Harvard Case - Schiit Audio: Does it Make Sense to Sell on Amazon?
"Schiit Audio: Does it Make Sense to Sell on Amazon?" Harvard business case study is written by Michael A. Stanko, Jeff Pollack. It deals with the challenges in the field of Marketing. The case study is 8 page(s) long and it was first published on : Nov 23, 2020
At Fern Fort University, we recommend that Schiit Audio consider selling on Amazon, but with a strategic approach that prioritizes brand protection and control. This means implementing a hybrid strategy where they leverage Amazon's vast reach while maintaining their direct-to-consumer (DTC) model and brand identity. This approach will help Schiit Audio achieve its growth goals while mitigating potential risks associated with selling on the platform.
2. Background
Schiit Audio, founded in 2010, is a successful audiophile company renowned for its high-quality audio components at competitive prices. The company's founder, Jason Stoddard, prioritizes direct-to-consumer sales, emphasizing brand control, customer relationships, and a unique brand experience. However, as Schiit Audio experiences rapid growth, the company faces pressure to expand its reach and potentially increase sales through an online marketplace like Amazon. This case study explores the potential benefits and risks of selling on Amazon for Schiit Audio, considering its unique business model and brand values.
3. Analysis of the Case Study
To analyze Schiit Audio's decision, we can utilize a SWOT analysis framework:
Strengths:
- Strong brand reputation: Schiit Audio has cultivated a loyal customer base through its commitment to quality and value.
- Direct-to-consumer model: This model allows Schiit Audio to control its brand message, customer experience, and pricing strategy.
- Innovative product development: Schiit Audio consistently introduces new products and features, staying ahead of the curve in the audiophile market.
- Strong online presence: Schiit Audio has a well-established website and social media presence, fostering direct engagement with its customers.
Weaknesses:
- Limited reach: Schiit Audio's direct-to-consumer model restricts its potential customer base compared to larger online marketplaces.
- Potential for price competition: Selling on Amazon could expose Schiit Audio to price wars with other sellers, impacting profitability.
- Loss of brand control: Selling on Amazon could lead to a diluted brand experience, as Schiit Audio might have less control over product presentation and customer interactions.
Opportunities:
- Increased market reach: Amazon's vast customer base provides significant potential for expanding Schiit Audio's reach.
- Access to new customer segments: Amazon can attract new customer segments who might not be familiar with Schiit Audio.
- Improved logistics and fulfillment: Amazon's fulfillment network can streamline shipping and logistics for Schiit Audio.
Threats:
- Negative impact on brand perception: Amazon's focus on low prices and aggressive discounting could negatively impact Schiit Audio's premium brand image.
- Competition from counterfeit products: Amazon's marketplace is susceptible to counterfeit products, which could damage Schiit Audio's reputation.
- Loss of direct customer relationships: Selling on Amazon could weaken Schiit Audio's direct customer relationships, impacting customer loyalty and brand advocacy.
Additionally, a PESTEL analysis can provide further insights:
- Political: Government regulations on online marketplaces and data privacy could impact Schiit Audio's operations on Amazon.
- Economic: Economic fluctuations and consumer spending patterns could influence demand for Schiit Audio's products.
- Social: Growing consumer interest in high-quality audio and personalized experiences presents opportunities for Schiit Audio.
- Technological: Emerging technologies like voice assistants and smart home integration could influence Schiit Audio's product development and marketing strategies.
- Environmental: Schiit Audio's commitment to sustainability and ethical sourcing could resonate with environmentally conscious consumers.
- Legal: Intellectual property rights and product liability concerns need to be addressed when selling on Amazon.
4. Recommendations
Based on the SWOT and PESTEL analysis, we recommend a hybrid strategy for Schiit Audio:
- Maintain a strong direct-to-consumer presence: Schiit Audio should continue to prioritize its website and direct sales, fostering a unique brand experience and maintaining control over customer relationships.
- Sell on Amazon with a strategic approach: Schiit Audio should explore selling on Amazon through a 'brand store' approach, focusing on:
- Brand protection: Schiit Audio should implement strict brand guidelines for product presentation and customer service on Amazon.
- Controlled pricing: Schiit Audio should maintain its premium pricing strategy on Amazon, avoiding aggressive discounting.
- Exclusive offerings: Schiit Audio can offer exclusive products or bundles on Amazon to incentivize customers and differentiate its offerings.
- Leverage Amazon's fulfillment services: Schiit Audio can utilize Amazon's fulfillment services to streamline logistics and shipping, allowing them to focus on product development and marketing.
- Monitor and adapt: Schiit Audio should continuously monitor its performance on Amazon, analyzing sales data, customer feedback, and competitor activity. This data will inform future decisions regarding product offerings, pricing, and marketing strategies.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Selling on Amazon aligns with Schiit Audio's growth strategy while maintaining its commitment to quality and customer experience.
- External customers and internal clients: This strategy caters to both existing and potential customers, expanding reach while preserving brand loyalty.
- Competitors: Schiit Audio can leverage Amazon's reach to compete with other audiophile brands while maintaining its unique brand positioning.
- Attractiveness: The hybrid strategy offers a balanced approach, maximizing potential reach and revenue while minimizing risks associated with selling on Amazon.
6. Conclusion
Selling on Amazon can be a valuable growth strategy for Schiit Audio, but it requires a strategic approach that prioritizes brand protection and control. By implementing a hybrid strategy that leverages Amazon's reach while maintaining its direct-to-consumer model, Schiit Audio can achieve its growth goals while preserving its unique brand identity and customer relationships.
7. Discussion
Other alternatives not selected include:
- Exclusively selling on Amazon: This option would maximize reach but could lead to a loss of brand control and potential price wars.
- Not selling on Amazon: This option would maintain brand control but limit Schiit Audio's growth potential.
The chosen hybrid strategy minimizes risks by balancing reach and control. Key assumptions include:
- Amazon's customer base is receptive to Schiit Audio's products: This assumption is supported by the growing demand for high-quality audio products.
- Schiit Audio can effectively manage its brand on Amazon: This assumption requires implementing strict brand guidelines and monitoring performance.
8. Next Steps
To implement the recommended strategy, Schiit Audio should:
- Develop a detailed plan for selling on Amazon: This plan should include product selection, pricing strategy, brand guidelines, and marketing initiatives.
- Partner with an experienced Amazon consultant: This consultant can provide guidance on navigating the Amazon marketplace and optimizing performance.
- Monitor and adapt: Schiit Audio should continuously monitor its performance on Amazon and adjust its strategy based on data and market trends.
By taking these steps, Schiit Audio can successfully leverage the power of Amazon while maintaining its unique brand identity and achieving its growth objectives.
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Case Description
Schiit Audio was a manufacturer of audio equipment in the Los Angeles, California area. The company, which mainly sold its products directly to consumers, experienced consistent growth in the years leading up to 2015. However, in the summer of 2015, the company's founder had three major issues to resolve. First, he was devoting half of his time to a marketing agency he had founded earlier and was increasingly feeling that the arrangement was inadequate to provide the leadership his audio company needed. Second, some suppliers were causing inventory and out-of-stock issues that made it difficult to deliver products to customers on time. Finally, selling products on Amazon Marketplace expanded the company's reach to new customers, but came with drawbacks, including lower margins, high fees, and inventory management difficulties. The founder had to make some decisions for the business venture's path forward.
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