Ordinarily, unfairly capitalizing on the familiar brand identity of a known brand would be brand dilution. The entity using the known brand’s identity can be considered a parasite. A parasite brand is a brand that lives off the brand equity of another brand. No imitator, no copycat, no parasite should be allowed to steal another brand’s identity. That is the same as getting a free ride.
Parasite brands decide that their only way of developing brand authority and a brand promise is not to develop their own authority or their own promise, but to steal the identity of another. These parasite brands not only build their own sales, but they unfairly transfer the known brand’s promise. They unfairly transfer the known brand’s authority. The result is that these parasite entities lessen the known brand’s brand value.
Many trademark cases are based on different versions of this type of brand equity dilution.
But, when money buys a well-known brand name along with its identity and other intellectual property, thus gaining the ability to use that brand name, it is considered brand management genius.
And, that is where we are right now.
After a year or more of failed strategies and rejected lifelines, Bed Bath & Beyond filed for bankruptcy. Everything was up for bids. Overstock.com, the internet close-out merchandise retailer that sells home furnishings, home décor, bedding and a variety of other home goods bought the rights to the Bed Bath & Beyond’s intellectual property.
For $21.5 million, overstock.com bought Bed Bath & Beyond’s “… website and domain names, its trademarks, trade names, patents, customer database, loyalty-program data and other brand assets related to the Bed Bath & Beyond banner.”
According to The New York Times, overstock.com indicated that beginning in August (after all Bed Bath & Beyond brick-and-mortar stores close), people clicking on overstock.com will be “redirected” to bedbathbeyond.com. Overstock.com will also rename its mobile app and loyalty program. The New York Times also wrote that overstock.com will consider changing the name of the overstock.com business entirely.
This is a paean to the Bed Bath & Beyond brand. And, a sorry coda to the iconic retailer. Why? Because overstock.com stated that it has looked at many options that would successfully change its image as a liquidator. Regardless of the ways in which overstock.com changed its merchandise, overstock.com could not shake its image as a seller of left-over, clearance goods.
In other words, overstock.com plans to use the brand promise of Bed Bath & Beyond to ditch its customer-perceived liquidator image and become a retailer that “…makes it easy to feel at home!” which was Bed Bath & Beyond’s mission.
The $21.5 million question is whether this name change will work. The Wall Street Journal urged investors to be cautious, as resuscitating failed brands has not been as profitable as one would think. The example used is Retail Ecommerce Ventures which bought Pier 1, Modell’s Sporting Goods and Stein Mart.
Further, since there is no legal definition of a brand, there is no way to “buy” the Bed Bath & Beyond brand experience. Buying the trademark is not the same as buying the brand. Brand and trademark are two different entities.
Trademarks exist for one basic reason: to enable the public to easily identify a particular product or service that derives from a particular source. Trademark law protects consumers from deception. Different from trademarks, brands are promises of expected, relevant, differentiated, trustworthy experiences. You trademark products but you brand promises. That promise means that if you buy this brand, you will receive this experience. And that promise comes from an authoritative (quality, leading, trustworthy) source.
Will overstock.com customers become confused? Will customers expect the new bedbathbeyond.com to deliver just like Bed Bath & Beyond? Will overstock.com be able to profitably capitalize on the familiarity of Bed Bath & Beyond. Will overstock.com be able to successfully adopt and adapt the Bed Bath & Beyond’s promise and brand authority?
It is unclear. But, transferring equity is not as simple or as quick as it may sound. Here is an example.
In 1999, Electrolux AB bought back its name in the US from an equity firm. The cost was not even close to $21.5 million. The equity firm provided a new name for their business: Aerus. The Electrolux AB agreement with the equity firm was to offer a 5-year grace period in which Aerus could use the Electrolux brand name to transition customers to the Aerus name. Currently, on its website, Aerus shows its vacuums branded Aerus. Yet, for example, if you walk down Stone Way in Seattle, Washington (a major throughfare), you will find an Electrolux Aerus store. Has Aerus been able to infuse its own brand vacuums with the same quality image as Electrolux? Or must Aerus continue to prompt customers and potential customers with the Electrolux provenance? The store does not promote “Aerus with Electrolux vacuums inside.” The store is Aerus Electrolux.
Interestingly, but not surprising, after the overstock.com announcement of the Bed Bath & Beyond intellectual property purchase, The New York Times writes that overstock.com “…added more than 100,000 bedding and bath items to its site as vendors raced to do business with the company.”
Overstock.com must focus on developing its own trustworthy brand value for the new brand-business. Value creation is not solely about generating shareholder value. No company can create sustainable value for its shareholders without creating enduring value for its customers. An enterprise cannot have sustainable, profitable growth of the bottom line unless there is quality growth of the top line. People value familiar quality, leading, trustworthy sources of relevant differentiated promises.
The challenge facing overstock.com is to become a quality, leading, trustworthy source of a promised experience. Using the Bed Bath & Beyond name cannot make this happen without a lot of brand-business building by overstock.com.
Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
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