You often hear about collaborations in the fashion industry. We have previously discussed collaborations going wrong (see our article here in relation to Adidas and Kanye West). However, what about when collaborations go right?
We explore what fashion brands should do when seeking collaborations.
Benefits of collaborations
There can be many benefits for fashion brands for participating in collaborations. As an example, Crocs has a specific webpage entitled ‘Crocs Collaborations’ which includes Levi’s, Disney Pixar Cars, and Justin Bieber. The obvious benefit of such collaborations is the additional social media following and the ability to potentially reach new customers. Crocs has around 2.6 million followers on Instagram, whilst Justin Bieber has around 294 million followers. If Justin Bieber thinks Crocs are cool, then many of his social media followers may follow suit. In fact, both ‘drops’ of the collaboration with Justin Bieber are marked on that Crocs webpage as sold out. Similarly, collaborations allow brands to release limited edition products (e.g. Crocs’ collaboration with the band KISS), which may lead to rushes by consumers to purchase the products.
Therefore, collaborations can expose a product to new customers and markets and may attract more attention.
What should you do when seeking a collaboration?
The first step is for the brand to talk with the potential collaborator and conduct due diligence to try to determine the expected benefits (and any negatives) of a potential collaboration. This may include:
- How do the parties see the collaboration working and progressing and what is the strategy?
- What are the benefits for each party of the collaboration (e.g. would it lead to a new product and does the collaboration make sense)?
- How much is the collaboration going to cost and how much profit is projected and over what period?
- What will be the duration of the collaboration?
- What audience and reach does the collaborator have?
- What is the collaboration’s target consumer demographic?
- Do the parties have shared or different values, particularly in respect of ESG issues?
- What public image does the potential collaborator have (e.g. on social media)?
- Has the collaborator been involved in other collaborations and how did they work out?
- What happens if the collaboration does not work out?
If the brand decides to move towards a collaboration, then it is essential that it puts in place a strong, written collaboration agreement setting out how the collaboration will work. This will usually include contractual provisions addressing the following:
- Parties – Who the brand is contracting with (e.g. a company or an individual) and each of the parties’ roles, responsibilities and commitments.
- Products – What are the collaboration products, how many are going to be made, where and how will the products be made, how many drops will there be, what happens to unsold products, and how else the collaboration will work.
- Promotion – How will the collaboration be promoted by both the brand and the collaborator in terms of actions and financial expenditure.
- Branding – Clarification on the branding that will be used will be needed. For example, whether a sub-brand is needed and is going to be created.
- IP Ownership – Who will own the intellectual property (IP) rights, who will apply to register the IP rights if any (including for the brand name), and whether any licences are needed for IP.
- IP Infringement – How will IP infringement issues be addressed, who will take the lead in dealing with the infringement and on what terms. What is to be the position if IP infringement is claimed against one of the parties to the collaboration?
- Negative publicity – What constitutes negative publicity for each of the brand and the collaborator and what is to happen if there should be such negative publicity.
- Territories – What is to be the geographical reach of the collaboration?
- Payment – What will be paid, how payment will be made (lump sum, royalties and in what currency), when payment will be made (e.g. in advance or at certain milestones), when payment does not have to be made, and who pays expenses (e.g. travel costs).
- Warranties – Contractual promises including that the parties can enter into the agreement, the products will not infringe a third party’s IP, and neither party will damage the other’s reputation.
- Competition – is the brand concerned about the collaborator collaborating with a competitor of the brand after the collaboration with the brand has ended?
- Term and Termination – How long will the collaboration be for, when and on what grounds can the collaboration agreement be terminated, and what happens once the collaboration ends or is terminated.
- Law – which country’s laws will govern the collaboration agreement and which country’s courts will determine disputes.
Final thoughts
Collaborations have risks but can be of great benefit to fashion brands. Effective due diligence and a strong collaboration agreement will help to address potential issues.
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