Zappos is an online retailer founded in 1999 that specializes in shoes, clothing and accessories. It grew rapidly due to its superior customer service culture and emphasis on fast shipping, free returns and friendly customer support. In 2009, Amazon acquired Zappos for $1.2 billion but allows it to operate independently. Zappos continues to focus on customer satisfaction through its unique company culture and wide product selection. It remains a leader in online shoe and apparel sales.

1. Zappos

2. Zappos
Executive Summary

3. Executive Summary
∗ Founded – History
∗ Growth
∗ Products
∗ Culture
∗ Employees
∗ Customers
∗ Amazon

4. ZAPPOS
Situation Analysis

5. Internal Environment
Current 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.

6. Internal Environment
Availability of Resources:
∗ Best selection
∗ Over 1,000 brands
∗ Millions of items in warehouse
∗ 100% of products inventoried (no drop ship)

7. Internal Environment
Organizational Culture & Structure:
∗Zappos operates separately from Amazon.
∗CEO Tony Hsieh manages the company the same as
pre-acquisition days.
∗Terms of the arrangement with Amazon allows Zappos
to remain committed to the values and mission of the
company that has been in place since day one.

8. Internal Environment
Organizational 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

9. 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?

10. 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

11. SWOT Analysis
Positive factors: Negative factors:
Strengths Weaknesses
∗Large product selection ∗Large inventories
Internal ∗Price competitive ∗Shipping costs
factors: ∗Excellent customer experience ∗Competitors
Opportunities Threats
∗Market penetration ∗State / federal regulations
External ∗Lower overhead ∗Reliance on carriers
factors: ∗Customer convenience ∗Reliance on internet providers

12. 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

13. ZAPPOS
Market Product Focus

14. 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

15. MARKET PRODUCT FOCUS

16. MARKET PRODUCT FOCUS
∗ Diversification
∗ Offers over 1000 brands of shoes and apparel
∗ Endless inventory of shoes in virtually every style, size, and
color

17. 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

18. Zappos
Marketing Program, Strategy,
and Tactics

19. Product
∗ Adidas, BCBG, Guess, Calvin Klein, D&G, Ed Hardy etc..
∗ Find product and direct customer if they do not have
item

20. Price
∗ Competitive pricing
∗ No coupons-feel that level of service supersedes need
for coupons

21. Place
∗ Falling under the umbrella of Amazon, they are visual
to the largest online retailer in the world

22. Promotion
∗ Engaging commercials
∗ Word of Mouth
∗ Collaboration using social media
∗ Customer service and liberal return policy
∗ Zappos Insights

23. Zappos vs. The Other Guys
Key Variable Typical Brand Zappos
Service as Marketing Low High
Traditional Media High Low
Spend
Toll Free Number Hidden Everywhere
Invitation to Interact Hard to find All the time
Openness To Talk Business Only No time limit
Toll Free Number Hours Typically 9-5 24/7
Outsourcing Common No
Employees as Medium Normal
advocates

24. ZAPPOS
Financial Projections

25. 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

26. Amazon.com
(2010 Financials in millions)
Net Sales $ 34.20 40%
Operating Exp $ 32.79
(Marketing = 3%)
Net Income $ 1.15 28%

27. Amazon.com Revenue Mix
(millions)
$1,075 , 3%
$15,417 ,
42%
$20,439 ,
55%
Media
EGM
Other
Zappos.com accounted for approx. $1.4 billion of EGM in 2010

28. Amazon.com
2011 Forecast (in millions)
Net Sales $ 36.80
Operating Exp 35.73
(Marketing = 5%)
Net Income $ 1.07
Zappos.com $ 1.50

29. ZAPPOS
Organizational Structure
.

30. Zappos
Organizational Structure
 Relatively flat informal organizational
structure
 Direct Response Team
 Key Management throughout organization
 Positive organizational culture
 Progressive leadership
 Worker Empowerment

31. Organizational Chart

32. Direct Response
Organizational Chart

33. ZAPPOS
Company Achievements
Let us “WOW” you!

34. 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.

35. 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.”

36. ACHIEVEMENTS
COMPANY MILESTONES
2002 - $32 Million in Gross Sales.
2006 – First $3 Million in one day.
2007 – Nike joins ZAPPOS.
 Let us “WOW” you!

37. ZAPPOS/
AMAZON
In 2009, Amazon acquired
Zappos for $1.2 Billion in
cash and stock.
Amazon CEO Jeff Bezos
allows CEO Tony Hsieh to
run Zappos independently.

38. 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

39. 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.

40. 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%)