Wish You Wood is a toy boutique located in the main shopping strip of a resort town near Piney Lake. People who own cabins near the lake or come to visit the local state park enjoy browsing through the town’s stores, where they pick up pottery, paintings, and Wish You Wood’s beautifully crafted wooden toys. For these shoppers, Wish You Wood is more than a store; it is a destination they associate with family and fun.
The store’s owners, Russell and Vanessa Harris, personally select the toys from craftspeople around the world. They enjoy their regular customers but believe selling mostly to vacationers has limited the company’s growth. They decided that the lowest-cost way to expand would be to sell toys online. However, after several years of trying, traffic to the store’s website was still unimpressive. They were able to drive some business to their site using social media, but the site never took off in the way they had hoped.
Russell and Vanessa concluded that the next-best way to sell online would be to partner with Amazon. Amazon lets other retailers sell products on its site. The Harrises signed an agreement with Amazon to list the store’s most popular items. Customers could then purchase Wish You Wood toys right from Amazon’s site. Under Amazon’s participation agreement, the listings must be honest and may not link to Wish You Wood’s own website or invite phone calls from customers. In exchange for giving the products exposure on the site, Amazon charges a monthly fee plus a commission on each sale.
Initially, Russell and Vanessa were thrilled about their decision to partner with Amazon. They tracked each month’s sales and compared them with in-store sales. In the first five months, sales jumped 45 percent, mainly because of sales on Amazon. Then, suddenly, sales of its popular toy train sets stopped altogether. Puzzled, Vanessa visited Amazon to make sure the train sets were still listed. To her surprise, she found that the train set was there, at the usual price of $149, listed right after the same set available directly from Amazon at $129. She and Russell concluded that shoppers were now buying the product directly from Amazon.
It appeared that their store had helped Amazon identify a product consumers value.
The Harrises worried that they needed a new strategy.
If they matched Amazon’s price, they would lose most of the profit on their most popular items. Wish You Wood was too small of a business to negotiate better prices from its suppliers. If the store didn’t match Amazon’s price, it would continue to lose sales to Amazon. Russell and Vanessa wondered whether they should pull out of Amazon altogether or find a way to continue working with the partner that had become a competitor. They also considered rethinking which toys to offer on Amazon.
DISCUSSION QUESTIONS 1. Prepare a SWOT analysis for Wish You Wood, based on the information given. Using the SWOT analysis, what general corporate strategy would you recommend for Wish You Wood?
2. Should the store continue or change its current approach?