Internal EnvironmentCurrent objectives, strategy, & performance: ∗ Zappos is a service company that happens to sell clothing, shoes, handbags, eyewear, watches (and eventually a bunch of other stuff). ∗ Zappos is “Powered by Service” ∗ Providing the best online shopping experience possible. ∗ Fast, Free Shipping. Free return shipping. 365-day return policy. ∗ Fast fulfillment. Expedited delivery. Fast, friendly & expert customer service.
Internal EnvironmentAvailability of Resources: ∗ Best selection ∗ Over 1,000 brands ∗ Millions of items in warehouse ∗ 100% of products inventoried (no drop ship)
Internal EnvironmentOrganizational Culture & Structure:∗Zappos operates separately from Amazon.∗CEO Tony Hsieh manages the company the same aspre-acquisition days.∗Terms of the arrangement with Amazon allows Zapposto remain committed to the values and mission of thecompany that has been in place since day one.
Internal EnvironmentOrganizational Culture & Structure: 1. Deliver WOW Through Service 2. Embrace and Drive Change 3. Create Fun and a Little Weirdness 4. Be Adventurous, Creative, and Open-Minded 5. Pursue Growth and Learning 6. Build Open and Honest Relationships With Communication 7. Build a Positive Team and Family Spirit 8. Do More with Less 9. Be Passionate and Determined 10. Be Humble
Customer Environment∗ Who are current & potential customers?∗ What do customers do with our products?∗ Where do our customers purchase our products?∗ When do customers purchase our products?∗ Why/how do customers select our products?∗ Why do potential customers not purchase our products?
External Environment∗ Competition ∗ Online retailers such as shoebuy.com ∗ Conventional store front∗ Economic growth & stability ∗ Online clothing has doubled over past 5 years ∗ Only 10% of retail clothing market∗ Political, legal, & regulatory issues ∗ Internet taxation ∗ Support for Nevada state margin tax∗ Technological Advancements∗ Sociocultural Trends
SWOT Analysis Positive factors: Negative factors: Strengths Weaknesses ∗Large product selection ∗Large inventoriesInternal ∗Price competitive ∗Shipping costsfactors: ∗Excellent customer experience ∗Competitors Opportunities Threats ∗Market penetration ∗State / federal regulationsExternal ∗Lower overhead ∗Reliance on carriersfactors: ∗Customer convenience ∗Reliance on internet providers
Key Questions∗ Where is the industry now?∗ What are critical success factors in the industry? ∗ Product selection ∗ Price competitiveness ∗ Free shipping ∗ No hassle returns which included free return shipping ∗ Fast delivery time
ZAPPOSMarket Product Focus
MARKET PRODUCT FOCUS∗ Target Market ∗ Men ∗ Women ∗ Children∗ Product Market Grid Report ∗ Agreement with West-Coast’s shoe Pavilion to run its ecommerce site (shoepavillion.com) ∗ Zappos.com joined amazon.com
MARKET PRODUCT FOCUS
MARKET PRODUCT FOCUS∗ Diversification ∗ Offers over 1000 brands of shoes and apparel ∗ Endless inventory of shoes in virtually every style, size, and color
MARKET PRODUCT FOCUS∗ Differentiating Attributes ∗ Stocks more than 3 million pairs of shoes, handbag and accessories ∗ Selection and Service∗ Positioning Strategy ∗ Exclusive footwear and apparel ∗ Fortune 100 companies ∗ 50 most innovative company ∗ Ranked significantly higher than other companies in fashion industry
ZapposMarketing Program, Strategy, and Tactics
Product∗ Adidas, BCBG, Guess, Calvin Klein, D&G, Ed Hardy etc..∗ Find product and direct customer if they do not have item
Price∗ Competitive pricing∗ No coupons-feel that level of service supersedes need for coupons
Place∗ Falling under the umbrella of Amazon, they are visual to the largest online retailer in the world
Promotion∗ Engaging commercials∗ Word of Mouth∗ Collaboration using social media∗ Customer service and liberal return policy∗ Zappos Insights
Zappos vs. The Other GuysKey Variable Typical Brand ZapposService as Marketing Low HighTraditional Media High LowSpendToll Free Number Hidden EverywhereInvitation to Interact Hard to find All the timeOpenness To Talk Business Only No time limitToll Free Number Hours Typically 9-5 24/7Outsourcing Common NoEmployees as Medium Normaladvocates
Zappos.com Financial• Increased to over $1.2 billion sales• 75% repeat customers• Raised tens of millions from outside investors• $48 million from Sequoia Capital• 2009 only 5% profit• CEO Salary $36,000 per year• As of November 2009-Amazon.com
Amazon.com(2010 Financials in millions)Net Sales $ 34.20 40%Operating Exp $ 32.79 (Marketing = 3%)Net Income $ 1.15 28%
Amazon.com Revenue Mix (millions) $1,075 , 3% $15,417 , 42% $20,439 , 55% Media EGM OtherZappos.com accounted for approx. $1.4 billion of EGM in 2010
Amazon.com2011 Forecast (in millions) Net Sales $ 36.80 Operating Exp 35.73 (Marketing = 5%) Net Income $ 1.07 Zappos.com $ 1.50
ACHIEVEMENTS From humble start-up in 1999 to #1 online shoe retailer in 2011. One of first companies to capitalize on the emerging SEM market (Search Engine Marketing). Success due to superior customer service rather than a glitzy marketing campaign. “Word of mouth” marketing.
ACHIEVEMENTS ZAPPOS Corporate Culture. Fortune – “100 Best Companies to Work For.” #23 (2009) – Highest Ranking Newcomer Tony Hsieh, “ This is not just a company. It’s like a way of life.”
ACHIEVEMENTS COMPANY MILESTONES2002 - $32 Million in Gross Sales.2006 – First $3 Million in one day.2007 – Nike joins ZAPPOS. Let us “WOW” you!
ZAPPOS/AMAZONIn 2009, Amazon acquiredZappos for $1.2 Billion incash and stock.Amazon CEO Jeff Bezosallows CEO Tony Hsieh torun Zappos independently.
FUTURE OF ZAPPOS Washout? Fast, Free Shipping Free Returns on Shipping 365- day return policy 24/7 Call Center 75% of sales- Repeat Customers #1 Online Shoe Retailer
FUTURE OF ZAPPOS Centralized warehouse location in Kentucky. Allows for faster delivery time. Zappos stocks over 3 million shoes, handbags, accessories from over 1,136 brands. Social Media Fan Favorite- 1.7 Million Fans on Twitter.
Recommendations∗ Increased profit margin ∗ Reduce inventory and shipping cost ∗ Drop ship with select vendors that can provide transparent customer experience ∗ Eliminate low profit product lines ∗ Partner with suppliers on customer recommended products as opposed to in house investment ∗ Utilize Amazon’s global network to create an international presence (45%)