The kids licensing market in the U.K. is changing rapidly, and change, sooner or later, always offers opportunity.
The U.K. is unquestionably a tough market, especially for kids licensing, which has been hit not just by the recession, but also by the closure at the end of 2008 of Woolworth's, by far the biggest retailer for kids licensed products. But if the market is tough, it is also opportunistic, and there are some interesting developments and trends emerging.
According to Ania Kozielec, senior account manager, NPD License Tracker, the latest figures for the year ending March 31 show that "the kids licensing business fell by about 6 percent year-on-year. This is the first time this has happened in a very long time."
However, the U.K. remains Europe's largest market for licensed kids products. The NPD License Tracker puts the value of the market for all children ages 0 to 14 across accessories, clothing, electronics, footwear, greetings cards, health and beauty, publishing, school equipment, traditional toys, video games and video tapes/ DVD at £2.2 billion ($3.6 billion).
"One of the reasons for the decline is the recession, but a much bigger reason is the closure of Woolworth's," adds Kozielec. "While spend on licensed product has fallen, total spend on kids [including non-licensed products] has actually gone up by 2 percent over the same period."
"Cash-strapped parents are trading down to cheaper private label, rather than the more expensive products with a character on them," adds Kozielec. "The loss of Woolworth's removed the opportunity for the small-ticket impulse purchase."
The loss of Woolworth's to the kids licensing business is powerfully illustrated by other NPD data. "For the 12 months ending March 31, Woolworth's was still the No. 1 retailer for licensed products [for kids], even though it only traded for nine of those 12 months," Kozielec explains.
Clare Piggott, vice president of consumer products at Nickelodeon Viacom Consumer Products, agrees that the demise of Woolworth's was a heavy blow to the kids licensing business. "While all the main chains such as Argos, Tesco and Asda have benefited, some of the Woolworth's business seems to have just disappeared." says Piggott.
One possible explanation for the "missing Woolworth's sales," noted by Piggott, is offered by NPD's Kozielec. "In the year ending March 31, only two licensed product categories posted sales increases—publishing and video games."
Kozielec suggests that the rise in publishing, which is "almost all in comics, magazines and stickers," represents a replacement of the impulse, small-ticket purchase typically made on the high street. "People that once popped into Woolworths's for a small toy, now go into WH Smith, for example, and buy a comic, magazine or sticker instead," says Kozielec.
NPD License Tracker found that for the year ending March 31, toys accounted for 36 percent of the U.K.'s kids licensed market; clothing, 20 percent; publishing, 12 percent; and DVD, 10 percent.
"Video games are continuing to climb strongly," notes Kozielec. "They currently account for about 6 percent of the kids licensed market, and although there are signs that the rate of growth has slowed of late, I still think they will continue to be a strong growth category because there are some great products out there, they are fun for the whole family and a lot cheaper than a night out."
Even so, NVCP's Piggott does not see the Woolworth's closure as the biggest drag on the kids licensing business. "The biggest issue in the U.K. at the moment is the recession," asserts Piggott.
Piggot expects things will get better, especially for Nickelodoen, looking ahead to next summer's release of The Last Airbender, based on their hit series "Avatar." "It's a strong boys' property, but with a very strong female lead—so we should attract some girls as well," she says.