Piracy In Merchandising In India
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Piracy in Merchandising in India

Piracy in Merchandising in India

Piracy is a downright menace and thorough nuisance, in all forms it assumes; be it in the high waters or in product merchandising! As if piracy in the high seas were not enough to give commercial liners sleepless nights, the piracy industry among products and merchandise has given many a licensed manufacturer, woe and heartache!

* Worldwide the value of counterfeits in relation to total turnover:

·      Computer software 35%

·      Audio-video 25%

·      Textiles and clothing 22%

·      Toys 12%

·      Perfumes 10%

·      Pharmaceuticals 6%

·      Watches 5%

*Source: Michele Forzley, JD, MPH, “Counterfeit Goods and the Public's Health and Safety”, International Intellectual Property Institute

Gone are the days when a simple product was wholesome for use and was what you intended it to be. These days with spurious products doing the round in every facet of sales, one has to examine every product closely to determine its authenticity, and sometimes a close observation may not be enough!

  

Casualties from contraband and unethical practices are estimated to be $200 billion per year, and growing at a very fast pace. We are hopeful that sustained and coordinated efforts can bring down piracy to manageable levels, single digit figure, considering the recent initiatives and efforts taken by the Indian Governing bodies. Considering that merchandise exports account for about 15 percent of India’s gross domestic product, which may be far less than China it still is a significant driver for Asia’s third-biggest economy.

To understand more on how piracy has become a scourge to the industry it is imperative to understand India’s growth statistics. According to the World Bank's Human Development Report it is believed that approximately 20 to 22 per cent of India's population owns 47 per cent of the income. This translates to the fact that there are more than 250 million middle class consumers with purchasing power. So when we consider the fact that 32 per cent of the population is below the age of 15, there is a massive potential for growth in the licensing business.

Imagine! 50 – 55 million homes expending over Rs. 50 a month on branded products that translates into merchandising grosses of Rs. 30 – 35 billion a year!

The Indian retail market is tremendously large, approximately about US$ 350 billion. However, what is of interest here, is the growth prospects that organized retail throws up! Estimated to be only US$ 15 billion there is massive opportunity in this space and by 2010 it is expected that organized retail will grow up to US$ 22 billion. Looking at the massive growth of organized retailing which can reach 40 per cent over the next few years, Indian merchandising is distinctly slated to overwhelm.

Licensing or merchandising?  Flip the coin!

To bring piracy in merchandising under control it is necessary to understand that licensing and merchandising are two sides of the same coin. In a way they co-contribute to the progress or growth of each other. There is a definite pattern that emerges between licensing and merchandising, albeit not clearly defined.

Licensing calls for finding the right medium to initiate or introduce the product into the market. Merchandising, on the other side, is the task of the retailer or the retail merchant to decide on how he would like to envision his product while keeping the international brand or image of the product intact. Taking into account the burgeoning number of licensed merchandise in the organized retail segment of the country, it is being estimated that licensing in India is slated to be worth USD 550 million in the coming five years.

The sum of $550 million worth of licensing is still a tiny figure as compared to the well established markets in the West; nevertheless one must take into account India’s growing potential in the world of licensing. With malls mushrooming around the corner, one is privy to a whole slew of licensed products all around us. These merchandise range from steady product categories like toys, wearing apparel, school and food products to unusual product categories such as tailor-made vacations and even wall paints.

Over the last few years, we have seen a dramatic change in the Indian licensing industry. India, once a closed market, today, has transformed into a global arena; replete with a foray of international and strong local brands to choose from. Licensing in India today is no longer confined to character licensing. Even though small, we are witnessing the slow yet steady rise of various other kinds of licensing in India, ranging from, sports licensing, art licensing and brand licensing and much more.

What exactly does licensing hold for India, and how much can we stand to benefit from it? Huge, I may say! The potential for India to be profited from the licensing industry is way beyond one’s imagination. Given the growth and rise of advanced and organized retail in India, it is estimated that the  the pace is set  for new cooperation grounds between International Licensing organizations and Indian business houses.

We are seeing a whole new spurt of licensed merchandise from licensing of brands or trademarks, designs, personas and references (from animated cartoons, motion pictures, etc.), celebrity names and images, events, etc. One can almost see a boom in the growth of licensing as its popularity reaches higher levels in India. Licensing used on various merchandise such as jewelry (pendants, etc), apparel, lifestyle supplements and add-ons, toys, gifts, games etc. has brought forth huge potentialities for Indian brands, businesses, distributors, retail merchants, specialists and architects, attorneys, financial consultants and licensing agents.

Of special mention is the growth that we are witnessing in the character and entertainment licensing industry. This particular domain has experienced intensely enormous activity in the last five to six years. Children's entertainment market is gaining momentum at a steady rate and pace and apart from television and silver screen; children’s broadcasters are now focusing their attention to the lucrative licensing and merchandising space.  

Licensing is one of the best developed marketing tools when it comes to appealing to kids. Through research, kids inform us that before they enquire about a particular product, they are eager to know of the product has been developed particularly for their entertainment and leisure. Almost every company that targets children has realized that the best way to inform children that there is a product or service available to them is to link it to a recognizable character. Take for example, even at the age of three/four, children are well aware that a picture of ‘Doreamon’ on any children’s merchandise is meant for their use and urge parents to buy it.

Add to it, the recently concluded IPL (Indian Premier League), which was yet another pointer lauding the arrival and success of sports licensing in India. Licensing in sports developed into a flourishing multibillion dollar industry in India and around the world under the BCCI backed India Premiere League (IPL) in cricket.

Bold and Brave Steps

And in my opinion, entertainment in its broadest sense has become a necessity rather than a luxury in life... Walt Disney

While on an international scenario, merchandising for children movies is a hot property, in India, it's still in its emerging stage. For example if in Hollywood, Spiderman goods and toys lent to approximately 40% of the total revenues of the movie, In India, the merchandise provided only 2%-3% to the total receipts. In more ways than one, merchandising in India is still seen as a marketing tool than a revenue earner. The movie becomes an advertising tool for merchandising. There is a need to look beyond only one aspect!

At Kids Animation India we are of the opinion that the reason why organizations turn to licenses is to bring down their risk when attracting children’s attention. Hence, when it comes to selecting a license, it is a proven fact that most fast-growing, well-versed businesses will opt for an established, hot license property to be linked to. This is the way to go! Animators with established hot licenses usually find their way around kids recall value, the greatest.

We believe in bringing the whole gamut to children’s entertainment, not satisfied with having just merchandise, new age business cues call for a wide variety of options to be delivered. Which is why, we at Kids Animation India have a fantastic integrated model; a holistic 360 degree model! Through our integrations of Kids TV channel (Spacetoon), Merchandising for Kids, Publishing (Fafa & Juno), Toys, Licensing, Events, IP division etc. we believe we have arrived at the scene with a whole spectrum of business models for children by escalating our use of merchandising and marketing to children.

 

At Kids Media India / SpaceTooon we believe that one of the important functions of the licensing division is to patrol our licensors to make sure that there is uniformity amidst all of the varied projects that go out, be it in the form of our publishing division or the creation of our characters. We realize that kids crave authenticity and are highly perceptive of change in quality. Take for example; our “Doreamon” merchandise. Children observe when Doreamon does not look right in the story book and express their discontent or question about the changes they see.

Hence it is extremely important to preserve the fantasy of our characters in being real. When they begin to seem otherwise, it breaches their fantasy. It breaks their thought process and their reality; the fantasy that they actually believe in their beloved characters. And I am of the opinion that most licensers believe the same. This is what we believe to be a major role of our company’s licensing division. Evidently, though, a character-merchandise can only look so much like a 2D animated character, we do the best we can! We supply our licensing division with intrinsic and detailed-to-the-core style guides!

Take another example - our style guides on the ‘Fafa and Juno’ series. It consists of practically everything; from how to depict the characters, the storylines, to how the characters act or conduct themselves, and the logos etc. It is wholly and completely comprehensive and yet we guard it. When a licensee sends us an example of a product, such as a school bag, they are compelled to present a prototype to us, for our appraisal and commendation. Even through style guides are given to licensees, we ensure to the very last detail that they conform to our requirements.

Why look at merchandising for children? Because it’s the next big thing! In fact the influence children play on their parent’s decision and buying power is so immense that research indicates 20% to 80% of purchases in most categories are done due to children’s recommendations. Studies reveal that children have been extremely influential in the purchase of 20% of all cars made by families with children. And the percentage of influence goes way up when there is a product designed especially for them and they know about it!

Understanding piracy in India

It is imperative to understand why piracy is so rampant in the sub-continent! The tendency to procure cheaper products seems to be something unique and specific to Indian consumers. While economies of piracy seem to be justified in any society, this particular phenomenon is without doubt more predominant in evolving countries such as India. The apparent reason for this is that India is not yet a developed country. India’s GDP per capita does not rank in the top five or 10 or either in the top 50; and is lower than even most of the developed Asian countries.

Approximately 36% of India’s populations live below the poverty line. Furthermore, most of the copyright products and licensed merchandise are looked upon as an indulgence rather than a necessity. As might be expected 'affordability' acts as the primary restraint in the purchasing decision. Which brings us to the point, that fake and counterfeit merchandise tend to become far cheaper than the originals thus making pirated products an evident choice for most of the consumers. An additional conducive factor in this circumstance is possibly the buyer’s mental positioning towards branding and quality. Quality consciousness among Indian consumers has yet to come to international standards. Therefore, Indian consumers do not hesitate in purchasing inexpensive products even if they are of rock-bottom quality. This causes the pirates to focus on churning out only on quantity and not on character. 

Another important aspect to look into is the slackness of the country's copyright enforcement machinery that draws in unscrupulous people to piracy. Copyright piracy is a cognizable offence according to the Copyright Act. But as in the case many similar laws, anti-piracy enforcement of law lacks the edge and the punch in being proactive. One hardly hears of people being caught and punished in India, when found involved in piracy.

The remissness in law implementation is the result of laxity on the part of the enforcement system, namely the local authorities on one hand and the supine mannerisms on the part of right-holders on the other.

One cannot expect the law enforcers and the local state authorities to go after pirates and counterfeit manufacturers, as it is not their priority and there are far more pressing matters at hand. A credible understanding for this, as indicated by the Departments of Police, is the greater participation and interest of the law enforcement force in more exacting areas such as curbing murders, debaucheries and terrorist activities etc. Moreover the intensity of the force and the enforcement facilities and capital equipment needed for controlling piracy are also not adequate to undertake effectively the troubles of India's size and tapestry.

Naturally, low-lying criminal offences such as copyright piracy do not receive the requisite attention from the law enforcers. Perhaps another issue might be the lack of acquaintance among the law enforcing personnel with India’s copyright laws and inaptitude of the personnel to differentiate an illegal product from the original.

This could be the rational explanation for India not coming forth as an incorporated and structured arena of commercial activity, of global repute. The markets in India continue to stay divided; giving adequate range to the unprincipled suppliers/sellers to illegally control the conditions in their favor, which in turns provides for an ideal surrounding for piracy to multiply. Most pirated goods makers are seen to function at local levels and cause disruptions in the local demand supply gaps in a number of rural and town markets in India. These markets have strong concentrations of pirates who sweep into action due to the lack of cooperative campaigns from legitimate manufacturers.

The recent endeavors of the Indian government in planning to spruce up the existing legislative instrument to give more teeth to anti-piracy laws and take necessary steps to control piracy is worth mentioning. We believe that without governmental intervention, banishing piracy will be almost impossible. In India, the Intellectual Property Rights (IPR) is covered under Copyright Law, misdemeanor and encroachment of which forces both fine and imprisonment on a compulsory basis.

Ending the menace

There are many examples India can learn from countries that have ventured successfully into the path of licensing evolution. Establishments and institutions that control and innovate across different facets are the ones that will come forth emerge as victors. Hence the confrontation that India has to face in moving forward is to rein in the contextual acquisitions of the West and to truly embrace true licensing or Licensology, which is a body of knowledge that deals with all aspects of licensing - making it one of the most energizing and stimulating business models and merchandising tools in the country.

Because infringers rarely come together for the betterment of mankind, brands must do so. As an organized player, KAI has been proactive in instructing Indian consumers to look at character merchandise beyond the basic means of entertainment, but rather as an effective tool that can help better the child’s ability to comprehend and in understanding the world around him better. As a proactive measure we believe that the need of the hour is to initiate developmental activities along with the numerous toy associations, pediatricians and small informal nursery groups to inform parents on how character and product merchandise can help the child to grow and develop more effectively.

Similarly organized players can also initiate promotional activities in combination through the launch of their new products and editions to ensure a larger slice of the market. Having said that a number of brands have actively initiated and favorably stalled the growth of piracy but there is indeed a long way to go especially in semi-urban and rural markets.

Some factors that can help to lower piracy include:

·      Vendor legalization efforts

·      Vendor agreements with original equipment manufacturer (OEM)

·      Addressing customers demand with appropriate supplies with appropriate pricing

·      Government-led education and escalated Enforcement with Dedicated Resources

·      Creating specialized intellectual property enforcement units at the national and local level and providing dedicated resources to investigate and prosecute intellectual property theft;

·      Increasing cross-border cooperation among police and other enforcement agencies to improve coordination for law enforcement in multiple countries

·      Supporting the training of law enforcement and judiciary officials (including establishment of specialized IP courts where appropriate) and providing better technical assistance to ensure that the people on the front lines of piracy enforcement are equipped with the tools they need to deal with the changing nature of intellectual property theft.

·      New distribution agreements

·      Public-private partnerships

·      Globalization

·      Implement the World Intellectual Property Organization (WIPO) Copyright Treaty

·      Create Strong and Workable Enforcement Mechanisms as Required the WTO’s Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) by adopting and implementing laws that meet international norms for IP rights protection.

·      Lead by Example

At the end of the day, a successful anti-counterfeiting elaborate and systematic plan of action is largely supported through the agglomerated engagement of similarly affected brands. Since this has yet to take place, widespread acceptance of anti-counterfeiting measures has yet to revolutionize the market. When a perceived retail outlet is seen selling fake goods of several brands together, it is understood that the corresponding wholesaler and importers is also partaking in fakes. Ideally, in a single sweep getting rid of all the counterfeit stock from the outlet and warehouse can have far more important consequences and implications than just removing limited pieces of a single brand.

 

 

 

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