Thursday, June 16, 2016

Looking at e-commerce Retailer Monoprice's Competitive Advantage

Lawson, Andrew

As high definition televisions and similar technologies became affordable to the general consumer, I quickly became familiar with the e-commerce retailer, Monoprice.  As anyone who has been down the path of purchasing the required HDMI cables realized, these cables can be costly.  A friend told me about Monoprice (http://www.monoprice.com/), I found an HDMI cable for a fraction of the cost that the retailer I purchased my TV from was charging for the same cable.  Now, for many of my electronic needs, Monoprice is the first place I shop.

            When reading the article, “Can You Say What Your Strategy Is?,” by Collis and Rukstad, the concept of defining an advantage in a strategy statement immediately made me think of Monorpice.  According to the authors, “The complete definition of a firm’s competitive advantage consists of two parts.  The first is a statement of the customer value proposition.  Any strategy that cannot explain why customers should by your product is doomed to failure...The second part of the statement of advantage captures the unique activities or the complex combination of activities allowing the firm to deliver the customer value proposition.”
            By visiting Monoprice’s website, the following statements can be seen in the “About Us” portion:
“Established in 2002, we have built a stellar reputation for product excellence and customer service.
We offer over 6,500 high-quality, affordable electronics and accessories to professionals and consumers worldwide.
Our proven business model eliminates entire layers of markup within the supply chain, which allows us to sell premium products at a fraction of marketplace prices with incomparable speed and service.”
            So what then is Monoprice’s competitive advantage?  First, it seeks out production lines on which it can price its offerings at least 30 percent lower than comparable products sold by competitors1.  Next, it specializes only in electronics (currently) and can find its own manufacturers and do rigorous product testing.  The latter, ensures acceptable quality and customer reviews for its products can easily be seen on their website and elsewhere which can attest to this quality.  Next, they outsource production to China. Next, they take advantage of an efficient supply chain which uses an automated system in conjunction with staff members to package their orders.  Finally, their customer service, fast shipping, and return policies provide value to the customer.  All combined, Monoprice delivers customer value through low prices, often at a fraction of their competitors, and a positive customer experience. 
            Monoprice has a competitive advantage over traditional brick-and-mortar stores through its business practices and delivery of an exceptional customer experience.  As such, as of 2013, Monoprice is now a $120m-a-year business and has been growing at between 25% and 35% a year for the last five years.  If you find yourself in the market for electronics, consider giving them a try.  

References
1.     https://www.buzzfeed.com/jwherrman/how-monoprice-is-eating-the-tech-world-from-the-in

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