How to Survive the Retail Landslide of the Great Recession


Remember the Retail Crash at the End of 2008?

Christmas 2008 changed everything for retailers of consumer products.  Remember that awful retail season?  Or would we all rather forget it?  Retail sales took a serious plunge, mass marketers and independent retailers kept slashing prices and their margins in the hope of attracting more shoppers, and the day after Christmas, retailers were stuck with a huge amount of Christmas goods that they couldn’t unload.

On a national and international level, we were in a financial crisis that plunged the country into what was being called the Great Recession, and in the process banks began to fail here and abroad, retailers closed or consolidated, countries went into ever more serious debt, and many millions of jobs were lost.  Credit became tight as the banks still standing were reluctant to invest in companies that might close. Consumer confidence collapsed. The result was a retail landslide of epic proportions.

Banks Take a Hike

American manufacturers of consumer goods – I should call them “producers” and not “manufacturers” as most manufacturing of consumer goods has been outsourced to China and other countries – discovered that the long-term relationships they had had with their banks were now fragile and unproductive.

A number of my licensees went back to their banks for renewal of their revolving lines of credit to get the funds they had to have in order to purchase their 2009 lines, only to find that they could no longer get credit.  For companies without sufficient cash on hand, that meant taking out smaller lines of credit at higher rates of interest from other sources, and cutting back dramatically on their 2009 lines.

Businesses Closed Across America

Some of my licensees just closed their doors, doomed by receivables that weren’t coming in, a lack of cash to meet overhead much less purchase new lines of product, and a dismal retail outlook for all of 2009 and perhaps beyond.  Bankruptcy and consolidation was the order of the day.

Other consumer goods producers cut back on their expenses any way they could so they could stay afloat.  One of their targets was the artwork they licensed from agents, artists and design studios.  Many of our licensees decided to cut back or eliminate inbound art licensing entirely, deciding instead to generate artwork using their in-house creative staff.  And many of the companies that were still licensing art were seeking the safest subject categories they could find, based on sales of product in prior years.

Consumer Confidence is Critical

As a result, the art, character and brand licensing agencies that I spoke with during 2009 and into early 2010 told me they were down anywhere from 30% to 50% in gross revenue.  2009 was a tough year all around.  The rebound in consumer confidence started to build gradually in 2010, but the licensing environment had changed and many companies weren’t as eager to bring in licensed artwork.  In my opinion, that was a big mistake on their part and for those companies that cut back on bringing in strong licensed artwork, it undoubtedly meant a slower recovery.

You see, to have a strong presence in the marketplace, companies need to present to consumers the most attractive and compelling products they can possibly create.  And that takes attractive and compelling artwork. There are no two ways about it. While some in-house creative staff might be able to generate that level of high-impact artwork, most can’t, and so the road back from the Great Recession for many companies wasn’t just about the availability of credit or consumer confidence, it was and is about creating lines of product that the typical consumer would love to buy.

Just as it’s a normal response for companies under threat to cut their expenses on marketing and advertising – one of the very worst things they can do in those circumstances – it’s also a normal response under stressful conditions to stop spending as much on strong, beautiful, inspirational, charming or compelling artwork for their products.  And again, that’s exactly the wrong thing for companies to do.

Why Licensing Compelling Art Makes Sense

Just ask yourself, if your company is under financial stress, wouldn’t it help if you had the strongest possible product line so that you could increase sales and pump up your bottom line?  The answer in our industry is a resounding yes!  And that’s the quality of artwork that licensors and their representatives and agents need to present to all active and potential licensees – the very best and strongest artwork they can develop to help them achieve greater sales, and make up for the ground they lost in the retail landslide.

As we begin to move out of the Great Recession, let’s all work on building stronger product lines with stronger art and design.  It’s time for companies to increase, not to decrease, their inflow of strong new art.  It’s really the only way to win, and the only way forward to recovery.

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This article first appeared in the Spring/Summer 2011 issue of Art Buyer, published by Lema Publishing Ltd of Berkhamstead, Herts., United Kingdom.

(c) Lance J. Klass.  All Rights Reserved.  This article may not be reproduced with the expressed written permission of the author. 

For information about copying all or part of this article, contact the author

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