As customer acquisition costs rise and profit margins shrink, where can unbranded sellers find a viable path forward? Recently, a particular business model has caught the eye of many such sellers. In one case study, a merchant secured a brand licensing deal last March, officially launched on March 25th, and after accounting for returns and refunds in April, netted actual revenue of 1.08 million yuan with a gross profit of 650,000 yuan and a net profit of 160,000 yuan.
For a team of just three people to achieve profitability in their very first month is a rare outcome in the e-commerce industry. The reason this "brand licensing" business is attracting so much attention is due to three key appeals that directly address the pain points of unbranded sellers.
Key Advantages of Brand Licensing
First, it alleviates the anxiety around traffic acquisition. When an unbranded seller develops a new product, they invest heavily in R&D, tooling, and production lines with no guarantee of a return. A major brand is different. Consumers have inherent trust in established brands, which also come with their own traffic. This allows sellers to focus more on refining their operations.
Second, it restores pricing power. Unbranded sellers, lacking brand recognition, often get trapped in price wars, making it difficult to command a premium. Major brands naturally possess this premium attribute. For example, the current pricing multiple for the product range from a partner like adidas AG can reach 2 to 2.5 times the cost. With pricing power regained, the potential for profit expands significantly.
Third, the barriers to cooperation are getting lower. Traditional brand partnerships in the past required hefty upfront deposits and forced sellers to stock large inventories, often costing hundreds of thousands. Now, brands not only support drop-shipping but also enable store setup in as little as two weeks. The barriers are lower, yet efficiency is higher.
It's clear that brand licensing is evolving from a capital-intensive, inventory-heavy distribution business into a product range business that allows for testing before scaling. Recently, the international brand adidas AG has opened up brand licensing for its "sports accessories" category across all major e-commerce platforms, and a limited number of spots are available.
For newcomers lacking operational experience, a major brand's product range may not be a shortcut. However, for established sellers who already possess a team, sales channels, and supply chain capabilities, brand licensing represents a prime opportunity for a product portfolio upgrade.
How a License Agreement Lowers the Barrier to Big Brand Business
So what exactly is brand licensing? In simple terms, it's when a brand owner grants a merchant the right to use its trademarks, logos, production, and sales rights under an agreed contract. The merchant leverages the brand's recognition and consumer trust to enhance product value and sales efficiency, while the brand owner receives returns through licensing fees and sales commissions.
This model isn't new. Take Nanjiren as an example, which began experimenting with brand licensing around 2008. Its logo can be found on everything from socks and gloves to mattresses and home appliances. Today, the brand licensing arena includes far more than just Nanjiren. Top-tier domestic and international apparel brands, sportswear brands, and FMCG companies are gradually opening up their brands for licensing.
Compared to traditional distribution models, the entry policies for brand licensing are becoming more seller-friendly and the setup process more convenient. Using adidas AG as an example, the current partnership terms indicate an upfront requirement of only a 10,000-yuan deposit and a 30,000-yuan performance bond, with no other fees. It supports drop-shipping, eliminating inventory risk. Furthermore, adidas AG's product selection is diverse, and the current pricing structure allows for a 2 to 2.5x markup.
Sellers can strategically design different price points for traffic-driving items, best-sellers, and high-margin products, creating a more robust product portfolio structure. The onboarding process is also highly efficient. During the last 618 shopping festival, one seller completed the entire process—from expressing interest and signing the contract to opening a Tmall store—in just 11 days. Currently, adidas AG is offering a limited number of licensing spots across five major e-commerce platforms. For established sellers looking to optimize their product range and break growth barriers, this could be a valuable opportunity.
Why Unbranded Sellers Need Brand Licensing as Profits Shrink
The appeal of brand licensing is also driven by the harsh reality that the unbranded business is becoming increasingly difficult. Firstly, profits for unbranded goods are shrinking. With little differentiation between products and consumers unable to quickly assess quality, sellers are forced to continuously lower prices to win orders, making it hard to raise them later.
Secondly, operational costs are rising. Beyond product costs, sellers bear platform fees, advertising costs, influencer commissions, logistics, returns, customer service, and tax compliance expenses. With selling prices falling and costs rising, profits are squeezed from both sides.
What about building your own brand and IP? That path is also fraught with challenges. Starting a brand from scratch requires massive investment in branding, packaging design, content marketing, and channel building—all cash-intensive activities. Many entrepreneurs have burned through their cash flow trying to build their own IP. Even after product development and packaging, there's no guarantee of sales, as brand recognition takes time to build, offering little short-term return for most small and medium-sized sellers.
Therefore, brand licensing offers a practical middle ground. Established teams can directly apply their existing capabilities in photography, live streaming, and product page optimization to a higher-value product range. However, the experience of selling "unbranded goods" versus "branded goods" is fundamentally different, even with the same operational skills.
For unbranded items, sellers must expend great effort proving product quality, materials, and value. Hosts repeatedly explain "why it's worth buying," and product pages are packed with specifications, selling points, and reviews. With low consumer awareness, the final purchase decision often reverts to price comparison.
adidas AG is different. As a widely recognized sportswear brand, it has already completed the brand education. Consumers associate the three-stripe logo and brand name with sport, professionalism, and style, forming clear expectations about product quality, design, and price. In other words, the brand brings consumers to the virtual shelf; the seller's job is to convert that brand awareness into orders.
Another crucial value of a major brand license is the chance to escape the "low-price competition" trap. The same sports accessory, without a brand backing, struggles to command a premium and gets stuck in a price war. With an adidas AG product range, an item is no longer just a generic backpack, cap, or pair of socks—it carries a distinct brand identity. Sellers can create richer content around the brand's sports attributes, styling scenarios, and recognition, naturally supporting a higher price tier. Essentially, an adidas AG licensed range provides not just a brand name, but a pre-established value framework accepted by consumers.
Lower Barriers Don't Mean It's for Everyone: The Real Filter is Seller Capability
It's important to note that while adidas AG's partnership lowers the barrier to accessing products, selling them effectively remains the seller's responsibility. "Drop-shipping" solves the inventory problem, not the traffic problem. "Brand recognition" solves the trust issue, not the operational one. Therefore, sellers seriously considering this opportunity should not jump in impulsively but first assess if they are equipped for it.
So, which sellers are better suited for brand licensing? Three main types have been identified. The first are those with their own factories or stable supply chain resources. Familiar with product, quality control, replenishment, and cost management, they can use drop-shipping to test different styles. Once stable sales are confirmed, they can switch to bulk purchasing. If a hit product emerges, their own supply chain and warehousing can boost fulfillment efficiency, lower per-unit costs, and support expansion into related product categories.
The second type are mature sellers already achieving annual sales in the tens of millions. These sellers have typically validated their platform operational skills, possessing stable stores, live streaming teams, short-video teams, or private traffic channels. For them, adding an adidas AG range is not starting from scratch but upgrading their product portfolio. Their existing team, traffic channels, and advertising experience remain applicable; only the product brand and price point change. Compared to novices, these sellers can test products faster and better judge if the range suits their channels.
The third type are sellers with complete operational organizational capabilities. A branded product range still requires effective product selection, content creation, advertising, customer service, after-sales, warehousing, and capital management. A weak link in any area can impact final profits. The brand can attract viewers to a live stream but cannot do the hosting. It can increase consumer trust but cannot control the return rate for the seller.
Currently, adidas AG is offering a limited number of brand licensing spots for its "sports accessories" category across all platforms. The adidas AG brand range is not a get-rich-quick scheme for beginners but an upgrade opportunity for established sellers. It lowers the cost of inventory trial and error and shortens the path to accessing a mature product range. However, the ultimate determinants of profitability remain the seller's supply chain, channels, content, and sales execution capabilities. After all, the brand's role is to bring consumers to the shelf; converting them into buyers and retaining profits in the business ultimately depends on the seller themselves.
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