Brand Merchandising: An untapped biz route to success
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In 2012, when George Lucas sold the Star Wars franchise to Disney for 4.05 billion USD, it created a worldwide buzz and there were many who called the acquisition grossly overpriced and ridiculous. The movie series, which had over 7.5 billion USD in combined box office receipts for all of its 6 releases, was seen as a diminished property at the box office. What made Disney pay an astronomical sum for a franchise that was petering out? The answer lies in not at what the movie makes at the box office but what the popular characters of the movie lend themselves to!
The toys, the games, the masks and those light sabres that a generation of kids grew up playing with have so far generated a whopping 20 billion USD! (http://www.cnbc.com/2015/05/04/guess-where-star-wars-makes-real-money-not-in-the-theaters.html) This is the power of Brand Merchandise.
Brands globally take merchandise seriously and anything that has their name on it is an extension of their brand. This seriousness has created many success stories. Harley Davidson generates a sizeable chunk of its revenue from its merchandise elements as it does from its bikes. National Geographic is another example of turning a part of their merchandise into a product that people go for and buy.
In India, Being Human is an example worth Rs 100 crore of brand merchandise for which people yearn. They put in their money to buy its T-shirts, caps, bags and other accessories. Indian companies and Indian offices of global corporates treat merchandising as an expense and not as a possibility. The result is shoddy and repetitive merchandise with poorly- placed logos screaming cavalier attitude or sheer nonchalance towards a great opportunity of subliminal branding and possibly an alternate revenue stream.
The brand merchandise industry in US and Europe is an organised industry with dedicated lobbyists and an industry body that serves as the guiding light for the businesses and provides for knowledge sharing and collaboration. With turnover that surpasses 20 billion USD in America and over 7 billion USD in Europe. This is a serious business. However, in India inspite of a total turnover that exceeds 2 billion USD, there is no industry body, no credible source of information, and data and it has no government policy as it is not regarded as an industry.
The problem is not just the fact that there is no cohesive policy or leading body for this industry to be taken seriously, the problem is inability of people involved in brand merchandising to rise over their petty insecurities and start collaborating. In an environment where price is the deciding factor for everything, quality, innovation and thought take a backseat.
The industry is mired in corruption and cowers to purchase departments of organisations, partly because brand teams of Indian companies have been forever treating brand merchandise as an after-thought. It has been an industry which is relationship centric, with no entry barriers. Anyone who knows anyone in a company can become a supplier of corporate gifts (as it’s generally called in India). Despite thousands of buyers and equal number of sellers, the industry is disorganised, fragmented and there are hardly any specialist companies in the business who are grossing more than Rs 100 crore in annual turnover.
It’s these inherent structural and mindset issues that prevent VCs from touching startups in this industry. Couple of investments have already gone bad and as per the VCs, this industry is simply not scalable.
It’s an uphill task but there are international and Indian players in this arena, who have started slowly and painstakingly churning its wheels. However for any sort of breakthrough, all stakeholders in this industry, the brands and the vendors need to realise that brand merchandising does not start with the product or its cost, it starts with the BRAND.
And, that would be a beginning for this industry and only then it would script a success story.