Fashion Collaboration between designers, high street and chain retailers have become increasingly popular in recent years. For designers, the advantages of fashion collaborations with a high street chain include financial benefits, and being able to reach out to a new customer demographic through a larger market.
Designers should always be mindful of control over quality, prices and flooding the market with their brand, as low prices, poor quality and having your brand appearing ubiquitously in “stack ‘em high, sell ‘em low” type establishments can, in the long run, cause huge damage to the designer’s brand.
Tahir Basheer, an Industry member specialising in fashion and media law for leading London-based law firm, Sheridans, offers his expert guidance.
1. What to License in a Fashion Collaboration?
The agreement should clearly state exactly what is being licensed to the retailer. If you are a designer with a variety of brands you may not want the retailer to have a license over all of them. Also, the retailer is most likely going to want an exclusive license over your brand. You should consider this carefully as it means you will be unable to license the brand to another retailer while the agreement is in force. A diffusion line or sub-brand is often the solution as it builds a level of distinction between the main brand and the sub-brand.
2. Product Licensing
The agreement should clearly define what products are being licensed. If you are entering into an agreement with a large department store they may want to use your brand over a wider range of products than just clothes. I have seen the list requested range from clothes, jewellery, eyewear and household goods to name a few. The designer should think hard about the list of licensed products he or she is prepared to license to a retail store, particularly if it is an exclusive license. The key thought to bear in mind is considering whether it is more sensible to license different products to different specialist stores rather than being tied down to just one.
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3. Maintain Control in your Fashion Collaboration
The designer should maintain as much control as possible over how the retailer uses the designer’s brand. The extent that you will be able to achieve this will vary depending on your negotiating strength but it is important that you have control over things such as what logos or marks can be affixed to the products and how your marks are presented to the public. Without such control the retailer may cause irreparable damage to the reputation of your brand. The agreement should contain provisions stating that the retailer will send you samples of products before they hit the shelves and that you may reject them if they do not meet your standards before they are sold in any stores.
4. Get into nitty-gritty
Depending on the nature of your brand it may also be important to maintain control over such things as; where the products are manufactured, how many products are manufactured, where your products are sold, the minimum price at which products can be sold at and how the products are marketed and advertised.
5. Decide the Royalty paid
The way in which the retailer pays you should be clearly set out. Often designers receive a royalty (i.e. a percentage of the sales or profits made by the retailer when selling your products). What percentage this is will be a hotly negotiated point and will depend on the bargaining power of you and the retailer. It is not just the percentage of the royalty that is important but also on what royalty base price it is calculated on. Regardless of power, it is important that the agreement contains provisions that allow you to audit and inspect the books and records of the retailer in relation to your products. This will enable you to check that you are being paid correctly and if not, be paid any shortfall. Often when an audit is carried out and a shortfall is discovered it is not a case of the retailer being dishonest but more a case of errors in the royalty accounting happening somewhere along the agreement, invoicing, payment or processing chain. Having the ability to check that you are being paid properly can, therefore, be very valuable.
6. Top Tips for unsold products
The agreement should clearly state what will happen to the products the retailer has manufactured that have not been sold when the agreement comes to an end. It is standard practice for there to be a sell-off period whereby the retailer can continue to sell the products for a short period of time, following which there should be an agreement allowing for the remaining stock to be sent to the designer either for free or at a discounted price or cost price.
Designers may be wooed by the financial benefits of selling large amounts of stock (albeit at a lower price) but need to be mindful of getting the right balance between price, quality, ease of access and long-term brand positioning. If a fashion collaboration and the accompanying agreements are handled correctly, this should be a successful marriage that respects the designers’ quality and standard controls while allowing the retailer to do what it needs to do to maximise sales to its target audience.
Do you have any further insight into fashion collaboration? We’d love to hear from you! Let us know in the comments below.
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