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Sunday, September 22, 2019

Art Licensing Editorial: The U.S./China Trade War and its Impact on the U.S. Art Licensing Industry

This is NOT an optimistic article and the information in it is depressing. There are hundreds and hundreds of articles on the Internet that discuss what is anticipated and what is already happening to the U.S. economy due to the U.S./China Trade War. The purpose of this article is to inform artists that license art (licensors) on why the trade war and the increase of tariff is negatively impacting the U.S. manufacturers/wholesalers, retailers, consumers, and ultimately licensors in the Art Licensing Industry.

Note: The information in this post that is “quoted" from Internet articles have a symbol and a number placed after the "quote “ to notify you what article the quote came from. They can be found in the Resources section at the bottom of this post. Also, any red bracketed [text] are comments by me.

The term manufacturer that the U.S. uses in the art licensing industry is not really accurate because not all the companies that artists license their art to literally manufacture the products. Many companies hire other companies (mostly outside the U.S.) to manufacturer products according to their specifications.  A more accurate word is wholesaler instead of manufacturer and is used in this article.

U.S./China Trade War 
"The US and China are locked in a bitter trade battle. Over the past year, the world's two largest economies have imposed tariffs on billions of dollars worth of one another's goods. US President Donald Trump has long accused China of unfair trading practices and intellectual property theft.  In China, there is a perception that the US is trying to curb its rise. Negotiations are ongoing but have proven difficult. The two sides remain far apart on issues including how to roll back tariffs and enforce a deal. The uncertainty is hurting businesses and weighing on the global economy.” ❊1

A tariff is a tax or duty that the government places on a class of imported goods. Tariffs on exports are very rare. In theory, tariffs makes the foreign products more expensive and is meant to encourage or safeguard the domestic industry which does not have to pay the tax. The tariff is collected by customs officials and goes to the government.  

Tariffs in the U.S. are now placed on almost all imported products.  The increase in the May 10, 2019 tariff  “. . .  affects U.S.-bound goods that leave China after that time, not shipments in transit.  It affects more than 5,000 goods, including industrial chemicals, electronic circuit boards and a range of consumer products. Affected products include a variety of furniture, clothing, electronics, handbags, luggage, hardware, bicycles and bicycle helmets, shampoo, perfume, dishes, bed sheets, meat and cereal.” ❊2 

The ". . . list of items to be tariffed has come in four stages. The first two lists have 25% tariffs. The third list started at 10% [9/14/18] and escalated to 25% on May 10, 2019.  This is in addition to any existing duties your product may have. So for example, if your product has an existing 8% duty, the new rate would be 8% + 25% = 33%.  . . . List 4, not yet in place, will encompass all products not currently hit by List 1, List 2, or List 3” ❊3 But because there are so many articles about what the Trump Administration was and is  planning and what actually occurred, it is confusing in knowing what is correct and what is the amount of tariff each imported product is actually paying.  The ❊3 article seems to have the most up-to-date information and does have links to the tariff product lists.

Increase of Tariff Affecting Shipping
The raise in tariff has impacted the cost in shipping products and a delay in getting the products to wholesalers and retailers. Wholesalers and Retailers started purchasing an increase of products from China to avoid the tariffs increase in 9/14/18 and again with another tariff increase in 5/10/19. "Maersk’s data indicated China’s shipments to the U.S. had grown 5 to 10 percent in the third quarter [2018] compared to the prior year as retailers built up their inventories to avoid any new levies, Skou said, according to Reuters.” ❊4

The problem is that it “ . . . is leading to record volumes at the Port of Los Angeles [and other west coast ports]. As a result, containers are starting to stack up, potentially creating the same congestion headaches the port went through a year ago [2018] during the first round of tariffs.” ❊5   Also, the extra vessels waiting to offload containers and labor shortages are causing port berth congestion and delays.  Not only that but local warehouses are filling up or have filled up while waiting to send the products to buyers.  Thus, the containers will be stuck at the ports causing more congestion. Note: Port Congestion is the term commonly used to describe the situation where vessels have to queue up outside a port and are waiting for a spot so they can load or offload.  Ports have a limited amount of dockage and in most cases capacity does not match demand.

Cargo availability continues to be a leading problem as extra vessels and resultant labor shortages are causing berth congestion and delays.  Thus, once the products are removed from the container it is mostly sent back to China empty. "The fastest growing segment of container traffic at the port are so-called “empties,” containers that arrive full of imports but leave empty to go back to China to pick up more goods (it costs the shipper or the import/export company $250 per empty). The number of “empties” is up 21%.”  ❊5    

"Freight prices for containers going from China to the U.S. have surged 128 percent from a year ago as of the beginning of December [2018], according to data from Freightos, an online freight marketplace. The price of shipping a container from China to the United States has risen dramatically in the last year due to uncertainty surrounding trade tensions between Washington and Beijing. . . .  The U.S.-China tariff battle is even affecting the air cargo industry: Recently, the president and CEO of airport ground-handler and catering solutions provider SATS told CNBC his company has seen changes in routes due to the trade war.” ❊4 

It does not apply right now because of the extra products being shipped to the U.S. from China but for the future the trucking industry feels threatened by the U.S./China trade war. "Trucks are the main transportation for most foreign goods arriving at the large West Coast ports in Los Angeles, Long Beach and Oakland. Higher tariffs mean fewer ocean shipments, less port activity and the need for fewer drivers to haul that freight to distribution centers. . . . As the economy slows down, trucking is going to feel it because businesses hunker down and cut back on investment and production and lay off workers.” ❊6

Wholesalers (manufacturers) and Retailers
Many wholesalers and retailers have their products manufactured in China so the increase in tariff is costing them more to have their products manufactured. "Larger companies have more flexibility in placing orders before tariffs take effect, but placing large orders ahead of schedule is a financial burden many small firms can’t afford. Those that do are getting their products later than expected due to congestion at the ports, further straining small businesses’ bottom lines.” ❊7 When the tariff was increased to 10% in 2018 at least the large wholesale and retail companies were able to absorb the increased tariffs and not raise prices on their products.  But now that it is at 25% many will be forced to raise prices. Note: Already, stores that raised the price of high end products are losing customers. Information is from ❊8

It is interesting to read what plans and strategies some of the home goods chain stores are using in adapting to the raise in tariffs. For instance," Macy’s Inc is adopting a no-price-increase strategy for the rest of 2019, despite some risk". Target Corp. and Kohl’s Corp feel they are prepared to take on the increased tariffs but didn’t mention their strategies. Ross Stores Inc. is opting to first wait-and- see what their competitors are doing. Information is from ❊9

"While higher tariffs will affect businesses of all sizes, they are particularly onerous to small businesses . . . Small businesses are more vulnerable to a lot of the risk and uncertainty created by trade wars than are larger enterprises . . . They have much less leverage in shifting product sourcing to another country, for instance, or spacing out the timing of shipments in order to avoid when the tariffs hit.” ❊8  

Wholesalers and retailers that have China manufacture their products are delayed in receiving their products due to the congestion at ports. Some of the products do not arrive soon enough to be sold to consumers for different seasons and for holidays such as Easter, Halloween, Thanksgiving, and Christmas. Retailers that purchased the products from wholesalers are returning those products to the wholesalers. And wholesalers and retailers (purchased products from China) that did not arrive on time are most likely drastically reducing the prices to be sold to consumers through discount companies.

Even gift and home goods manufacturers in the U.S. may need to purchase essential parts for their products from China and other companies overseas to be able to manufacture their products.  For example, not enough or the right kind of fabrics for pillows and paper for greeting cards, decorative bags, and gift wrapping paper may be not be available in the U.S. and must be purchased from China.  Thus, these U.S. manufacturers are also impacted by the increase in tariffs and right now the ports congestion.

Note: Many of the Internet articles mention the loss of jobs due to the U.S./China Trade War.  But these articles were written in 2018 before the tariffs went into effect and are more predictions than what is actually happening.

Consumers
"Almost certainly. American retailers and manufacturers were largely able to absorb the 10% tariff – narrowing their profit margins – negotiate offsetting price cuts with Chinese suppliers, import a big stockpile of goods before the tariff took effect, and spread the added cost across many products. But a 25% duty is too much to camouflage with such tactics and a big chunk of it is expected to be passed to U.S. shoppers . . . 

The new 25% tariff, combined with earlier duties imposed on $50 billion in Chinese shipments and on steel and aluminum, would cut U.S. employment by 934,000 and cost the average family of four $767 a year, according to a study by the Trade Partnership. So far, the existing 10% tariff and the other duties have caused barely a ripple for the U.S. economy, trimming growth by an estimated tenth of a percentage point in 2019 if they stayed in place, according to Oxford Economics. But the boost in the tariffs to 25% would triple the impact to three-tenths of a percentage point if sustained, crimping an economy that was forecast to go about 2.2% this year.” ❊10

Art Licensing Industry (licensors)
As mentioned in the Wholesalers (manufacturers) and Retailers section, extreme congestion at the West coast ports is happening this year and causing delays of products being sent to U.S. wholesalers and retailers. Some of the produces are arriving so late that they are not in time to be sold prior to the seasons and holidays. The price on those products not arriving on time will probably be drastically reduced and sold to consumers through discount companies. Unfortunately if that happens, licensor royalty earnings on those products will be VERY low.  Hopefully the congestion at the ports next year will decrease immensely and wholesalers will receive the products on time so that consumers will purchase the products and licensors will earn larger royalties.

Note: Some product collections, for example home goods, may consist of different types of products.  For instance, a kitchen collection could consist of tabletop ceramic-ware, tea towels, and placemats.  Those products may be manufactured in China by different companies and shipped the U.S. at different times. Thus, some of the products in the collection could arrive in time to be sold. But, the other products in the collection may be delayed and very little sold if at all.

Of course, it is too soon to know how bad the rise of product prices will actually affect the U.S. economy and what the impact it will do to the art licensing industry.  Only time will tell!

Resources
The above post mentions quotes from the following articles. I recommend that you read these articles because they contain a lot of important information you should be aware of.








❊7 Tariffs hit consumer wallets” - see comments by Jordyn Dahl, Linked News Editor 9/6/19




Your comments are welcome. Click on the comments section (below) to write your comment. Note: Some people have a problem in leaving a comment. The most successful method is to comment as Name/URL (your name and website or blog with a "complete" URL address. For example: http://www.joanbeiriger.com/

Friday, January 25, 2019

Art Licensing Editorial: January 2019 Atlanta Gift Show Success and Trends

AmericasMart, the venue of the Atlanta International Gift & Home Furnishing Market trade show, has more than 1,400 permanent showrooms and the January 2019 show had 3,300 temporary booths exhibiting products. The AmericasMart article “AmericasMart Kicks Off Winter 2019 Trade Show Season With Energy and Optimism” stated that a strong holiday season and a positive outlook for 2019 drove significant buying at the show.  Comment: It did look like attendance was up from last year and reps were very busy writing orders.

Note:
 Last May, International Market Centers (IMC) acquired Atlanta AmericasMart according to the article "IMC, Atlanta-based AmericasMart to unite as world's largest showroom operator”.  The article states that “ . . . IMC will now have a significant furniture showroom foothold in the High Point, Las Vegas, and Atlanta markets, and will become the world’s largest owner and operator of showroom space. The combined entity will operate as International Market Centers, but AmericasMart will continue to brand itself as such in the Atlanta market.”  

The take over by a new company may impact the number of companies that are leasing showroom space at AmericasMart and those that rent
 temporary booths during the trade shows.  An exhibitor that had a temporary booth at the show told me that the price for a booth has increased and that there were no chairs in the booth this year. They were informed at the show that if they want chairs, they would have to pay extra.  On the other hand, there were improvements for buyers and those walking the show.  1. There were more chairs, benches and tables for buyers to use this year than previous years. Finding a place to sit to eat lunch, meet with other people, or just relax is always a problem at the Mart. 2. The AmericasMart app was upgraded. The Mart has a free WiFi and the app shows events, information about the companies and locations of the showrooms.  It now has an easy way to  find exhibitor showrooms and booths by using blue-dot navigation when using a device that accepts Wi-Fi (smart phone, tablet, computer). The location of a person is shown on a floor map and an arrow points to the showroom that the person requested. The arrow continues to change on the map as the person moves toward the showroom.  This is a very welcome improvement because some of the floors are so large that the showrooms are hard and sometimes impossible to find.

Positive retail sales is important for the future of artists to continue licensing art to manufacturers and earning good revenue.  I believe that knowledge-is-power and that is the reason why I keep track on the health of retail sales by reading articles about them and the predictions for the future.  According to the article “US retail sales rebound sharply in October” retail sales rose 4.6 percent. And, according to the eMarketer in the article “US Christmas sales predicted to surpass $1 trillion for the first time this year” . . . "marking it the strongest growth since 2011. This report comes amid concerns over the future of brick-and-mortar retailers, news of  bankruptcy and store closures.”  Comment: That means despite the concern by consumers and retailers that the U.S. might have a recession because of the economy sales of products in 2018 have increased.  And, according to economic analysis and business strategy expert Kimberly Amadero in the article “US Economic Outlook for 2019 and Beyond” the U.S. economic outlook is healthy according to the key economic indicators (gross domestic product growth rate, unemployment, inflation, etc.). Amadeo predicts that even though the economic outlook is healthy "2019 will experience subdued economic growth, although a recession is unlikely."

Note: Not all companies exhibiting at the Atlanta Show use art on their products.  When they do use art, they may not license it but purchase the art outright or use their own in-house designers.  Below are examples of trends seen at the 2019 Atlanta Show. These photos were taken in public areas of AmericasMart were filming is allowed without permission by the company. Brownlow Gift (www.brownlowgift.com), C and F Enterprises (www.cnfei.com), and Studio M (www.studio-m.com) photos are the only companies that license art.

TRENDS 
The following discussion about trends refers to those that relate to licensing art such as themes and colors.  Thus, trends in product texture, shapes, and kinds of materials used to produce the products are not considered in the discussion.

In the past Atlanta Gift shows, at least a few new trends were showcased in numerous showrooms each year. At last years shows, a slew of new trends such as vintage trucks/cars/bicycles, succulents/cactus, farm, llamas, and lake/camping were prevalent in many showrooms and on all kinds of products. But this year new trends were not apparent and gave the impression that there was nothing new. That was disappointing because buyers are always looking for new products for consumers!

Buyers and artists that I talked to agreed with me that they did not see any new themes at the show. Instead the same popular themes from the past shows were used and the art was refreshed to give them a new look.  Those that I talked to thought that the reason why there were no new themes is that manufacturers are concerned about the increased tariff in importing product that is raising the cost to produce products. Also the possibility of sales declining due to the apparent decline in economic growth could cause a recession.  Thus, manufacturers are apprehensive in trying to sell products with new themes that are untested because they may not sell well.  Those reasons may be correct or not, But, just using the same themes and refreshing them by changing the art and/or colors and not introduce new themes may eventually not be new enough to keep sales of products positive. 

Read Gifts and Decorative Accessories magazine trend spotters Alex Herring and Lenise Willis article “Trendspotting at AmericasMart 2019” to see a different viewpoint on trends. Discussed in the article are the following five gift trends they spotted at the show.  
1. The color sage for fall with a muted color combination used for pillows, table runners and other household products. 
2. Celestial craze/moons used for notebooks, socks, garland, and wall charms.
3. Terrazzo texture used for planters.
4. Botanical fronds, ferns, pressed leaves and exotic flowers used on many products.
5. Nursery gifts and décor that has minimalist designs and colors. 

Comment: The color sage has been slowly increasing in popularity for mostly fabric products. And, botanical exotic flowers and leaves are also increasing in popularity and seen at the show on many products. But the celestial trend can probably be considered a NEW TREND since it is now slowly appearing on other products even though it has been on wall art for years.  In fact, Studio M/Magnet Works known for its outdoor garden products has expanded into giftable products that are inspired by elements of nature. Their new line “Elements” created by artist Cherish Flieder is a celestial trend.  See the picture below.
  Also view Gifts and Decorative Accessories videos of interviews at the 2019 Atlanta show in the following showrooms: Studio M with co-owner Curt Todd, DEMDACO with artist Kelly Rae Roberts, CTW Home Collection, Amanda Blu, distributor One Coast that reps many companies, Ivystone, Ganz and Midwest-CBK.

• Color Trends

The Pantone Color Institute™ is a consulting service within Pantone that forecasts global color trends and chooses a color each year that symbolizes design trends and cultural mood.  "For 20 years, Pantone’s Color of the Year has influenced product development and purchasing decisions in multiple industries, including fashion, home furnishings, and industrial design, as well as product, packaging, and graphic design.” according to the article "2019 Pantone color of year”.  The use of Pantone colors for home furnishings is illustrated by the Pier 1 chain stores when they sent out a promotion about refreshing consumers homes with Pantone’s 2019 color of the year “Living Color”.  See the promo below.
Keep in mind that not all Pantone’s Color of the Year is a trend that will be seen on all products or used on all themes.  For instance, the 2018 Pantone Color of the Year “Ultra Violet" is not suitable for the coastal theme but this years Color of the year “Living Coral” is suitable.  However, Ultra Violet color is use on fabrics for fashion and home décor.  Thus, colors that are trending seem to depend upon the type of products and themes.
Packaging is one type of product that any color is suitable.  In the above photo, the rose color (Fuchsia Rose) at the top was Pantone’s 2001 Color of the Year and still going strong.  The combination of black, white, and yellow probably came from the popularity of the bumblebee theme that has been trending the last several years.  The popularity of the black & white check plaid that is popular in the farm theme was clearly trending last year and is even stronger this year and seen on a variety of themes including Christmas.

• Theme Trends
Themes that are consistently good sellers for products are considered to be evergreen (timeless).  They include flowers; birds; insects (butterflies, bees, ladybugs, dragonflies); coastal and nautical images (seashells, lighthouses, anchors); exotic flowers, palm trees, birds, and leaves (fronds, ferns, flamingos, parrots); dogs and cats; roosters; turkeys; pumpkins; fall leaves; Santa Claus; snowmen; reindeer; and poinsettias.  In current years, several other themes seem to be on the road to becoming evergreen; vintage bicycles and trucks, flamingos, and a variety of sayings on signs, plaques, and other products.

Last year there was a spurge of newer themes including camping with vintage campers, lakes, farm animals, llamas, succulents and cactus, red and black check plaid (buffalo plaid), white and black/gray check plaid (used mostly with the farm theme).

Increasing in popularity this year seems to be honeybees, flamingos with exotic leaves and flowers, white and black/gray check plaid used on all types of themes and products. A decrease in popularity in many of the showrooms seemed to be llamas, lake and coastal themes including mermaids.

Below are photos and comments on some of the theme trends seen at the Atlanta Show. 

- Sayings

Inspirational and faith sayings, that includes quotes (repeat words from a book, speech etc.), phrases (two or more meaningful words), idioms (not a predictable meaning), and quips (clever or witty comments) with or without art on the products are still VERY popular.  But, not all buyers think so.  I talked to one buyer who was looking for new products.  She said that she could only sell so many signs with sayings on them.  I am not sure if her comment meant that there were too many products with sayings on them or she could not find any sayings other than on sign products.  However, I saw all kinds of sayings on products at the Mart.  Sayings were not only on signs but also on journals, mugs, plates and serving trays, tea towels, pillows, and tote and gift bags, ornaments, clothing etc. Even though sayings on signs were still the most prevalent.

– Succulents/Cactus
Succulents and cactus products seem to be popular but not necessarily across the entire U.S.  Some exhibitors (manufacturers) at the show that I talked to said that the majority of their cliental are not in the southwest were succulents and cactus are growing so they are not producing products with them because they would not sell well.  Others said that they are selling well but those exhibitors were selling succulents/cactus figurines and not succulents/cactus art on products. Overall, I did not see that many exhibitors selling succulents and cactus except those exhibitors that were selling mainly outdoor products and those were figurines.

– Farm
Farm animals, barns, farm sayings, and white and black/gray check plaids are still very popular and on many types of products.  The white and black/gray check plaids that were mainly on farm theme products last year have now spread for use on other themes such as flowers, dogs, harvest, Halloween, thanksgiving and even Christmas.

– Christmas

Traditional colors of deep red and green is still popular for Christmas products.  No new Christmas themes were seen at the show and Santa’s, snowmen, reindeers, moose, polar bears, poinsettias, pine needles, pinecones, and Christmas sayings were predominate. Last year vintage trucks and the use of red and black buffalo plaid were seen on all Christmas themes.  This year there wasn’t as many.  In place of buffalo plaids on products in most showrooms were different kinds of white, red and green plaids and white black/gray check plaids.
Although the traditional Christmas look is very popular “some” manufacturers refreshed Santa’s and snowmen by dressing them in buffalo plaid and a few even in white black/gray check plaid.  Buyers seemed very interested in purchasing Christmas ornaments from elegant shapes and bright colors to plain round shaped ones that had sayings on them.

– LED lights
LED lights on products are not new but are still popular.  They are not only on Christmas but also on Halloween and everyday products.  They are used on wall décor, decorative flags, doormats, and more.  Also they are used to light glass vases and other glass products. Note: In looking at the art style on the paintings shown in the above photo, Oak Street Wholesale “may” license the art.  If you are interested in finding out if they do, you need to contact them at www.oakstreetwholesale.com.

RELATED ARTICLES
"Art Licensing Editorial: January 2018 Atlanta Gift Market Success & Trends”
http://joanbeiriger.blogspot.com/2018/01/art-licensing-editorial-january-2018.html

"Art Licensing Editorial - 2017 January Atlanta Gift & Home Furnishings Market Trends / Record-Breaking Attendance”
http://joanbeiriger.blogspot.com/2017/01/art-licensing-editorial-2017-january.html

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