What do you do when your hero product, the thing that you’ve built your business on, suddenly stop selling? It sounds like a nightmare to anyone who has founded a business. But this is what happened to Fraser Smeaton and his business, MorphCostumes.

Smeaton co-founded MorphCostumes with his brother 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, the ‘Morphsuit’.

However, it soon 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 into a business with a multi-million 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.

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.

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 peoplen and the business went into financial difficulty.

How MorphCostumes turned around its business

So, what do you do as a growing, ambitious business, when you realise you can no longer rely on your hero product?

Smeaton admits that at first they got it wrong. 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 doesn’t work, he found out, “because great people need a strategy [in place] to work with.”

Instead, Smeaton and his team had to overhaul their strategy in order to save the business. One of the key changes they made was to start selling direct to consumer on Amazon.

Before they had primarily sold through retailers or wholesale through Amazon. But they found that there were advantages to selling on Amazon Marketplace, even it if 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”, says Smeaton, for things like SEO, advertising and decisions over things like which product pictures work.

“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.”

They now make more than 85 per cent of their sales through Amazon Marketplace.

They’ve also learned to use the data to find the kind of costumes that customers really want. This doesn’t necessarily mean striking ones like 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 centring a hero product 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.