Sean John/Macy’s Deal Brings Questions For Licensees

Posted by Marty Brochstein on May 06, 2010

Today’s  announcement that Macy’s has become the exclusive U.S. department store retailer of Sean John men’s sportswear is only the latest in a long line of retailer moves that is having a profound effect on the licensing business. In a phased rollout beginning in Spring 2011, Macy’s and macys.com will be the only retailers selling the line outside Sean John’s nine U.S. storefronts.

Like major retailers such as Kohl’s, Target and Wal-Mart, Macy’s is building a major part of its business around exclusive and direct-to-retail (DTR) licensed brands. In Macy’s case, the list includes such notables as Tommy Hilfiger men’s and women’s sportswear, Martha Stewart home products and  Donald Trump Signature, among many others. Last year, more than 42% of all merchandise sold at Macy’s was from exclusive brands or limited distribution brands, including 19% from private label.
Every retailer seeks differentiation and exclusivity. If everyone is selling the same goods, the main avenue of differentiation is price, which in the end depresses everyone’s margins.

Thus the rise of DTRs, exclusive SKUs and deals such as the Macy’s-Sean John alliance. The licensing element is apparent when the deal takes the shape of a DTR. It’s also obvious that the more shelf- and floor space that a major retailers gives to its own brands and exclusives, the less there is for everyone else to fight over.

One key question is the next effect on Sean John licensees. As Women’s Wear Daily notes in reporting on the deal, “… the brand’s licensed classification businesses will receive heightened visibility and marketing support throughout Macy’s stores. One category getting an immediate boost is Sean John underwear, which Macy’s is bringing back into its stores after previously dropping the line.”

Major Sean John licensees will reap the rewards of the increased exposure at Macy’s, but at what cost? While other department stores and specialty retailers can continue to carry the licensed lines as before, how many are going to do that once the core sportswear departs their sales floors?