Could your brand rival Amazon?

There’s a tip in ven­ture cap­i­tal that if you’re in the same line of busi­ness as Ama­zon, get out. And if Ama­zon isn’t in your line of busi­ness, also get out. The sec­tor is irrel­e­vant. Nowhere is this truer than in retail. Ama­zon is a fero­cious beast, with 30 per cent of the UK’s entire ecom­merce mar­ket. And it just keeps expand­ing.

Mid-Novem­ber saw the unveil­ing of Ama­zon Phar­ma­cy, which will offer dis­counts of 80 per cent on gener­ic drugs and 40 per cent on brand­ed prod­ucts. The share prices of oth­er retail­ers plum­met­ed: Wal­greens, own­er of Boots, fell 10 per cent in a day.

Just a week ear­li­er, the Euro­pean Union informed Ama­zon of its pre­lim­i­nary view that it breached rules by using sales data to ben­e­fit its own-brand prod­ucts. It is alleged Ama­zon uses non-pub­lic data to find prof­itable lines and then enters them with its own prod­ucts. The legal­i­ty is dis­put­ed. The effec­tive­ness is not.

So what’s the solu­tion to retail­ing in the age of Ama­zon? The only answer is brand­ing. A hand­ful of bril­liant brands are prov­ing it is pos­si­ble to thrive. They enjoy loy­al cus­tomers and can charge a pre­mi­um.

Building a brand with personality

Han­nah Chap­man is the founder of Ava May Aro­mas, a can­dle brand she launched two years ago from her fam­i­ly kitchen, aged 23. She melt­ed wax on the kitchen hob to pour into moulds. Today she employs 26 peo­ple and expects turnover to hit £10 mil­lion.

“My brand is an orig­i­nal,” she says. “Some of our fans have fol­lowed my sto­ry since I start­ed. Our name and logo are unmis­tak­able.”

Her fame on social media trig­gered a raft of copy­cats, but the brand ensured sales are still boom­ing. “My dad is now my busi­ness part­ner,” she explains. “I remem­ber speak­ing to him about all the peo­ple copy­ing me. I was quite stressed. He was very calm and said ‘Don’t wor­ry, no one can copy your sto­ry’. And he was right.”

Chap­man built the brand on social media. Insta­gram is her main plat­form, with 242,000 fol­low­ers. “I talk to my fol­low­ers like they are fam­i­ly,” she says. “I show my face near­ly every day. My fol­low­ers feel like they are on my jour­ney with me. I have cus­tomers from my first days who still check in.”

The result is a bul­let-proof brand. This is reflect­ed in price: Ava May Aro­mas charges £18 for a can­dle and £24 for a two-wick can­dle. Ama­zon’s rec­om­mend­ed brands are both cheap­er and low­er qual­i­ty: no threat.

How to measure brand strength

When brands want to gauge their supe­ri­or­i­ty to gener­ic rivals, the best place to start is price. For exam­ple, Nuro­fen is 100 per cent ibupro­fen, yet costs three times more than a gener­ic ver­sion. This method of com­par­ing a brand to a gener­ic rival is enshrined in ISO 10668 and used by ven­ture cap­i­tal firms to cal­cu­late the val­ue of unlist­ed retail­ers.

A great brand can push any prod­uct line into this pre­mi­um brand­ed cat­e­go­ry. Mark Shep­hard and his busi­ness part­ner Chris Niebel launched a col­la­gen beau­ty brand in May, using a basic online shopfront for sales. They tar­get­ed celebri­ties to build their brand, called Reverse Life, and won endorse­ments from Chris­tine McGuin­ness, Peter Andre, Tanya Bard­s­ley, Car­ole Mal­one and Amy Childs. They sold £100,000 worth in the first two months and hit £250,000 in August.

“We have already out­per­formed every col­la­gen com­pa­ny,” says Shep­hard. “Our tar­get for the first quar­ter of 2021 is £500,000 a month mak­ing us by far the largest, most suc­cess­ful col­la­gen com­pa­ny in the UK for col­la­gen and vit­a­min prod­ucts.” These are sen­sa­tion­al num­bers in a crowd­ed prod­uct cat­e­go­ry.

Big brands enjoy the same uplift; an improve­ment to the brand leads to stick­i­er cus­tomer loy­al­ty and the abil­i­ty to charge a pre­mi­um.

Insur­ance, for exam­ple, is noto­ri­ous­ly gener­ic. Insur­ers tend to com­pete on price. Yet brand­ing can make a huge dif­fer­ence. Liv­er­pool Vic­to­ria worked with a cre­ative agency Des­ig­nate to push its LV= brand as a warm and emo­tion­al sym­bol of hap­py fam­i­ly life. The result was sales growth of 696 per cent in five years. Cost of acqui­si­tion fell 77 per cent.

Failing to invest in branding is a mistake

Yet too many small brands fail to invest in brand­ing. James Bev­eridge, co-founder of brand con­sul­tan­cy Made By Giants, observes: “From our expe­ri­ence, small-busi­ness founders come to realise the val­ue of their brand quite late in their jour­ney; ini­tial­ly it’s about prod­ucts and the bot­tom line. They are also very stretched so don’t have a lot of time to define the foun­da­tions of their brand.”

Bev­eridge believes retail­ers need to spend more time on their brand­ing. “Brands aren’t cre­at­ed out of thin air. The art of defin­ing, artic­u­lat­ing and bring­ing to life a strong brand across an organ­i­sa­tion takes love, care and craft­ing. The peo­ple doing this kind of work are the equiv­a­lent of the research and devel­op­ment team behind the Aston Mar­tin. Aston Mar­tin even call them­selves a design com­pa­ny.”

The rise and rise of Ama­zon means prod­ucts with­out a strong brand will strug­gle. Cut-price rivals are flood­ing the mar­ket and Ama­zon’s own-brand prod­ucts will drag prices ever low­er.

Chap­man at Ava May Aro­mas believes her strat­e­gy to build a pre­mi­um brand means her can­dle busi­ness can soar above this mael­strom. She’ll find good mar­gins and loy­al cus­tomers no mat­ter what the mar­ket does.

“I am try­ing to stay off Ama­zon and stay inde­pen­dent,” she says. “It would dilute my iden­ti­ty. My way is to run my own web­site; the only way you can buy my prod­ucts.” Her sto­ry makes a con­vinc­ing case.