Approaching the End of the Line

All licensed products approach the end of term in the licensed merchandise manufacturing agreement.


Perhaps a license has been a good revenue generator for a manufacturer at the beginning of a motion picture launch campaign or with a venerable character or rock band franchise.


Somewhere towards the end of the term of manufacturing, sales are even or wane, while the costs of manufacturing and production are better applied to the next productive acquisition or licensed brand items.


There's also the need to address slowed movement of the stock on hand.


Generally, at end of the licensed goods agreement, a product manufacturer as licensee has three options.


1) Sell any existing inventory for stock on hand, back to the licensor. Many licensors don't want to be in the goods carry back and stock supply brokerage business.


2) Destroy the stock and issue a certificate of destruction, which doesn't really afford any return or payback. Sometimes cost of destruction isn't even worth the charitable inventory giveaway.


3) Closeout or Liquidation, if set at a reasonable value to benefit new audiences of customers, who still enjoy the cultural notoriety of a brand while being able to consume it at their relatively discounted but appropriate economy of scale.


A best solution can be Export sales. For end of run brand licensed products, it makes more sense to introduce the goods as bulk or volume remaining lot available offers, to key buyers and decision makers with reasonable distribution through chains to reach their nation's customers with the same in trend or vogue brands, to be enjoyed by consumers at the lower price economy of scale. The licensee enjoys a return of income to reinvest in new product production forward.


Such inventory sell off is not only fruitful as income at end of term for the licensee, it can also be tabulated and drawn as a reasonable reduced royalty for the licensor, at a prorated or reduced close out value to also benefit the licensors royalty income stream as a tail on the end of run.


How many licensors actually provide the benefit to their licensees with an end of term closeout strategy or a referral to wrap things up nicely with a closeout income plan to end stock on hand?


Export sales of lots into new countries or territory markets are a good provisional income solution.


Looking at most product manufacturers licensing agreements, there are usually terms and caveats expressed on export provisions that must be met. But just what are the seven to nine stipulations or regulations for export noted as restrictive or permit related, for the export sales of the licensed goods or merchandise?


Thoughts?


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