Sell Direct-to-Customer or through Amazon?

Submitted in partial fulfilment of the requirements of the course

Written Executive Communication

Instructor: Prof. Shubhda Arora

Submitted on December 12, 2019 by

XYZ

Section X
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MEMORANDUM

To: Stan Reid, CEO - PedalSpark

From: Mark Ellinas, CMO

Date: 12th December 2019

Subject: To evaluate e-commerce strategies for the new entry-level e-bike of PedalSpark

Dear Stan,

The enclosed report consists my analysis of an alternative approach for PedalSpark to take its
new entry-level bike to market. Since the leading e-commerce websites help to access a
larger geographic region, thus increasing sale volumes of the bike, and a better brand
awareness, I recommend you to sell through Amazon.

I have also worked out an action plan for successfully carrying out this option.
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EXECUTIVE SUMMARY

PedalSpark, a luxury e-bike manufacturer has recently launched an economical model and is
now looking at different channels to bring the product to market. It is currently considering
two options. One, to continue selling through its own website or two, sell it through Amazon.
The report evaluates these two options for their impact of sale and brand image. It is
recommended to sell on Amazon given it’s larger customer base.

(word count: 70)

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CONTENT PAGE

TOPICS Page
Number

Situational Analysis 5

The Decision Statement 6

The Options 6

Criteria for Evaluation 6

Evaluation of Options 6

Recommendation 8

Action Plan 8
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SITUATIONAL ANALYSIS

PedalSpark is a manufacturer of high-end electric bicycles. It’s highest selling signature

luxury model sold for a sum of $4,000 available only through its website and was included in
the few “best e-bike” lists. PedalSpark now introduced a cheaper, entry-level model to
approach a greater clientele with relatively affordable prices. It bet on the expectation that
some people will be willing to trade higher battery life and motor power for a lower budget.

Mark Ellinas, CMO of the company was evaluating ways for taking the product to the
market. He noticed an increasing demand for electric bikes in the past few years, especially in
China, with little or no setbacks in the trend. However, the company has uptil now restricted
its sales to its own website but is now considering other channels to exhaust the increasingly
crowded market.

Lately, among all the other top e-commerce websites, Amazon.com has captured more than
half of the universal audience to be their first choice to purchase anything on an online
market-place. Over 100 million people have subscribed to Amazon prime membership which
signifies the large retention of customers on the platform. It helps its registered sellers to
increase their sale volumes. Example, InstantPot. holds a record of selling 300,000 pots in
just 36 hours on Amazon, additionally the company derives 90% of its sale from Amazon.

Merchants on Amazon are entitled to additional benefits coming from the numbers achieved
by the site. It owns about 130 private labels so far and projects to hit sales of $25 billion by
2022. Further, AmazonBasics is also known to rip off popular designs of existing merchants
and sell them themselves at a cheaper price. The access to customer data, is also an issue.

PedalSpark being a luxury brand will be open to a competition with the already existing
luxury brands such as Apple, Versace, Rolex and Jimmy Choo who have an established
presence on Amazon. This brings us to the discussion of designing an approprite strategy to
advance the new bike on online-channel given the current competitive landscape.
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POINT OF DISCUSSION

What is the appropriate online channel strategy for PedalSpark to launch its new and cheaper,
entry-level bike?

POSSIBLE SCENARIOS

1. Continue exclusive sale through company’s website

2. Expand through Amazon in either of the following ways:
1. Sell directly to Amazon for resale
2. Let Amazon handle the warehousing and shipping for your product
3. Company handles the shipping and Amazon brings only customer base.

CRITERIA FOR EVALUATION

1. Sales Volume
2. Brand awareness
3. Customer data

EVALUATION OF SCENARIOS

i) Exclusive sale through company’s website

a) Sales Volumes: Last year, $4000 luxury bike sold itself 2000 times through the
company’s website. This new bike is expected to sell 10,000 units in a year if featured on
Amazon, and therefore Amazon gives a better sales volume.
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b) Brand Image: All the luxury brands who sell on Amazon, hesitated about it for a long
time in the fear of brand dilution. However, bigger brands such as Apple, Versace, Rolex
and Jimmy Choo have hosted their products on Amazon.
c) Customer Information: Consumer prefernces, market demand, profit margin data is
observed to have been taken by Amazon from its registered sellers to decide whether or not
to enter the particular market and what modifications to the product, be it in terms of price
or make of product that can help them maximise their sale volumes. So, as far as
confidentiality of Customer data is concerned, restricting sales to PedalSpark’s own
website is a better alternative.

ii) Selling on Amazon

a) Sales volumes: Amazon in known to sell high volumes. Of the U.S. consumers who
make $150,000 or more, 70% are Amazon Prime members. Taking the example of Instant
Pot, it sold 300,000 units within 36 hours on Amazon. 90% of their sales come from this
channel.
b) Brand Image: Luxury brands such as Apple and Versace have started selling on
Amazon while still maintain the brand image.
c) Customer Information: Amazon is known to cannibalize sales of existing players by
launching cheaper and better products of similar design under the label, AmazonBasics. The
same happened with the CEO of a successful start-up for a new kind of table stand. Now,
the company does not exist. However, for e-bikes, Amazon already have a lot of sellers
apart from PedalSpark listed. They already have the market information, however, if
Amazon wants to enter the market, it would take them years to do so. Being on Amazon can
help PedalSpark find new customers, else people might not even know about them.

RECOMMENDATION

It is recommended that PedalSpark should sell products on Amazon.

ACTION PLAN
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1. PedalSpark should sell directly on Amazon and let them handle warehousing and
shipping.
2. Meanwhile, they should continue selling through their website and promote the same.
3. It should also continue to develop more products and increase the category range.

(Total word count: 1046)