This week Judge Jeffery Oing made some key rulings in the contract dispute initiated by Macys Inc against Martha Steward Living Omnimedia and J.C. Penney Co. Inc. The judge decided MSLO and JCP did not violate any confidentiality terms when they entered into a partnership. The design exclusivity claim remains to be settled, and is highly anticipated by the industry for any implications to existing/future agreements between suppliers and retailers.
It is common for large retailers to negotiate for exclusivity with brands, as they look to achieve higher market share and assortment dominance with consumers. More common is to have a portion of a product range exclusive or a diffusion line created. The design exclusivity claim from Macy's is suggesting that MSLO cannot design for another retailer, even under a different trademark (in this case, "JCP everyday" trademark).
Designing multiple lines and product ranges for a variety of retailers is a key method by which many brands/suppliers are able to sustain growth. Aldo's Products Service unit, which is the wholesale division of the global shoe retailer, is expected to double its business within two years, from $110 million in 2012. They do work for Nordstrom, Hudson's Bay, Macy's, JCP and Coles. We've also worked with apparel suppliers who contract similar designs to retailers under different brands, helping the supplier to achieve efficiencies in production.
This court case is highlighting two growing aspects of the supply chain:
- suppliers chasing big business deals, adjusting (or not) product & design ranges to suit their retailers requests
- retailers chasing the same big brands, so the customer affinity for a retailer relies less on product offering
This case has already had a significant impact on JC Penney's business, as shop-in-shop builds were halted, and product sits in warehouses awaiting a green-light to sell. Final words from the judge emphasizing the potential impact of his ruling:
This is a business deal that you should not have the courts involved in. Once I start doing certain things, you cannot turn back. I cannot express that enough. There’s a lot at stake.