The business of ailing brands

Business Week had a story recently about Kenneth Cole’s brother, Neil, who is now running a company called Iconix. The business model of Iconix is that it buys fashion brands — but just the brand, not the company. Through a licensing arrangement, it sells others the right to actually design and manufacture the apparel, in exchange for a “guaranteed royalty of 4% to 10%.” (I’m assuming that’s a percent of gross, not net, but if the article says for certain, I missed it.)

I was interested to see that its most recent deal is with Wal-Mart, which will be “the exclusive U.S. licensee of the surfwear pioneer Op brand.” I used to wear Op when I was in junior high or so, and about two years ago I think I noticed that a boutique I like in Manhattan, Gerry’s (which tends to stock brands like Ted Baker and Modern Amusement), was carrying Op stuff, which I hadn’t seen in many years. I remember chatting with clerk about it, and he claimed it was selling well. Since then I’ve seen some Op ads in some hipster lifestyle magazines, and even briefly considered doing a Consumed on it, but never did.

Other Iconix brands include Joe Boxer and Mossimo (which I gather are exclusively sold in Sears/K Mart and Target, respectively), and, I was surprised to learn, Roca Wear.

The article spends more time on Cole’s up and down career than on details of this business, but supposedly it’s doing well. (Although some of the downs in his career kind of give me pause.)

What’s interesting about licensing businesses in general is that despite the assorted chatter about brand-skeptical consumers, licensing can be very lucrative precisely because of brands’ power to transform commodities. It’s particularly interesting when it happens with brands that have fallen on hard times, but are still familiar. With the right cost structure and the right marketing, they can build on that familiarity. (This is the subject of an article I’m working on now, actually, so more on that in the future.)

Op will be an interesting one to watch, and I wish I knew more of the back story. Was it totally dead for a while? Who was behind the Op stuff that was popping up in Gerry’s, of all places? From whom did Iconix acquire the marks, and when? Who will be doing the designs? Lots of people will recognize the brand when they see it, but younger people probably won’t. Who will the consumer be? Etc. Like I said, should be an interesting one to watch.

UPDATE: An incoming link leads me back to this bit on an interesting blog called Legal Fixation: “Although there are numerous OP and OCEAN PACIFIC trademark registrations, the assignment history of this OCEAN PACIFIC registration gives some good clues as to the transactions.”