This article was originally written for and featured in Franchise Focus.
Reports from the High Street continue to disappoint with persisting concerns about drops in footfall and consequential drops in retail sales.
But is this all a result of consumers having less to spend and low consumer confidence? Or is it also the issue of where and how consumers are spending the money that they do have? More and more bricks and mortar stores are facing the competition from online sales, for example, the demise of HMV (one of more high profile administrations of recent times) was at least in part a result of the growth in online downloads of music and movies. In the last five years, consumers have become far more confident about buying online and this trend is only likely to continue. How will this impact on franchise stores?
The online trend is unlikely to signal the end of physical retail outlets, all indications are that brands and retailers are reacting by streamlining their store portfolios. The rent bill will always be a substantial expense for a business, particularly impacted by the previous trend of upwards only rent reviews.
Therefore, businesses are taking opportunities that present themselves to off load premises that are no longer profitable. Also, particularly for foreign markets, more and more retailers are looking at franchising rather than extending themselves.
Another way in which brands can strike back is to focus on the retail experience being offered to the customer. In addition to seeking to combine online technology with physical sales brands are also looking at the presentation of their retail space, as a way of maximising their appeal and differentiating themselves from their competitors. Recent high profile flagship launches include Burberry’s Regent Street store, the presentation of which mirrors its website
Is it possible for a retail space to take on additional meaning to consumers such that on its own it can communicate the brand’s identity, separate to the brand name and/or logo? Apple certainly thinks so.
On 22 January of this year, the US Patent and Trade Mark Office approved Apple’s application for the layout of its retail stores to be registered as a trade mark. The application had not been without its difficulties. Initially, the USPTO objected to the application, doubting that it was distinctive. Not put off, Apple persisted submitting evidence of its use and how it had acquired distinctiveness. Its perseverance paid off and the mark proceeded to registration in the US
At present, it does not appear that Apple has filed for similar protection in the UK or EU. However, in principle there is no reason for it not to. European trade mark law provides that any sign that is capable of being represented graphically that distinguishes the goods or services of one company from another can be registered as a trade mark. The UK and EU Registries still retain a level of scepticism towards more exotic trade marks and would be highly likely to follow a similar approach to the USPTO in making any applicant demonstrate through evidence that it has become a badge of origin of that particular brand. Recent cases of exotic trade marks being approved include Cadbury obtaining a UK trade mark for purple in relation to milk chocolate bars and Nestle obtaining a Community trade mark registration for the shape of 4 bar packs of Kit Kats.
A trade mark is a powerful intellectual property right. It is not limited in time like patents or designs, potentially being valid for as long as a brand continues to renew and make use of it, and it does not rely upon an infringer being shown to have “copied” the trade mark, there is no requirement of intent to infringe. Also, under UK and EU law where the owner can show the mark has a reputation in the UK and/or the EU then rather than focussing on consumer confusion an action for unfair advantage can succeed where the consumer forms a link between the trade mark and the alleged infringement.
Not every brand will be able to trade mark its retail space, or even want to, but two lessons to be learnt from Apple are first – its stores do stand out from the crowd and second – their set up is consistently reproduced around the world. Another example of this is McDonalds, there are some regional differences but the consumer always knows that they are in a McDonalds.
But will Apple be followed by others and what will determine whether it will be possible to follow such example? The first is necessarily concept driven and certain market sectors will be restricted by the products that they deal in, for example, clothing will always need dressing rooms. Equally, brands may not want to commit long term to a particular layout – it may end up looking tired and past its sell by date. However, what retailers and brands may wish to focus on is producing a concept for their flagship store and then rolling out a simplified version across their retail footprint.
Many brands are finding that their growth is currently coming from overseas markets, such as China and the Middle East and that for overseas markets it is preferable to enter into partnership with a franchisee rather than investing themselves in a new and unfamiliar territory. To the extent that the retail footprint at home and further afield includes franchised stores the agreement should pave the way for a consistent look and feel to stores.
It should be ensured that any franchise agreement, in addition to specifying the type of locations and minimum number of locations for stores should also give clear directions on the look and feel of that store, with photographs and pictorial representations. Also, it is necessary to provide for a situation if the concept of the retail space needs to change, imposing an obligation for the franchisee to do so and a time frame in which they should comply. You can, of course, expect that the franchisee will focus on which party will bear the costs of such a change, whether they are shared or if there is any level of contribution
What is apparent is that the way that consumers relate to brands and shop is changing and brands and retailers need to adapt in order to compete.