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Zappos
ZapposExecutive Summary
Founded – History Growth Products Culture
Employees Customers
Amazon
Executive Summary
ZAPPOSSituation Analysis
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.
Internal Environment
Availability of Resources:
Best selection Over 1,000 brands Millions of items in warehouse 100% of products inventoried (no drop ship)
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.
Internal Environment
Organizational Culture & Structure:
1. Deliver WOW Through Service2. Embrace and Drive Change3. Create Fun and a Little Weirdness4. Be Adventurous, Creative, and Open-Minded5. Pursue Growth and Learning6. Build Open and Honest Relationships With
Communication7. Build a Positive Team and Family Spirit8. Do More with Less9. Be Passionate and Determined10. Be Humble
Internal 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?
Customer 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
External Environment
SWOT Analysis
StrengthsStrengthsLarge product selectionLarge product selection
Price competitivePrice competitiveExcellent customer experienceExcellent customer experience
WeaknessesWeaknessesLarge inventoriesLarge inventories
Shipping costsShipping costsCompetitorsCompetitors
OpportunitiesOpportunitiesMarket penetrationMarket penetration
Lower overheadLower overheadCustomer convenienceCustomer convenience
ThreatsThreatsState / federal regulationsState / federal regulations
Reliance on carriersReliance on carriersReliance on internet providersReliance on internet providers
Internalfactors:
Externalfactors:
Positive factors: Negative factors:
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
Key Questions
ZAPPOSMarket 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
MARKET PRODUCT FOCUS
Marketing Program, Strategy, and Tactics
Zappos
Adidas, BCBG, Guess, Calvin Klein, D&G, Ed Hardy etc..
Find product and direct customer if they do not have item
Product
Competitive pricing No coupons-feel that level of service
supersedes need for coupons
Price
Falling under the umbrella of Amazon, they are visual to the largest online retailer in the world
Place
Engaging commercials Word of Mouth Collaboration using social media Customer service and liberal return policy Zappos Insights
Promotion
Key Variable Typical Brand Zappos
Service as Marketing
Low High
Traditional Media Spend
High Low
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 advocates
Medium Normal
Zappos vs. The Other Guys
ZAPPOSFinancial Projections
• 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
Zappos.com Financial
Net Sales $ 34.20 40%Operating Exp $ 32.79
(Marketing = 3%)
Net Income $ 1.15 28%
Amazon.com (2010 Financials in millions)
Amazon.com Revenue Mix(millions)
$15,417 , 42%
$20,439 , 55%
$1,075 , 3%
MediaEGMOther
Zappos.com accounted for approx. $1.4 billion of EGM in 2010
Net Sales $ 36.80 Operating Exp 35.73 (Marketing = 5%) Net Income $ 1.07
Zappos.com $ 1.50
Amazon.com2011 Forecast (in millions)
ZAPPOSOrganizational
Structure
.
Relatively flat informal organizational structure
Direct Response Team Key Management throughout
organization Positive organizational culture Progressive leadership Worker Empowerment
Zappos Organizational
Structure
Organizational Chart
Direct Response Organizational Chart
ZAPPOSCompany Achievements
Let us “WOW” you!
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!
ACHIEVEMENTS
ZAPPOS/AMAZONIn 2009, Amazon acquired Zappos for $1.2 Billion in cash and stock.Amazon CEO Jeff Bezos allows CEO Tony Hsieh to run Zappos independently.
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 ZAPPOSWashout?
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.
FUTURE OF ZAPPOS
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%)
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