CHAPTER 10: International Development of the Fashion Business
Michael F. Colosi and Paul A. Friedman
Summary adapted from Chapter 10 of "Fashion Law: A Guide for Designers, Fashion Executives and Attorneys" edited by Guillermo C. Jimenez and Barbara Kolsun (Fairchild Books, 2010).
While fashion has become truly a global industry, with brands such as Levi's, Polo or Gucci sold in virtually every country in the world, international expansion can be quite challenging for the small to medium sized fashion company. As a result, most fashion companies choose to expand into foreign markets via a cooperative arrangement with an agent, distributor, franchisee or licensee.
The first issue that fashion companies should consider is whether in fact a particular line is suitable for international expansion. Next, they might consider the extent to which they would be willing to grant their foreign partner exclusivity. Foreign representatives and distributors frequently wish to obtain as broad a grant of exclusivity as possible (both in terms of territory and in terms of the right to market a particular product range). However, the fashion company may wish to utilize several different partners or licensees in a particular territory, so it should be careful to precisely delineate the scope of their respective exclusivities. One solution is to limit exclusivity to particular types of specialty stores and to certain departments in certain stores.
The fashion company should conduct proper due diligence on prospective foreign partners before entering into any agreements. A key question to ask is, how well has this partner done with comparable brands in the past? And, has the partner marketed this type of product before (marketing of luxury lines can be fundamentally different than marketing low-end lines)?
Trademark issues, which are always vital to a fashion company, become more complex in the international environment. Any company considering an eventual international expansion should ask itself whether its preferred trademark will work as well in foreign markets as in the domestic market. Foreign trademark counsel will have to be carefully selected to conduct research and file registrations. The Madrid Protocol, administered by the World Intellectual Property Organization, permits an "international application" for trademark which facilitates multiple trademark submissions.
Fashion executives should be familiar with the pro's and con's of each of the major types of international expansion structures: licensing, distributorship, agency/sales representation, franchise and joint venture. For example, licensing can be attractive when the licensee is highly-experienced and would be able to exploit a greater latitude to tailor products to local tastes and needs. Conversely, distributorship might be preferable when the fashion company wants to preserve maximum control over product.
A further issue to be considered in international operations, especially with regard to foreign manufacturing, is the risk of becoming implicated in sweatshop allegations. The risk of brand tarnishing due to such accusations has been evidenced in high-profile incidents involving such companies as The Gap, Nike and the Kathie Lee line at Wal-Mart.
Author details:
Michael F. Colosi
Senior VP, General Counsel and Corporate Secretary
Kenneth Cole Productions
New York, New York
Summary by: Guillermo C. Jimenez
