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