Diane von Furstenberg Lawsuit Reveals How Discount Retailers Get Current Season Finds

Ever wonder how discount retailers like TJ Maxx can offer discounts on authentic in-season designer products, long before typical seasonal sales start? Diane von Furstenberg‘s lawsuit against former distributor ID Beauty International sheds some light on one method that’s probably fairly typical.

ID Beauty’s license agreement required the company to consult DVF for any retail channel less prestigious than the high-end space, according to the complaint. Lawyers for DVF said such consultation never occurred before ID Beauty sold products in Canada and the U.S. to mass market retailers, including TJX Cos. (TJX), the owner of TJ Maxx and Marshalls, without honoring a six-month exclusivity period of sale to specialty and high-end retailers. {Bloomberg}

Love Diane perfume

There’s no love lost between Diane von Furstenberg and the former distributor of her Love Diane perfume

Outside of their domestic markets and established product lines, many brands rely on distributors to manufacture and sell things like fragrances, beauty lines and sometimes even secondary lines. As an example, Just Cavalli by Roberto Cavalli and McQ by Alexander McQueen have both, at one time or another, been designed, produced and sold completely independent of the main line, with the established label simply taking a percentage of sales as a licensing fee. You may be familiar with the recently launched beauty lines from Tom Ford and Dolce & Gabbana. If you missed the first press releases, it may come as a surprise to learn that production of those makeup lines is handled primarily by Estee Lauder and Procter & Gamble Prestige respectively. While all of the aforementioned companies may have a role in advertising and marketing materials, Tom Ford (the company) isn’t actually reaching out to the makeup counters at Sephora, Saks and Neiman Marcus for placement. That, product testing, formulas and many other things are responsibilities handled by the distributor. Outside of brands’ domestic markets, goods can creep back in to discount retailers in their own backyards if a distributor can’t move as much merchandise as they anticipated.

While Diane von Furstenberg likely turned the work of distributing her Love, Diane fragrance over to ID Beauty, it seems there was a contractual obligation for ID to follow a schedule similar to that of the brand when it came to working with discounters. Part of the company’s lawsuuit alleges that in not giving the fragrance a chance to sell at full price retail, the clothing and apparel brand was also damaged. It’s a very rare occurrence for all inventory to sell at full price, and brands realize that. Stores like TJ Maxx, Marshalls, sites like Gilt, Yoox and the Outnet wouldn’t exist if  that were the case; but timing is everything when it comes to moving that merchandise at any price necessary.

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