MorphCostumes was created in 2009 by brothers Fraser and Ali Smeaton and their friend Gregor Lawson with their launch product, the Morphsuit, being an all-in-one spandex costume that covered the wearer from head to toe. The idea was the latest in a number of side hustles they had set up alongside their corporate jobs, and the initial plan was just to sell a few thousand pounds. The trio each put in £1000, bought 200 Morphsuits and spent the rest funding a basic website and a few Facebook ads.
The first 200 suits sold in a few days so the decision was quickly made to invest their life savings into the business and buy another 2000 costumes – which also sold out quickly. They continued to scale the Facebook advertising, and with word of mouth helping get the name out there – plus the name of the business plastered across the backside of every suit – the business grew so quickly it turned over more than £1m in the first year.
By 2012 that figure had grown to £11m but that coincided with the Morphsuits trend starting to cool. The founders then spent three years realigning their strategy, broadening their business model to include more variety of fancy dress costumes, and focusing on becoming the best in the world at developing and selling these direct to consumers via Amazon and other marketplaces. Today they are on course for £41m turnover.
Modern Retail had the pleasure of sitting down with Fraser Smeaton, CEO of MorphCostumes, to find out more about their journey…
How does your sales process work now compared to the earliest days of MorphCostumes?
We used to do everything, from building the website to packing the orders, with stock stored in our flat. It was the absolute epitome of a side hustle start up. We built up the business slowly over time, originally investing in our first hires including our finance director, who is still with us, because it’s such an important role and then building up to the 60-strong team we have today.
Today, our team looks after all the logistics so we can focus on what will make the biggest difference in every area, be it sales, product lines, logistics, sourcing and everything in between.
How have you had to adapt your business strategy over time, and what do you think has had the biggest impact on that?
At the outset, we sold solely through our website and operated a wholesale model, but we now have a much more effective model – focusing on channels and customers that provide the highest return on the work we put in. Direct-to-consumer on Amazon is our primary channel. Selling DTC on Amazon rather than wholesaling to Amazon allows us to capture the retail margin and make more cash per unit sold. It also gives us more control of the marketing so we can sell more units at the higher margin. On top of Amazon, we have a wholesale business with major retailers such as Walmart, Target, Spirit Halloween and Party City.
We also dramatically grew our product line as in 2015 it became clear that we had reached saturation point for the original Morphsuits – not to mention the cheap copycats that were popping up. That year our revenue had shrunk to half of what it had been in 2012 and we were on track to lose £1M. We managed to fix this by broadening our focus.
Instead of just making Spandex costumes we started to make fancy dress costumes of all types – designs of the classics that looked cooler, fit better and lasted longer. Combining this with our D2C sales through Amazon transformed the business and set us up for the growth we have seen since then.
Halloween is by far and away our busiest time of year, but such is the public’s love of dressing up that there is high demand for Christmas outfits and themed party wear, while we also cater to World Book Day in the UK, Lent’s Carnival in Western Europe and the younger generations’ limitless love for dressing up as things like Superheroes.
Changing to this strategy has given us a much bigger market to target and has positioned us where the customer wants to shop. This strategy has meant we have grown each year since 2015 (even through the pandemic when dressing up for Zoom parties offered something ‘different’ to do in lockdown) and gives us plenty of room to continue to grow.
What are some of the biggest ecommerce and omnichannel challenges you’ve come up against?
The change in the Facebook model, when you could no longer talk to your fans at scale for free, required a big shift in strategy. We had built up 1.3M followers but after the changes we couldn’t engage with them at scale without paying thousands of pounds.
Mastering every stage of the process on Amazon has also been a huge challenge. It’s an incredibly complicated process and to get to the level we’re at now has been the result of focus, trial and error over ten years. Amazon provides an incredible reach through its multi-market network – and we have built a global network as a result of following Amazon into every market – but getting that to work in our favour is no mean feat.
What kind of advertising do you do, and where? How much of your business relies on word of mouth?
At the moment 99% of our advertising spend is on Amazon. We use Pay-per-click advertising to capture the demand on the platform. However, as our product range has expanded more and more, and we are in a position to serve the majority of what the consumer is looking for, we will move more spend to brand-building advertising in the near future.
Talk us through your market expansion strategy.
We do follow Amazon to new markets but assess the data for those markets to check they have a culture of costumes. More and more countries do as Halloween grows around the world, but many countries have their own key fancy dress holidays beyond Halloween. It’s also important to ensure Amazon has got to scale in that market.
Due diligence like this means we’ve never had to backtrack in any market – we’ll have thoroughly researched the data before we take any steps to launch.
If there is a tradition of dressing up but Amazon is yet to reach scale in that market we will look to the local leading marketplace – for example in The Netherlands Amazon has not managed to get a hold – instead Bol.com dominates that space.
With the consistency of your growth to the level you’re at now, do you think there’s anything that makes you particularly resilient as an ecommerce company?
The fact that we sell 1000s of products in multiple markets and manage to handle the complexity of that profitably makes us very resilient.
Not only does it mean we are not overly dependent on one product declining but it also deters competitors as it would take anyone else years of losses to work out the systems and processes that underpin what we do.
By continuing to use data to understand our audience, add more products to our range and roll out to new markets we anticipate we’ll be able to protect the business from any external factors. So many people love an excuse to dress up – even the pandemic saw us supplying costumes to people for at-home Zoom parties – so there’s not a huge amount I can see impacting our resilience more than that of any other company
We will continue to use data to add more products to our range and roll out to new markets.
What one piece of advice would you give someone launching an ecommerce business today?
Understand your success model and understand how what you are doing is creating value.
As well as building a profitable business we are creating a system that can profitably distribute and market thousands of products direct to consumers around the world. That has real value to larger companies with extensive product portfolios who want to be able to move to a global DTC model quickly.
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Rob Gamage is Managing Editor of Modern Retail. Combining many years of experience in publishing with a keen interest in small business and entrepreneurship, Rob is passionate about sharing interesting and inspiring content with retailers to help them grow.
