05 Nov 2020 15:37 IST

Bose is turning down the volume for retail stores

Strategising for an omni-channel model will help the company remain profitable in the long run

On January 15, Bose Corporation (Bose), a leading global manufacturer of high-end audio systems, announced its plan to close all 119 of its retail stores in North America, Europe, Japan, and Australia. However, the company clarified that its remaining 130 stores — located in Southeast Asia, South Korea, Greater China, United Arab Emirates, and India — would remain operational.

This strategic move by Bose was in response to the growing trend among customers to shop online for its audio products such as speakers and headphones. Though Bose planned to close down its stores, its customers had the choice to check out and purchase its products at retail stores such as Target Corporation, Best Buy Co., Inc., Apple, and the company’s Amazon storefront. Though it was evident that e-commerce was fast replacing the sales in the traditional retail store, industry observers still questioned whether the customers would opt for online purchases without ‘experiencing’ the Bose products in person.

Strong research base

Bose, founded by Dr Amar G Bose in 1964 in the US focused heavily on research. It took 15 years of hard-core research for the development of its path-breaking technology in high-end audio and for the noise-cancellation technology. The technology used in the noise-cancelling headphones for the consumers led to quite a few successful innovative products such as the headphones for professional military pilots, along with headsets for National Football League coaches. The profits generated were consistently redirected towards research to create new breakthroughs in sound technology.


Dr Amar G Bose, Founder




Whenever Bose launched a new product, a demonstration was held at its stores to create a ‘wow’ feeling for its customers. It was observed that once the customer had had a live experience of Bose’s products at its stores, they became hooked to them. Joel Rubinson, President at Rubinson Partners Inc., a marketing and research consulting firm based in the US, said, “One of the most impactful demos I ever saw was in a Bose store. The stores do a lot more than sell products…they are experience stores that demonstrate the superiority of Bose and the better lifestyle one can live as a result of buying their products.”

Premium pricing

Bose relied on minimum advertising and its products catered to a niche target market. Most of its products were priced more than those of its competitors. With an excellent sound system and innovative features, Bose products were high-end with even the speakers and components priced high. As a result of extensive research done by its engineers, the company owned a majority of the patents of the technologies it invented. The patents ownership ensured that the company was in a position to set a high price for its products.

The competitors to Bose were companies such as Sonos, Bowers and Wilkins, Samsung, Sony, Xiaomi, Beats, and Harman. The advent of voice-activated speakers from Amazon and Google further increased the competition for the company. Apple had also emerged as a major competitor with its Totally Wireless Headsets (TWS) which were extremely popular among millennials. As of 2018, Apple was in the top position with a 24 per cent share of the headphones market worldwide followed by Sony in the second position with 22 per cent. Panasonic was in the third position followed by Bose in the fourth.

Going online

Since the early 2000s, the retail industry in the US and other countries had been facing massive onslaughts from online e-commerce companies and the year 2019 saw the highest number of retail store closures. The industry was hit by the changing demographics and by online onslaughts. The effects were such that there were a series of shutdowns of retail business and a reduction in the number of retail stores, which led to the proliferation of both small and big online sellers. According to US-based research and advisory firm Coresight Research, the US retail market in 2019 saw the closure of 9,302 retail stores, which was 59 per cent more than in 2018.

Analysts at UBS, a Swiss multinational investment bank and financial services company, had estimated that as of 2019, 16 per cent of the retail sales in the US were done online and this was expected to grow to 25 per cent by 2025. These trends were likely to lead to the closure of 75,000 stores in the US by 2026. Of these 75,000, electronic stores were expected to account for 10,000 and clothing stores 20,000.

With the stores shutdown, Bose had to work on augmenting its online strategy. It had already been carrying out online sales through its website since 1999. Most of the e-commerce net sales for Bose from its online store Bose.com had been from the US and the global net sales for Bose in 2019 was US $192.9 million. This put bose.com at 25 in the US Electronics and Media e-commerce net sales in 2019, way behind the top three players, amazon.com, apple.com, and bestbuy.com, with 40 to 45 per cent, 10 to 15 per cent, and 5 to 10 per cent of the market share respectively.

Is it the right decision?

Bose’s decision to close down its retail stores in some global markets evoked a mixed response from analysts and retail market experts. The strategic move was criticised by some analysts who called it a mistake. In the long run, it was likely to have a detrimental effect on sales, they said. Bose had always relied on the ‘wow’ factor to sell its products and that was aided by its retail stores which displayed its products and provided an acoustic experience for the customers. The ‘wow’ factor was likely to be missing in the online sales format with quite a number of competitor products vying for the attention of customers.

However, others opined that as the organisation was an established entity with a long-time presence in the market, and high brand awareness, the decision to go online was advantageous rather than detrimental. The brand value of Bose was such that customers were willing to purchase its products online rather than at the stores as most millennials were accustomed to doing online research, comparing the features online, checking reviews available, and then going in for the purchase of the products.


The case brings to light three concepts in strategic management/marketing — generic competitive strategies and the importance of a competitive strategy; the concept of core competence and the basis of competitive advantage; and the channel strategy and channel levels.

Competitive strategies

Bose adopted the Differentiation Focus strategy to gain a competitive advantage over its rivals. It undertook long-term research on acoustics and came up with products that were first in the market. Most of the profits that it earned were invested in further research and development. Because of the uniqueness of its products, Bose was able to price its products at a premium and gain a competitive advantage in the market. By constantly innovating and introducing new products that created value for the customers, Bose managed to stay ahead of the competition and gained an advantage over them.

Core competence

C K Prahalad and Gary Hamel (1990) in the article ‘The Core Competence of the Corporation’ published in Harvard Business Review introduced the concept of Core Competency. The core competence of any business is the strategic, competitive advantage it holds over its competitors. Prahalad and Hamel mentioned that core competencies must fulfil three criteria:

1. They must make a significant contribution to the perceived customer benefits of the end product; 2. They should be hard for rivals to imitate, and 3. They should provide access to a variety of markets.

· Bose’s products were the result of long-term research. In fact, it took Bose 15 years of hard-core research to develop its path-breaking technology in high-end audio and noise cancellation technology. The Bose Wave radio was a small, remote-controlled clock radio designed for home use. With its innovative design and enhanced features, the Wave radio had rich, full sound not found in other portable radios. The rich sound and the satisfaction of listening to quality acoustics were the perceived customer benefits of the end products of Bose.


Early stages of research and development





· Bose’s products were developed in its own research labs and were hard for its rivals to imitate. In fact, Bose had a patent for most of its technology, giving it a competitive advantage over its rivals.

· The noise cancellation technology developed by Bose had varied uses in different fields and markets. The noise cancelling headphones were used by pilots in both the commercial and military space. They were also used in the sports arena; with widespread use by NFL coaches. Thus, the products of Bose had access to a wide variety of markets.




Noise Cancellation Technology






The strategic move by Bose to shut down its stores was not expected to have an impact on Bose’s core competence as research and development. New product development and innovation would continue to be the core competence based on which Bose competed in the market. All the three criteria for the fulfilment of core competence — perceived customer benefits, difficult to imitate, and providing access to a wide variety of markets — would still be met by Bose.

Channel strategies

Initially, Bose sold its products only through its own stores. Over a period, it started selling them even through retail stores such as Apple, Target Corporation, and Best Buy Co., Inc.

Bose ventured into online sales through its website in 1999. With a combination of its own stores, online selling, and third-party retail stores, Bose was selling its products through multi-channel retail. It ventured into the omni-channel retail model later on, encompassing all channel sales including social media to promote its products. With online sales showing increasing potential and the closing down of a number of retail stores in 2019 due to the changing preferences and buying behaviour of millennials, Bose decided to shut down its stores and go in for the online-only model.

Some of the major implications of the change in channel strategy for Bose were loss of touch with the customer at the ground level, loss of a suitable venue for the launch of new products, loss of the opportunity to educate and impress the customers on its historical journey and its research and innovation in sound technology.

· With Bose moving away from its retail store concept and selling its products only online, a first-time purchaser may not be that impressed with the products available online without experiencing them in person. This was bound to impact the competitive advantage Bose had enjoyed over the decades.

· Bose had to deal with competitors such as Sonos, Bowers and Wilkins, Samsung, Sony, Xiaomi, and Beats and Harman. The advent of voice activated speakers from Amazon and Google further increased the competition for the company. Apple had also emerged as a major competitor with its Totally Wireless Headsets (TWS), which were extremely popular among millennials.

· Bose’s competitors, such as Samsung and Sony, already had flagship stores in the US, and JBL and Harman had flagship stores on Madison Avenue in New York. In 2019, Sonos launched its first flagship store in Manhattan, US, with private listening rooms.

· The ‘wow’ factor was likely to be missing in the online sales format with quite a number of competitor products vying for the attention of customers.

It remained to be seen how the strategic move by Bose to change its channel strategy would impact its sales performance and also whether customers would continue to purchase its products online. Even though e-commerce was fast replacing sales in the traditional retail store, would the customers go in for the online purchase without ‘experiencing’ the Bose products in person? In the last few years, we have seen how traditional brick-and-mortar retail chains like Wal-Mart are increasing their presence online, while online retail giants such as Amazon are getting into physical retail. Developing omni-channel retail capabilities is being increasingly viewed as a solution in the fast-changing retail industry.

(Debapratim Purkayastha is Director, Anil Anirudhan is Research Associate and Sanjib Dutta is Research Lead, at IBS Case Research Centre, Hyderabad.)