Case Study: Should a Direct-to-Consumer Company Start Selling on Amazon?

Sitting in his office, Mark Ellinas frowned at his pc screen. It becomes packed with row after row of electrical

motorcycles, from high-priced models to reasonably-priced knockoffs that seemed held collectively by means of spit and a prayer. Though they numerous in fashion and price, the motorcycles did have one element in commonplace: where they have been being offered. The website he became searching at, flush with options, became Amazon.
As the CMO of PedalSpark, a small maker of high-end electric bicycles, Mark became thinking about strategies for promoting the organization’s new trip. The market for electric bikes had exploded within the beyond few years, particularly in China, and it confirmed no symptoms of slowing down. PedalSpark’s signature bike, a $4,000 luxury model to be had handiest through the organization’s website, was selling properly and have been named to a few “first-rate e-bike” lists. Now PedalSpark changed into about to introduce a less expensive, entry-degree version, which it was hoping might have the broader attraction. The motorbike was centered at charge-touchy riders, folks who were inclined to exchange higher battery lifestyles and motor power for a decrease price tag.

Two years ago PedalSpark had employed Mark faraway from his advertising role at a children’s bicycle maker. That enterprise had bought solely on its personal web site, and Mark’s expertise had served PedalSpark well with its first product. He becomes excited via the project of selling the brand new bike in an increasingly crowded marketplace, but the question was the way to do it.
His direct reviews were cut up. Gideon Bear, the income supervisor, tended to want aggressive strategies. He desired to promote the brand new version on Amazon, which had, as he’d put it, “some greater customers than our website.” But Tamar Nourse, the product manager who’d later come on board, turned into concerned approximately whether or not the bike could stand out on Amazon. She idea that maintaining the brand new version on PedalSpark’s web site, wherein their team could manipulate the entire income manner, would be higher over a long time.
Bzzt. Mark glanced at his telephone and saw a text from the CEO: Where are we on the net channel approach? Looking ahead to your presentation. The new model becomes almost prepared, and the CEO desired a decision quickly. With the presentation scheduled in two days, Mark still had a while to think—however not an awful lot.
Giving Information to the Enemy
Mark closed his laptop and walked down the hall to Tamar’s office. He knocked at the open door. “Hey, were given a minute?”
Tamar appeared up and altered her thick-rimmed glasses. “Hi, Mark. What’s up?”
He sat down throughout from her. “So, about the motorcycle. In the meetings with Gideon, it feels like you’ve been holding something back. We have to make a choice, so I need you to tell me what you aren’t telling me.”
She took a deep breath. “Mark, I’m still new here, and I don’t want to rock the boat. But I without a doubt suppose selling on Amazon could be a terrible flow for us.”
“Why, even though?”
“The day we put the motorbike on sale, Amazon will start vacuuming up facts about our clients, our margins, and the market’s potential. If it ever decides to get into the e-motorcycle commercial enterprise, we’ll have hand-added all the statistics it desires to squash us.”
“I realize disturbing is part of your task, but is it possible you’re being a bit paranoid here?”
“You should ask my B-college classmate Marta.”
“Who is she?”
“A few years in the past she turned into the founder and CEO of a hit start-up. She’d had a concept for a brand new kind of pill stand. She spent a yr growing a prototype and finding a producer in China that would work together with her. Then she began promoting on Amazon. Now she’s the former CEO of a corporation that doesn’t exist anymore.”
“Wow. What befell?
“For about a 12 months the pill stand got first-rate opinions and bought properly at $40 each. During the again-to-college season, she was shifting a few thousand a months. Then a bunch of copycat products started stoning up. She had to combat them off as fine she could. She complained to Amazon, however it didn’t do whatever, of the route. Then AmazonBasics debuted its new tablet stand. It becomes a lot like hers, though distinctive enough to avoid a lawsuit. It was also 1/2 the fee.”
“E-motorcycles are loads extra complicated than tablet stands, though. What are the possibilities Amazon will make one of its personnel?”
Tamar’s lips curled into a small smile. “I don’t realize, however, if we went head-to-head against Jeff Bezos, could you position your cash on us? Amazon’s private-label merchandise are projected to hit $25 billion in sales with the aid of 2022.”
Mark shuddered. “A darkish thought to have earlier than lunch. How do you determine our probabilities towards the present opposition?”
“We do have great bikes, but fine isn’t enough on Amazon. Whatever your product is, there’s always an inexpensive version, and usually, that’s the only humans buy. It’s an in no way-finishing, some thing is going charge war there. I’m guessing that isn’t what we want human beings to accomplice with our emblem.”
Nodding slowly, the CMO rubbed his chin. “Good point and I don’t disagree. Gideon is pretty eager at the Amazon idea, though.”
Tamar adjusted her glasses once more. “I get why—extra clients and more visibility. That can also assist us to sell motorcycles in the short time period, however what about the long term? If human beings buy the new version on Amazon, will they be unswerving to the maker or to wherein they offered it? We built the PedalSpark emblem with the aid of promoting the luxurious motorbike on our website. Why try to fix what’s already running?”

Randolph Palmer

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