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, landscape 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, Jim and Pam Klein, personally select
the toys from craftspeople and toymakers 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, they had to
admit that traffic to the store’s website was unimpressive.
Thanks to e-mail and Facebook reminders, they were luring
some of their loyal in-store shoppers to the site to make
off-season purchases, but few other people looking for toys
ever found Wish You Wood online.
Jim and Pam concluded that the next-best way to sell
online would be to partner with Amazon.com. Amazon’s
Marketplace service lets other retailers sell products on
Amazon. The Kleins signed an agreement to list the store’s
most popular items with Amazon. For example, if a shopper
is searching for wooden dollhouses, Wish You Wood’s dollhouses
will be included in the search results. A customer
who chooses to buy from Wish You Wood places the order
right on Amazon’s website. 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, Jim and Pam 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 popular
toy train sets, which were particularly profitable, stopped
altogether. Puzzled, Jim visited Amazon to make sure the
train sets were still listed. To his surprise, he 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. He and Pam 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 Kleins 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 at the Amazon site. Jim and Pam 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 toy store, based on the information given.
2. Using the SWOT analysis, what general corporate strategy would you recommend for Wish You Wood? Should the store continue or change its current approach? (PFA image for to develop ideas)
