SlideShare a Scribd company logo
Clothing, Customer Survive and
              Company Culture
               Submitted by Group 8
Agenda
   Brief history
   Happiness
   3 C’s
   Company culture
       Core values
       Application process
       Cost of recruitment and training
   Customer Service
       Fulfillment center
       Distribution Center
   Clothing
   Service delivery model
   Actual sales
   Requirement for merger
Tony Hsieh
•   1994-1995: Pizza business in
    college
•   1996-1998: LinkExchange
    (online advertising)
    Sold to Microsoft for $265
    million
•   1999: Venture Frogs (investment
    fund) - Invested in Zappos.com,
    Inc.
•   1999: Zappos.com, Inc.
•   Nov 2009: Amazon acquires
Company History
Year   Milestones
2000      Nick Swinmurn and Tony Hsieh function as co-CEOs of Zappos.
          Zappos records $1.6 million in gross sales.
2001      Sustained effort produces $8.6 million in gross sales for Zappos.
2002      Zappos leases the Fulfillment Centers in Shepherdsville, Kentucky.
          The brand elevates gross sales to $32 million.
2003      Gross sales at Zappos rise to $70 million.
2004      Sequoia Capital infuses a significant amount of cash into Zappos.
          Zappos moves its Headquarters and call-center operations to Henderson,
          Nevada.
          Zappos opens its first outlet store in Kentucky.
          Employee input is solicited for the publication of the first “Culture Book.”
          Gross sales at Zappos more than double to $184 million.
2005      Sequoia increases its investment in Zappos to a total of $35 million.
          Alfred Lin, cofounder of Venture Frogs, joins Zappos as CFO.
          A quit-now bonus of $100 is offered to new hires so that they will consider
          leaving the company after training if they think they aren’t a fit with the
          culture at Zappos.
          Zappos is named E-tailor of the Year by Footwear News.
          Gross Zappos sales double again, to $370 million.
Company History
2006   Nick Swinmurn leaves Zappos to follow a passion for creating other
       successful start-up businesses.
       Zappos expands and moves into larger Fulfillment Centers in Shepherdsville,
       Kentucky.
       Gross sales at Zappos climb to $597 million.
2007   Zappos launches a Canadian site.
       Ebags.com’s footwear and accessories e-tailor 6pm.com is acquired by
       Zappos.
       Zappos expands its product categories to include eyewear, handbags,
       clothing, watches, and kids' merchandise.
       Gross sales at Zappos hit $840 million
2008   Zappos lays off 8 percent of its workforce after investor Sequoia Capital,
       anticipating a sluggish economy, sends the message to its portfolio
       companies (including Zappos) that they need to cut expenses as much as
       possible and get to both profitability and positive cash flow.
       Zappos Insights is launched to help leaders, managers, and employees from
       other businesses benchmark Zappos.
       Gross sales at Zappos hit $1 billion.
What is your goal in life?


     Grow             Get a          Boyfriend /
   Company                                               Be Healthy
                    Great Job         Girlfriend
     why?             why?               why?              why?

    Retire           Make            Find Soul
    Early                                                Run Faster
                     Money             Mate
     why?             why?               why?              why?

    Spend
                     Buy A              Get               Run A
   Time w/
                     Home              Married           Marathon
    Family
             why?        why?        why?         why?



                     HAPPINESS
                       Tony Hsieh – CEO (Zappos.com)
Three Cs



                  Company
                   Culture




       Clothing              Customer
                              Service
Company Culture
   Differentiator that gave them competitive advantage
   2005 they debuted their core values
   Value # 7 – employees are encouraged to spend 10-20% of
    their free time socializing outside of work
   2008 created culture book
   Started a pipeline
       225 hours of core training
       160 initial/new hire training
       Additional courses: effective communication, coaching, overcoming
        conflict, & managing stress
       39 Opt hours: Inspiring Great Teams, Leadership Zappos Style, &
        Cultivating Culture
Core Values
   Deliver WOW through customer service

   Embrace & drive change

   Create fun & a little weirdness

   Be adventurous, creative, & open- minded

   Pursue growth & learning

   Build open & honest relationships

   Build a positive team & family spirit

   Do more with less

   Be passionate & determined

   Be humble
Application Process

   Personal theme song
   Rate themselves on a weirdness scale
   Assess how lucky they consider themselves
   Two interviews: skill based & culture based
   10-15 questions based on core values
   4 weeks paid training focused on call center training, offered
    $2000 to leave
Recruitment cost Training hours
Recruitment and training
let the cost of initial process per person      x
cost of recruitment (at Zappos)                 100x
success rate of initial training                y
Compensation for those who return (pg 6)        2000 (1 -y)
Cost of recruitment (at Zappos) after 4 weeks   100x / y
if 'n' employees are needed
Total cost                                      n(100x / y + 2000 (1 -y))
Retention percentage (given for call center)    20% (if generalized)
Total cost                                      .8n(100x / y + 2000 (1 -y))


   Training course                    Training hours
   Core level training                               255
   Leadership training                                39
   Also grooming with other employees         10% - 20%
Customer Service

   Believe rapid growth was due to customers’ loyalty
   CLT team receives an average of 5,100 calls
   Goal is to wow customers & establish personal connection
   Calls times are not measured
   Call center turnover in 2009 was only 7% whereas industry
    average was 150%
   Help customers find shoes regardless if Zappos carries them or
    not
   Strive to beat customer expectations
Fulfillment Center

   Located in foreign trade zone so vendors can ship directly, bypassing
    customs
   License Plate Codes & 100% Random
   Three storage areas
       Static racks – Freestanding shelving units
       Carousels – Ferris wheel type shelving system
       Kiva – Automated storage & retrieval system using inventory pods
   Do not implement a pay-per-performance or reward system
       Computers set up in internet café
       Karaoke, Wii guitar hero & rock band, free drinks, lunch & vending machines
       Employees know the job itself isn’t great but all the perks really make a
        difference
Fulfillment Center
Distribution
   Originally conducted drop shipping
   Brought inventory in house in 2000
   Purchased shoe store in Willows, Ca
   Purchase abandoned building across the street & used as
    distribution center
   Tried third party fulfillment center
   Within 6-8 weeks, developed their own fulfillment center
   2003-75% of orders shipped from fulfillment center
   Cut 25% of its business in short term, but provided to be the
    best decision
Clothing

   2006 – pursued additional lines of business
   U.S. clothing market was four times larger than footwear
    market
   Within 1 year Zappos had 130 different apparel brands
   2007 clothing reached 5% of Zappos sales
   2008 Zappos sold $31 Million in apparel
   Challenge was to get customers to see Zappos as more than just
    a shoe retailer
Service delivery system


          Clothing

         Fill in volumes
                                    Service
                                    delivery

  Provided the basis for employee
                                           Repeat purchase


           Corporate                Customer
            culture                  Service

    Creating ‘y’ type employees
Sales figures
                             1400.0
  Gross sales ($ millions)

                             1200.0
                             1000.0
                              800.0
                              600.0
                              400.0
                              200.0
                                0.0
                                      2000     2002      2004     2006        2008
                                                           Year
                                      Gross Sales     Old sales   New sales
Zappos com

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Zappos com

  • 1. Clothing, Customer Survive and Company Culture Submitted by Group 8
  • 2. Agenda  Brief history  Happiness  3 C’s  Company culture  Core values  Application process  Cost of recruitment and training  Customer Service  Fulfillment center  Distribution Center  Clothing  Service delivery model  Actual sales  Requirement for merger
  • 3. Tony Hsieh • 1994-1995: Pizza business in college • 1996-1998: LinkExchange (online advertising) Sold to Microsoft for $265 million • 1999: Venture Frogs (investment fund) - Invested in Zappos.com, Inc. • 1999: Zappos.com, Inc. • Nov 2009: Amazon acquires
  • 4. Company History Year Milestones 2000 Nick Swinmurn and Tony Hsieh function as co-CEOs of Zappos. Zappos records $1.6 million in gross sales. 2001 Sustained effort produces $8.6 million in gross sales for Zappos. 2002 Zappos leases the Fulfillment Centers in Shepherdsville, Kentucky. The brand elevates gross sales to $32 million. 2003 Gross sales at Zappos rise to $70 million. 2004 Sequoia Capital infuses a significant amount of cash into Zappos. Zappos moves its Headquarters and call-center operations to Henderson, Nevada. Zappos opens its first outlet store in Kentucky. Employee input is solicited for the publication of the first “Culture Book.” Gross sales at Zappos more than double to $184 million. 2005 Sequoia increases its investment in Zappos to a total of $35 million. Alfred Lin, cofounder of Venture Frogs, joins Zappos as CFO. A quit-now bonus of $100 is offered to new hires so that they will consider leaving the company after training if they think they aren’t a fit with the culture at Zappos. Zappos is named E-tailor of the Year by Footwear News. Gross Zappos sales double again, to $370 million.
  • 5. Company History 2006 Nick Swinmurn leaves Zappos to follow a passion for creating other successful start-up businesses. Zappos expands and moves into larger Fulfillment Centers in Shepherdsville, Kentucky. Gross sales at Zappos climb to $597 million. 2007 Zappos launches a Canadian site. Ebags.com’s footwear and accessories e-tailor 6pm.com is acquired by Zappos. Zappos expands its product categories to include eyewear, handbags, clothing, watches, and kids' merchandise. Gross sales at Zappos hit $840 million 2008 Zappos lays off 8 percent of its workforce after investor Sequoia Capital, anticipating a sluggish economy, sends the message to its portfolio companies (including Zappos) that they need to cut expenses as much as possible and get to both profitability and positive cash flow. Zappos Insights is launched to help leaders, managers, and employees from other businesses benchmark Zappos. Gross sales at Zappos hit $1 billion.
  • 6. What is your goal in life? Grow Get a Boyfriend / Company Be Healthy Great Job Girlfriend why? why? why? why? Retire Make Find Soul Early Run Faster Money Mate why? why? why? why? Spend Buy A Get Run A Time w/ Home Married Marathon Family why? why? why? why? HAPPINESS Tony Hsieh – CEO (Zappos.com)
  • 7. Three Cs Company Culture Clothing Customer Service
  • 8. Company Culture  Differentiator that gave them competitive advantage  2005 they debuted their core values  Value # 7 – employees are encouraged to spend 10-20% of their free time socializing outside of work  2008 created culture book  Started a pipeline  225 hours of core training  160 initial/new hire training  Additional courses: effective communication, coaching, overcoming conflict, & managing stress  39 Opt hours: Inspiring Great Teams, Leadership Zappos Style, & Cultivating Culture
  • 9. Core Values  Deliver WOW through customer service  Embrace & drive change  Create fun & a little weirdness  Be adventurous, creative, & open- minded  Pursue growth & learning  Build open & honest relationships  Build a positive team & family spirit  Do more with less  Be passionate & determined  Be humble
  • 10. Application Process  Personal theme song  Rate themselves on a weirdness scale  Assess how lucky they consider themselves  Two interviews: skill based & culture based  10-15 questions based on core values  4 weeks paid training focused on call center training, offered $2000 to leave
  • 11. Recruitment cost Training hours Recruitment and training let the cost of initial process per person x cost of recruitment (at Zappos) 100x success rate of initial training y Compensation for those who return (pg 6) 2000 (1 -y) Cost of recruitment (at Zappos) after 4 weeks 100x / y if 'n' employees are needed Total cost n(100x / y + 2000 (1 -y)) Retention percentage (given for call center) 20% (if generalized) Total cost .8n(100x / y + 2000 (1 -y)) Training course Training hours Core level training 255 Leadership training 39 Also grooming with other employees 10% - 20%
  • 12. Customer Service  Believe rapid growth was due to customers’ loyalty  CLT team receives an average of 5,100 calls  Goal is to wow customers & establish personal connection  Calls times are not measured  Call center turnover in 2009 was only 7% whereas industry average was 150%  Help customers find shoes regardless if Zappos carries them or not  Strive to beat customer expectations
  • 13. Fulfillment Center  Located in foreign trade zone so vendors can ship directly, bypassing customs  License Plate Codes & 100% Random  Three storage areas  Static racks – Freestanding shelving units  Carousels – Ferris wheel type shelving system  Kiva – Automated storage & retrieval system using inventory pods  Do not implement a pay-per-performance or reward system  Computers set up in internet café  Karaoke, Wii guitar hero & rock band, free drinks, lunch & vending machines  Employees know the job itself isn’t great but all the perks really make a difference
  • 15. Distribution  Originally conducted drop shipping  Brought inventory in house in 2000  Purchased shoe store in Willows, Ca  Purchase abandoned building across the street & used as distribution center  Tried third party fulfillment center  Within 6-8 weeks, developed their own fulfillment center  2003-75% of orders shipped from fulfillment center  Cut 25% of its business in short term, but provided to be the best decision
  • 16. Clothing  2006 – pursued additional lines of business  U.S. clothing market was four times larger than footwear market  Within 1 year Zappos had 130 different apparel brands  2007 clothing reached 5% of Zappos sales  2008 Zappos sold $31 Million in apparel  Challenge was to get customers to see Zappos as more than just a shoe retailer
  • 17. Service delivery system Clothing Fill in volumes Service delivery Provided the basis for employee Repeat purchase Corporate Customer culture Service Creating ‘y’ type employees
  • 18. Sales figures 1400.0 Gross sales ($ millions) 1200.0 1000.0 800.0 600.0 400.0 200.0 0.0 2000 2002 2004 2006 2008 Year Gross Sales Old sales New sales