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Joint Venture Between Jennifer Lopez and DSW to Boost Sales of Shoes and Bags

By David Raymond P. Leys

Designer Brands Inc. (DSW), American footwear retailer of designer and name brand shoes and fashion accessories, announced its partnership with renowned Jennifer Lopez (JLO).

JLO will have her own line of footwear and bags with DSW. She will design shoes and bags that will be exclusively sold at DSW stores and website. JLO explained that she is attracted by the high-quality products and accessible pricing of DSW.

DSW aims at improving its profitability and increase its market share by boosting its online presence. Last year, the stocks of DWS decreased by 36%. This bad result was due to tariffs on footwear and massive promotions on shoe brands in the U.S. This joint venture enhances the chances of DSW to attract new customers who are unfamiliar with the brand, especially as JLO has more than 200 million followers on social media.

This partnership demonstrates how celebrities can reinvent their businesses beyond typical licensing deals.

DSW and JLO have not shared more information about the content of their agreement. We can assume that both parties took all precautions to avoid any litigation in the future.

First, the formation of a joint venture requires to determine the type of structure. It can either be a corporation, a limited liability company or a contractual relationship. Parties choose the type of structure according to tax treatment and goals of the business. In this case, it seems that the partnership is an ongoing process and not a one-shot deal. DSW and JLO may have formed a limited liability company so they are flexible regarding ownership, profit/loss distributions, voting, and management.

The joint venture between DSW and JLO allows the production and sale of shoes and bags under JLO's name/brand and with JLO's endorsement. It makes sense that they hold their ownership interests through another entity instead of personally. It is essential for the protection of the assets of both DSW and JLO.

Potential tension may exist between DSW and JLO about control. It is understandable that JLO wants to keep significant control over the protection of her name, image, and brand. She will be involved in design and marketing, whereas DSW will run most of the operations of the business, such as sourcing, manufacturing, selling, and distributing the products.

In addition, the parties must agree on additional corporate issues: if it is indeed an LLC, then the issues would include veto power, admission of new members, adoption of the budget, and material changes to accounting policies.

DSW and JLO must also deal with intellectual property issues, namely the celebrity's name and likeness, the brand name of the product line, the product designs and formulas, and social networking accounts and domain names. On the one hand, DSW and JLO will probably each license their intellectual property to the joint venture, for the use and benefit of the venture. On the other hand, JLO will most certainly license her name and likeness and the manufacturer may license an existing brand name. In this context, DSW will likely require that JLO refrains from marketing any competitive goods. This is essential for the goodwill associated with JLO's name. Both parties must identify industry specific details as early as possible to avoid misunderstandings. They must also determine what happens if the relationship ends.

To sum up, the joint venture between DSW and JLO seems to be a win-win situation. Nonetheless, this first impression needs to be supported by solid legal provisions ensuring a clear understanding of the roles and responsibilities of both parties. Any potential conflict must be spotted before they arise in practice. This will ensure the viability of the joint venture between DSW and JLO on the long-term.



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This page contains a single entry from the blog posted on February 17, 2020 10:12 AM.

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