, online development, store renovation, new store developments and other marketing initiatives.
It defended its move on the basis that suppliers have to play a role as partner than just simply supplier in the enterprise.
As a result, suppliers are expected to invest in supporting marketing activities that increase volumes, lead to faster stock turnarounds, improve cash flow and impact the bottom-line.
On the surface this doesn't seem unreasonable until you fast forward ten years from now and wonder who's left standing amongst beleaguered brand owners and suppliers.
Leaving aside arguments around market dominance and the long term viability of the licensing and merchandising industry, the real loser could be the consumer that in reality is faced with dramatically reduced choice that's been sacrificed for increased profits of the superpowers.
Ardi Kolah is author of Maximising the Value of Licensing and Merchandising, published by Sport Business (£595), available from . This article is based on a presentation given at the SportBusiness Campus event at Cass Business School London in April 2006.
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