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Presented by Group 4:
Ankit Garg (191126)Ankita Garg (191127)Ishan Jain (191141)Madhur Gautam (191144)Payal Samanta (191156)Sudarshan Chitlangia (191177)
The Zappos Story
• Nick Swinmurm-Entrepreneur
• Mode of Strategic Decision Making:
Entrepreneurial
Logical Incrementalism
Timeline
1999: Founded under the domain name ShoeSite.com 2000: Venture
Frogs invested $ 1.1 mn, company renamed as Zappos.com
2003: Started selling handbags, apparel, watches, other accessories
2004-05: SequoniaCapital made investment of $35 mn
2006: Zapposreached break-even
2008: Zappos –largest online shoe retailer
2009: Amazon acquired Zappos for $1.2 billion
FINANCEJune 1999
• Swinmurn raised US$150,000 as initial capital
2000
• Venture Frogs invested US$ 1.1 mn in the business for its expansion
Oct 2004
• Sequoia Capital made an investment of US$20 mn in Zappos
June2005
• Sequoia Capital further invested US$ 15mn in Zappos
2005• Zappos achieved its break-even
• Break even achieved after 6 years : very high as compared to its competitors.
• Main reason for this is drain of revenue by free shipping and generous return policy
2007 2008 2009
Gross ProfitMargin
36.6 35.2 34.3
Net Profit Margin
6.2 3.4 2.5
Source: http://www.slideshare.net/Devcorporate/zappos-financials-1781754
Gross Profit and Net Profit
2007 2008 2009
Gross Profit 192945 223361 197316
Net Profit 1768 884 2376
175000
180000
185000
190000
195000
200000
205000
210000
215000
220000
225000
230000
2007 2008 2009
US$
Th
ou
san
d
Year
Net Profit
Gross Profit
MARKETING MIX
Products•Shoes, accounts for 80 % of its business•Apparel•Handbags•Eyewear•Watches•Kids’ Merchandise, accounts for 20 % of annual revenues
Pricing Policy
• Price Protection Policy
• FREE Shipping both ways
MARKETING MATRIX
Relationship Marketing
GOAL: “Offer Best Service in the Industry”
Their service promotes
STRATEGIES & ADVERTISEMENT
PEOPLE
PROCESS
STRATEGIC HR:
USE OF TEAMS
&
QUALITY OF WORK LIFE
Ten core values
• Deliver WOW Through Service• Embrace and Drive Change• Create Fun and A Little Weirdness• Be Adventurous, Creative, and Open-Minded• Pursue Growth and Learning• Build Open and Honest Relationships With Communication• Build a Positive Team and Family Spirit• Do More With Less• Be Passionate and Determined• Be Humble
STRATEGIC OPERATIONS:
INTERMITTENT SYSTEMS
Operational Decisions
• Shifted Zappos’ order fulfillment operations to 280,000 square foot
warehouse in Kentucky to ensure faster delivery
• Ended ‘drop- shipping’ of shoes, which accounted for 25 % of
company’s revenue to prevent delivery delays
• Ensured displayed products’ availability in stock at its warehouse
• Delivery accuracy rate of 99%
• Installed “Kiva Mobile Fulfillment System”- Magic Robots
ENVIRONMENTAL VARIABLES
Threat of Substitutes: Low
1. Shoes can not be replaced
Bargaining power of Suppliers:
Low
1. Large number of suppliers
2. One-fifth of foot wear industry
business is through online
Bargaining power of Customers: High
1. Saturated market
2. Switching costs are low
3. New e-firms offering discount schemes
Barriers to entry: Low
1. Low capital requirements.
2. Focus is on cost reduction
strategies
3. Little Product
Differentiation
Rivalry among firms: HIGH
1. Number of competitors
growing
2. Low industry growth
3. Little differentiation
strategy
Endless.com
Shoebuy.comPiperlime.com
COMPETITORS
STRATEGY TYPE:
PROSPECTORS AND REACTORS
SO Strategy:1) Use online distribution channel and
vendor base to expand globally2) Form strategic alliances with
vendors for customized foot wears
WO Strategy:1) Capturing new markets will
reduce business cycle vulnerability
2) Global presence can reduce cost with effective SCM
ST Strategy:1) Use culture as competitive advantage
which is difficult to copy2) Form strategic partnerships to
reduce inventory costs and offer differentiated products
WT Strategy:1) Emphasize cost reduction2) Product Differentiation
through customization3) Open to New markets
Strengths:• Core Values• Large vendor and Customer base• Superior Customer service resulting in customer satisfaction• Management flexibility in re-defining strategy and brand• Aggressive Training Criteria
Weaknesses:•Inefficient processes•High operating costs•Focus on US Market only• Vulnerable to business cycles
Opportunities:• Global Positioning• New Markets• Strategic Alliance
Threats:• Rising costs• Low product differentiation• New entrants
1. Customer Service is an Investment
2. Use of social media and employee-generated media-
Four social media strategies
Participating with People
Serving with
Content
Engage Influencers
Empowerment
Employee-generated media
“If you want to amaze your customers, amazeyour employees and inspire them to amazeeveryone who comes on contact with yourenterprise.”
• They believed that every person is anadvertising vehicle; with thousands of phonecalls a day, multiplied by 365, those are a hugeamount of touching points with our customers
Zappos encouraged employees to use Twitter as a means to promote transparency and to reach out to customers in a friendly way. Twitter enabled to :
• Respond quickly to any enquiry from customer: address customer service issues faster.
• To provide insight into market development
• As a tool to get in touch with prospective employees who appreciated Zappos’s core values
COMPANY BLOG “ZAPPOS TV” – VIDEO BLOGGING
3. Strategic Inflection Point
• Offline Advertising Online Advertising
• Search engine Marketing (SEM )
• Used Affiliates i.e. ‘associates’ to direct web traffic to its site
• Zappos Daily Shoe Digest
• Service- “Powered by Zappos”
• zeta.zappos.com
• Removal of price-protection policy
No offer of free shipping
Return time limited to 30 days
Discounts of up to 5 %
4.Information Sharing
Customer:
e-mail feedback form
Shoe manufacturers: “Powered by Zappos”
Vendors:
1200 vendors provided
information how customers
perceive their product
5. Zappos Sponsors
• "Zappos Rock 'n' Roll Las Vegas Marathon and ½Marathon," which draw 28,000 runners eachyear.
• Zappos WCC basketball championships. Duringthe tournament, Zappos hosts "Kidz Day,"which outfits local Las Vegas kids with a newpair of shoes and an event t-shirt
Is exceptional customer service an effective differentiator
“Everyone can’t be special, if it is then no one is special “
Is exceptional customer service an effective differentiator
YES !!!
• A good experience can help make a consumer a customer for life.
• Word of mouth and social media are very powerful tool to either
make or break your business and customers have the power to do
either of the two.
• It is important that you cater to your customer needs by providing
great customer service support in order for you to succeed with
your business.
Customer Service Over Profitability
• Long term investment than expense.
• Market leader with one-fifth of share in shoe industry in US.
• Claimed to have 80% of its customers either through word of mouth or social media.
• 75% repeat customers.
Customer Delight
Surprised overnight shipping
RISKS
Low Low/High
High Environment-related / disaster
Strategic
Low Insignificant Operational
FREQUENCY OF OCCURENCE
IMPA
CT
ON
TH
E FI
RM
ISSUE PRIORITY MATRIXHIGH MEDIUM LOW
HIGH Too much costs for overnight shipping
•Cash tied in inventory: cost-inefficient, high inventory holding cost;•New entrants like endless.com ,etc
Customer delight may increase expectations
MEDIUM •Re-directing to other websites-customer loss;•Saturated Market;•High return rate: 20-40 %
•Risks pertaining to drop-shipping;•Crediting customers while goods in transit
Privacy- related issues on regular emails sent to customers
LOW Recession Cannibalization due to 6pm.com
Over-dependence on social media;P
RO
BA
BIL
ITY
OF
OC
CU
REN
CE
PROBABLE IMPACT
Pitfalls for over-dependence on social media
• Updating audience on all the relevant issues may be tiresome
• 24 * 7 Connectivity Requirement
• Staying updated with upcoming sites of competitors and being adaptive
Recommendations
• Focus on inventory control
• Forward and backward integration
• Strict return norms e.g. mentioning reasons and not 100 % refund if no wear & tear
• Outsourcing call centre work
• Removal of price protection policy may hamper the customers’ trust
THANK YOU