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Sep25
The Branding Advantage

Ray Allegrezza, writing for the Furniture Today online newspaper, talked about a recent lunch he had with Michael Foster, co-founder of J.T. Michael Designs.

Starting the business last year, Foster said, "When we launched, we defined ourselves as importers, but now, we have evolved into a private-label supplier that has transitioned from being a vendor to being a resource partner."

branding 1.jpgHe was also asked about what the biggest changes in the furniture industry were. Here's his answer: "Most people would say China. But to my way of thinking, it's the new breed of retailers — the Pottery Barns of the world — that have impacted the furniture business the most. They created a dominant store brand and then wrapped that brand around a style of furniture that became synonymous with the store."

What he's saying here is that most people, like in other business sectors, would answer China also. I like his take on it, as it would apply across many types of businesses. When people answer China, they are saying that lower priced goods are the major problem of the furniture industry. Foster is revealing that it's not the major disrupter at all. 

He's saying that those that are doing the best, are those that understand the power of branding, and then building products around that brand. Those businesses that he supplies, (including all of the furniture companies owned by Berkshire Hathaway, i.e. Warren Buffet) start at profit margins of 45% and go up from there.

There is no easier way to say it: those that are able to develop a powerful brand, can make higher margins - and thus larger profits. Once someone has branded themselves, they can wrap that brand around almost anything and can make more money than those that don't brand themselves. Think of Richard Branson and Virgin here.

Branding eliminates the great majority of competition that relies upon being a commodity - low prices - as their only strategy.

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