How to reinvent your business when sales go stale

What do you do when your hero product, on which you have built your business, suddenly stops selling? It sounds like a nightmare to anyone who has founded a start-up. But this is what happened to Fraser Smeaton and his business, MorphCostumes.

Smeaton co-founded MorphCostumes with his brother Ali and a friend in 2009, in Edinburgh. It began as a side hustle specialising in a particular kind of striking, head-to-toe party costume made of spandex, which they called the Morphsuit.

It took off to such an extent that Smeaton and his co-founders were able to quit their corporate jobs and go full-time on the business. It turned over £1m in its first year, primarily finding customers through Facebook.

Within a few years, it had become a business with a multimillion-pound turnover. They “locked up demand” early on, Smeaton explains, by trademarking the Morphsuit name and putting it on the back of the costumes, along with their website. This turned customers into walking billboards, he says.

He also admits they were greedy with their profit margins and "left gaps for competitors to come in and nibble on our wholesale business". They also hired too many people and the business got into financial difficulty.

They tried to hire their way out of the problem by bringing in more experienced people. “We hired in hope rather than with a plan,” says Smeaton. This did not work, he found out, “because great people need a strategy to work with”.

But then things started to go wrong and by 2014 it was clear the company was becoming a victim of its own success. “The demand waned, we were no longer novel,” recalls Smeaton.

How MorphCostumes turned around its business

Instead, Smeaton and his team had to overhaul their strategy to save the business. One of the key changes was to start selling direct to consumers on Amazon. Before they had primarily sold through retailers or wholesale through Amazon. They found there were advantages to selling on Amazon Marketplace, even if it meant rubbing shoulders with microsellers.

“We found we could capture extra margin, generating more cash for the business,” says Smeaton. It also gave them “control of the marketing levers” for things such as search engine optimisation, advertising and decisions over which product pictures worked best.

“It gave us a competitive advantage over wholesalers who are one step away from the data,” says Smeaton. “Everyone now in our business is close to the data, rather than just one team.”

More than 85 per cent of their sales are now through Amazon Marketplace.

They have also learnt to use the data to find the kind of costumes that customers really want. This doesn’t necessarily mean striking ones such as the original Morphsuit. The company now offers more than 1,200 core designs. It uses digital data to find the best iteration of “evergreen products” that are consistent sellers, as this is where long-term revenue lies.

The company has moved from putting a hero product front and centre towards a strategy that makes data analysis the real protagonist.

There are key lessons for other businesses here, thinks Smeaton. Never get complacent about a hero product, act decisively with a new strategy when trouble looms and don't be afraid both to change both your product lines and your route to market.