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Luxury brands move away from licensing

News, 20 October 2015

TOKYO: Licensing agreements are losing their appeal in Asia as global luxury brands move toward aligning product ranges across the globe.

With e-commerce and shopping tourism rapidly globalizing the brand experience for Asian consumers, luxury manufacturers in particular are stepping back from licensing, according to Campaign Asia-Pacific.

In China, Japan and South Korea in particular, licensing has been common over many decades, but amid concern that a variety of price points and market-specific licensed products may confuse consumers, luxury outlets are seeking to maintain brand integrity by enforcing a consistent product range worldwide. Many brands now prohibit licensing.

"Licensing often creates a gap in pricing and brand perception between original brands and licensed products," said Euromonitor research analyst Yuiko Mitani.

A desire to protect long-term brand value is a major factor for the move, with licensed products potentially undercutting premium lines. Burberry, for example, recently ended a decades-long licensing agreement in Japan five years early as Chinese travellers were choosing to buy cut-price licensed Burberry products in Japan rather than premium Burberry products in the Chinese market.

As Asia's luxury sector booms, brands also want to be sure their expensive luxury products meet standards for high craftsmanship. By moving away from licensing agreements, premium brands are also looking to secure production quality and make the most of an Asian market with increased desire for high-end products.

"If a brand wants to be known in the marketplace for craft and excellence, licensing is obviously a contradiction," stated Manfredi Ritta, chief strategy officer for EMEA and South America at Interbrand.

For several decades, brands have developed licensing agreements with partners in Asia which allow licensees to release market-specific branded products at a lower price point. The practice allows brands that may lack the funds or market knowledge required for an Asia expansion to build product recognition at a fraction of the price.

Data sourced from Campaign Asia-Pacific; additional content by Warc staff