National clothing retail chain shares Chapter 11 bankruptcy news
The retail chain sold a number of popular swim, beach, and surf clothing brands.
When a retailer sells a clothing brand under a license from its owner, it has a somewhat risky business. In theory, if it meets sales totals, pays its licensing fee, and meets any other contractual obligations, things will move forward as planned.
In reality, licensing adds cost to a business with already-low margins. That's why huge retailers including Target, Walmart, and Amazon all have private-label brands.
Related: Popular sports bar restaurant chain shuts down multiple locations
When you own the brand, you don't share royalties with another company. That gives the retailer more control and less risk.
Of course, most retail chains don't have the ability to build brand equity for private labels. This means they use one of two possible business models.
Some retailers like Kohl's or JCPenney, for example, have some owned-and-operated brands, but mostly sell clothes purchased wholesale from big-name brands. Whether its Nike or Polo, these chains simply buy the merchandise, pick which SKUs they want, and sell it (usually with an agreed-upon minimum markup).
