In recent years, consumers have often seen brands that are irrelevant to clothing enter the clothing business. There are various brands, for example, Documentary channels such as Discovery and National Geographic, MLB, the stage of professional baseball players, and Yale, a prestigious Ivy League university in the U.S. However, the brands make consumers wonder more what they are in the sense that even though they are foreign brands, their clothing products are all owned by Korean companies.
All of these are “brand licensing”. Brand licensing means the process of leasing a trademarked or copyrighted property for use in connection with a product, service, or promotion. In other words, in the fashion industry, the licensee produces and circulates its own products by using only the brand name of the licensor. In this way, the licensee pays the royalty as a usage fee for the brand name to the licensor.
The reason why the fashion industry is interested in brand licensing is the fact that they have great merits in that they can achieve many savings in market costs. The new brands have to invest huge branding costs, but launching the brand by using the foreign famous brands spends fewer costs than the new brands because they have already been recognized by the public. An official at Cowell Fashion, which made licensing agreement with FIFA, said, “It takes 3 years and 4 to 5 billion won in marketing costs on average for a new brand to position in the market,” adding “the brand licensing strategy can have the same influences relatively in a short time without the process if the brand image, price, and design provide the consumers with satisfaction.”
Also, the experts say the tendency of the MZ generation to focus on itself is the cause of the popularity of the brand licensing trend. Just by searching Instagram with fashion-related keywords like outerwear, it can be seen that many influencers are wearing the licensed brand. The characteristic of licensed brands marketing is to lure customers with a “Logo Play”, which means designing the products using their brand logos, based on their own identity. Hence, it is evaluated as an effective strategy due to their tendency to pursue fun and attract attention. The Samsung Fashion Institute analyzed that it is the strategy that suits the MZ generation because it is easily accepted by those who pursue something different and are accustomed to collaboration.
The first domestic company to create a brand licensing is MLB of F&F. When Park Chan-ho, the Korean baseball player, was playing for the Los Angeles Dodgers in 1997, F&F made the licensing agreement with Major League Baseball of the U.S (MLB) and has had success connecting sports and fashion. Since then, the company brought in Discovery and has occupied a higher rank in the domestic outdoor apparel market. F&F recorded sales of 668.3 billion won in 2018 and 910.3 billion won in 2019 and exceeded 1 trillion won in 2021. Although the fashion industry is facing a crisis due to COVID-19, the upward trend is the meaningful outcome.
Also, National Geographic Apparel has gained popularity, when The Nature Holdings(더네이쳐홀딩스) signed the license agreement with National Geographic in 2013. On March 8, The Nature Holdings announced that the business profits in 2021 were about 68.2 billion won, up 23% from 2020. The official from the company said, “The number of the domestic consumers who enjoy the unique experience about the brand is steadily increasing, centering on MZ generation,” adding “Recently, the expectations are higher for the global market, so we will expand overseas expansion and take a leap forward for the global fashion company.”
As the success stories of brand licensing became known, the licensed brands connecting with film brand Kodak, U.S press CNN, and even global music chart Billboard are venturing into the fashion market. However, the domestic fashion industry is not just responding to this phenomenon positively. First, the original risks of brand licensing cannot be ignored. In the past, Korean company Eland signed a license agreement with sports brand Puma, so that raised it to 20 billion in annual sales. However, Eland was forced to close the business because the head office of Puma in Germany established Puma Korea after. Like this example, if the global headquarters do not extend the agreement and directly unfold the brand business, the licensee can get a deathblow due to the risks.
Also, Kim Sook-kyung, the editor of the fashion magazine Fashionbiz, pointed out that investment in technique and their own business philosophy in fashion has to be achieved to be on the fast track in the long term. However, in recent years, most of the outdoor clothing licensed brands are busy producing only so-called “popular” items such as backpacks or jackets. The official at Samsung Fashion Institute said, “Many of them start with ideas and capital at first by entering online, and then run offline,” adding “Because they are easily swept away by the trends, the companies quickly unfold and fold the brand.
Regarding brand licensing, some consumers responded positively, saying “it seems great to be able to make such a good design even if the brands are completely unrelated to fashion.”, and “Their atmosphere is delivered as it is to the products, so I am inclined to consume the products.” While, other consumers responded negatively, saying “I feel like I was hit in the back of the head as coming to think of the fact that it is the products that only borrow the brand name.”, and “I thought the products are not cost-effective, compared to the outdoor clothing licensed brands.” Like these, it can be seen that the reactions of consumers are also quite mixed as these advantages and limitations about it are clear.
The Korean fashion industry of brand licensing is growing bigger and bigger as it begins to export to the U.S, China, Southeast Asia, and so on. As these success stories increase further, many more companies are entering into brand licensing. However, the situation where licensed brands flood the domestic fashion market is just positive. Park Sin-ae, an investment analyst from KB Securities (KB 증권), said, “By transforming the licensed brand into a lifestyle brand and developing the powerful brand identity, it leads to a successful outcome.” That is, understanding and persuading the consumers is important to survive the licensed brand by strengthening the good “quality” and unique “positioning and story” of the brand.