Everybody wants to land that big product line with multiple SKUs, but it becomes increasingly difficult as the decision making process for licensees grows to be ever more complex and drawn out. We find ourselves in discussions with our licensees about things like NOS, MOQ, QPB, EDD, and so on long before the decision has been made to go ahead with a product line – but then that’s the way of the world nowadays.
I know…say what?
This is part of the new language that retail-based decision making is forcing art licensors to learn, or at the very least to understand. Manufacturers are leaning toward piecing together collections slowly rather than making a big splash with large SKU count introductions. They will start with one or two categories – maybe a dozen ornaments and/or a handful of plaques – and will wait to see how that goes before expanding the line to include more products. Caution is the word of the day, and retailers are not buying into multiple categories until they know a property has traction in the market, so we are left with a kind of Catch-22 situation where nobody wants to be left holding the bag, or in this case the pallet of excess stock.
A short primer of a few terms that can make or break your deal:
SKU – stock keeping unit
MOQ – minimum order quantity
QPB – quantity price breaks
NOS – number of stores
UC / UP – unit cost / unit price
EDD – expected delivery date
QA / QC – quality assurance / quality control
FOB – free on board or freight on board (shipping)
JIT – just in time (delivery)
PDS – product delivery schedule (sometimes product design spec)
Why do you care? Let’s say your licensee misses the first JIT date, so NOS reduces 50%. Now they haven’t sold their MOQ, they lose some QPB and the UC goes through the roof – but they can’t raise the UP and the retailer is holding them to the EDD on the PDS. QC goes out the window and now 10% of them are NFG (you figure that one out…) so the retailer clearances them out immediately and then – OMG happened to your brand?