Dec 17, 2014 · 1 minute

Ecommerce is a risky business. Just look at Fab's precipitous fall from a rarefied $1 billion valuation to a $15 million fire sale, which Michael Carney called one of "the biggest whiffs we’ve ever seen in the private markets." 

But one thing Fab supposedly had was a brand. Wasn't brand supposed to carry it through the rough margins and cutthroat competition of the ecommerce racket? Isn't anything possible with a brand????

It depends on how you build it and how you measure it, says Lightspeed partner Jeremy Liew. At last night's PandoMonthly fireside chat in Los Angeles, the Honest Company investor suggested that anyone can say they have a brand. But there's a way to measure if that brand actually has a significant impact on your business:

I think the key insight is that you’re not building ecommerce companies, you’re building a brand. Building a brand is where all the value comes from because when you’re building a brand, in a very sort of quantitative way, what takes means is that marketing as a percentage of sales goes down over time

Marketing as a percentage of sales goes down.

If that's not happening, then you do not have a brand. You may have a lot of shiny logos and a promo video with a few thousand hits, but if you're still paying the same amount over time to acquire customers, then you're doing it wrong. He goes on:

There are proxies, like looking at direct traffic or search volume over time. These are all proxies for the strength of your brand. But ultimately the best way to measure it is a trailing metric which is marketing cost as a percentage of sales over time.

Despite high profile ecommerce flameouts, Liew still believes strongly in the space.

"What’s great about ecommerce is that it’s completely controllable, and the entry costs are relatively low unlike the physical retail and catalogs," Liew says. "With ecommerce you can get in at a relatively small initial investment."

Once you're there, however, just don't lie to yourself about your brand. If it doesn't save you money on customer acquisition, it's worth nothing.