A version of this story first appeared in the April 11 issue of The Hollywood Reporter magazine.
Kids who can’t get enough of SpongeBob or Dora the Explorer can now visit the Nickelodeon Store … in Panama.
Entertainment conglomerate Viacom’s Viacom International Media Networks unit celebrated the opening of the first Nickelodeon retail store in the Latin American country’s capital of Panama City in November, with a second one set to follow in Riyadh, Saudi Arabia in late April.
They are the first in a series of planned Nick store launches in emerging markets, including a second Panama store set to open in June, a venue in Jeddah, Saudi Arabia set to open in September and one in Moscow in 2015.
Taking popular content and characters into international markets and to new platforms and venues has been a growth area for Hollywood giants on the hunt for new revenue sources amid a mature core market in the U.S.
And Viacom International Media Networks sees the move into the branded stores business, something Walt Disney has done with its Disney Stores since 1987, as a key growth opportunity.
Viacom is making a small start with a focus on international markets though and expectations to grow the Nickelodeon store base over the coming years.
Viacom’s approach differs from Disney’s business model though. For example, there are currently no plans for standalone Nick stores in the U.S. There are around 200 Disney Store locations in North America, around 40 in Japan and around 100 in Europe, according to the company’s web site.
Viacom’s international networks arm is also taking a different approach in other areas. Instead of operating stores itself, the company has teamed with Orlando-based retail expert Summit Resources International, which controls the stores and has a local partner operating them. Nick gets paid via a licensing deal that gives it a royalty percentage of sales. Financial details aren’t disclosed.
Nickelodeon has final creative approval on all products offered in the stores.
Nick sees the stores as additive to its consumer products offers on shelves of retail chains that have long partnered with the firm.
“Our success at retail with licensed products has been great,” explains Ron Johnson, executive vp of consumer products at VIMN. “The next logical step are Nickelodeon branded stores, which let fans really live the Nick lifestyle. We see stores as a growth vehicle and an opportunity to grow the brand in underserved markets.”
Nickelodeon is “an incredibly widely recognized global brand,” reaching around 500 million households in more than 130 territories via more than 70 local channels or branded programming blocks, he said.
Compared with some competitors, the Nickelodeon Store positioning emphasizes “kids first, but not kids only,” Johnson explained. “We have a more than 30 year-old brand, so there are a lot of young parents who grew up with Nick, which gives us broad appeal for the whole family.”
In line with that, the products available in stores are for kids and adults of all ages and cover such categories as apparel, accessories, gift and novelty items, home and tableware products and toys.
Why Panama first? “Panama has a real appetite for our brand, and SRI knows the market well,” said Johnson.
Global retail chains, including Macy’s and Zara, have also used Panama as a test market for new concepts.
“Panama has a diverse customer base. It’s very international, so you can test new things,” said Ruth Crowley, executive vp of business development at Summit Resources. “Our Nick store is in one of the best malls and one of the best locations there. And in retail, one thing is always key: location, location, location.”
As for Russia and the Mideast, Crowley said: “In Russia, the Nick properties are hugely popular. And there is nothing like this in the Middle East. We will be in brand new designer malls there.”
Asked about competition with Disney and other stores, Johnson said: “When you think about retail, your competition is really everybody else in retail. You fight for foot traffic. So, we are going to create products that balance price and quality and ensure the Nick experience.”
Added Crowley: “Disney is very different to me. It is about princesses and heroes. Nick is about all these characters that have cross-age appeal and are family oriented.”
Johnson said Nick consumer products will remain in other retail stores though. “The branded stores are about a brand experience. Other retailers provide more of an item experience,” he explained. “The bulk of our consumer products business will still be with traditional retailers. But the product lines will be differentiated, and a store is great halo brand marketing for us for different markets.”
“Extending the Nick brand and its characters to a retail store absolutely makes sense, especially internationally, because overseas is a big growth objective for the company” and all Hollywood giants, said Janney Montgomery Scott analyst Tony Wible, describing it as a high-margin business opportunity. “People will appreciate that they are looking to monetize their brands outside their primary vehicle of TV.”
If all goes well, the stores business could reach critical financial mass in a few years. “Viacom is focused on international growth, and within international consumer products are a key focus,” explained Johnson. “So, the stores strategically fit. They won’t contribute a material dollar amount for a few years, but the first store in Panama has been doing incredibly well and exceeded expectations. We even see an opportunity to do this kind of thing for other brands, such as MTV.”