Running head: ZAPPOS MORE THAN SHOES 1

Zappos More than shoes

An Assignment Submitted by
Luis Mendoza
Jesus Lopez
James Al Gonzalez
University of La Verne


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Table of Contents
1. Introduction3
2. Industry Environment.....4
3. Organizational Mission/Vision and Goals.6
4. Organizational Strategy..6
5. Zappos Structure....8
6. Control Features.....9
7. Organizational Culture.....10
8. SWOT Analysis ...11
9. Conclusion and Recommendations..12
References...13

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1. Introduction.
The term E-commerce has roots in the 1970s with the development of Electronics
Funds Transfer (EFT) and the introduction of the Automatic Teller Machines (ATM) in the
1980s. With the development of the Secure Socket Layer (SSL) standard in Mosaic web
browser and the explosion of the Internet in 1990s the term has been universally accepted as
the ability to buy and sell via the Internet (Graham, 2008; p. 776). Zappos.com is an online
shoe and apparel shop that was found in 1999 by Nick Swinmurn and developed into the
largest online shoe store. Today this online retailer offers 500 brand names and 90,000 styles
and stocks over 2 million pair of shoes (Lamb; 2011; p. 97).
Currently, the headquarters of the company is based in Henderson, Nevada. Its
products include shoes, apparels, handbags, accessories and eyewear. In 2009 the company
announced that it will be acquired by Amazon.com. At the very beginning the companys
name was ShoeSite.com that was changed a few months after the sites launch. The word
zappos, according to the companys leaders, should be a variation of the Spanish word
zapatos, which means shoes.
Since that time the company enlarged its target products from shoes only to apparel,
accessories and dresses inclusively. Today the company operates primary in the USA,
concentrating on more or less known brands like Nike and Ugg boot. The target audience of
the company is quite large, stating from children and teenagers and ending with the middle
age people of different social, economic and educational backgrounds. The company tried to
cover as many niche as possible, including the issues like hard-to-find size, wide and narrow
widths and vegan shoes. Through its quite short history the company showed more or less
speedy development and understanding of the market it operates in. Today its customer
oriented services include phone line and e-mails, although for some period of time phone line
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has been closed for the customers after the information that the companys site was attacked
and many customers information stolen.
Thesis Statement: The purpose of this paper is to make a research of the specifics of
Zappos.com Company in order to understand what makes it different from the similar e-
commerce projects. Organizational culture, industry environment and SWOT analysis will be
used to identify those specifics.

2. Industry Environment.
First and foremost, e-commerce is an industry, whether it concerns selling shoes,
clothes or books, has its specifics in comparison to traditional businesses. For instance, it is
clear that the companies like Zappos rely heavily upon the newly developed technologies and
the use of technological know-how. At the same time, such companies are governed by the
same business rules as traditional businesses are and there is a need to find the balance
between technological and business demands.
One of the important specifics of the industry environment in case with e-commerce
is customers as the target audience for e-commerce projects stands out from the large number
of usual customers. For instance, Swinmurn could not find investors for his project for quite a
long time because no one believed that people would buy shoes without trying them on first.
Another important specifics of the industry is the fact that people search shoes by brands
(Orlov; 2007; p. 34) and while today Zappos is one of the largest companies where the
number of brands reaches 500, the use of as much as possible strategy became one of the
reasons for Zapposs success. Moreover, it should be remembered that among the most
important specifics of the industrys environment is making customers interact with the
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company. There are various online services where Zapposs customers may get help and just
express their opinion. With the development of different social networks, like the Facebook
and Twitter, the company started using them as one of the important means of organization-
customers interaction.
In spite of the fact that Zappos is a purely e-commerce business, this does not mean
that its competitors are also pure e-commerce businesses only. Today many well known
brands and companies have web sites through which the one may find what he or she is
interested in. Among the best known competitors of Zappos are Bluefly, Inc., Coldwater
Creek and Collective Brands, Inc.
Originally, Zappos started with drop ship model, but the manufactures of many
desirable shoe brands would not support drop shipping. Drop shipping is a supply chain
management technique in which the retailer does not keep goods in stock, but instead
transfers customer orders and shipment details to either the manufacturer or a wholesaler,
who then ships the goods directly to the customer. Accessing these brands forced Zappos to
have a fulfillment center so it could buy in bulk and ship individual order from its own
inventory (Rabinovich, Laseter; 2011 p. 93). The drop ship model is good as a means for an
organization that would not work on expensive inventories, on the other hand, this system
increases the number of customer services challenges. This is because the company does not
have complete control of inventory, thereby unable to guarantee on time shipments. Today
Zappos has a mixed supply chain system in order to reach as many brands as possible and to
increase customer satisfaction.
Among the serious problems that Zappos faced since the very beginning was the fact
that people did not really believe in the opportunity of Internet sales or of the honesty of
online retailers. There were also problems with political and economic guidelines that
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regulated e-commerce. During the early years of Zappos operations there were almost no
laws regarding ecommerce. However, the situation changed quickly for better, when
customers attitude of ecommerce became more favorable with the acceptance of the security
of the transactions online.

3. Organizational Mission/Vision and Goals.
While Zappos.com is an online retailer, not just a website that describes the company
and the spheres of its work, it does not have sections like mission or vision statement. These
important characteristics of the company can be understood from different indirect indicators.
For instance, each profit business is oriented on customers satisfaction and this idea has long
become one of the basics of mission and vision statements, irrespective of the industry the
business is in. Zappos is an exception that is seen from the fact that the company launched the
mixed supply chain system.
One of the goals of Zappos as an online service leader is to maintain a high level of
customers satisfaction through providing them with the high quality services and products.
Another goal of Zappos is to make its customers associate brands with absolute quality
services in order to become more than just a retailer. The values of the company are also
easily observed from the way it operates. First and foremost, Zappos is oriented on treating
each customer as an individual and providing each of them with high quality services to get
their loyalty. Sustainable growth and profitability should be mentioned as the key factors in
the value statement of Zappos. Another important value of Zappos is their customers data
protection. This was seen from the actions that were taken after the January 16, 2012
revelation that the companys website had been hacked. On the whole, such mission, values
and goals are among the most appropriate for the type of business Zappos is in. Online
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retailing has a short-term history in which the role of customers satisfaction is the most
vivid.
4. Organizational Strategy.
Organizational strategy is one of the major key points for any organization that serves
as a mean of reaching success or failure. The Zappos strategy is to provide customers with
the very best service, what they call Wow service, and to ensure the items get delivered to
customers as soon as possible (Smith, Milligan; 2011; p. 167). This strategy resulted in the
expensive investment into the companys inventories and constant improvement of the online
services. It is possible to state that this is the very strategy that led the company to success,
although it resulted in additional expenditures many online businesses try to avoid.
One of the core values, Embrace and Drive Change the company emphasizes that
change is good for Zappos, there is no need to be afraid of it. Surely, such statement is true
only when it comes to the planned and controlled changes or simple changes in the
organizational environment and working process that do not require any planning.
On the whole, organizational strategy of the company is directly connected to its
mission and can be even called the result of such mission statement and the way the company
stated its major goals. This type of relationships, direct proportionality, is quite often
observed in modern business world and implies a number of important limits on the work of
organizations that use it.
For instance, it is almost impossible to integrate serious strategic changes in such
company as Zappos is as it may result in the change of the way the company views itself and
its customers in the industry. However, such strategy is quite obscure and is based on a great
number of different sub strategies that describe how and why many processes of customers
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satisfaction are applied. Thus, only those sub strategies can be changed, while the change of
the major strategy of the company may result in its ruining.
Moreover, there is observed a direct relationship of the companys organizational
strategy and the environment it operates in. Zappos ecommerce will continue to flourish as
long as people like the convenience and trust the security. While all customers seek high level
of services as possible, especially, when they get this very level of services for quite a low
price, all e-commerce businesses are oriented on customers satisfaction and the service
quality increase.

5. Zappos Structure.
While the basic selling process is done through the companys site, Zappos still has an
outlet store that is located along with its warehouse in Shepherdsville, Kentucky. Such simple
structure of the company is heavily influenced by the type of business it is in. Moreover,
comparing to many other online shops the structure of Zappos is even quite difficult. Zappos
does not produce any type of products it sells, thus there is no need in the large and expensive
inventory for the company.
Moreover, the structure of the company implements the high level of communication
between the companys employees and customers, which is supported by the companys
leaders. Zappos.com has fully integrated Twitter to it corporate structure Of nearly 1,600
Zappos.com employees more than 400 are on Twitter, actively tweeting to one another about
their own lives and work, and, in the process, Zappos.com (Fitton, Gruen, Poston; 2010; p.
94).
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This means that the companys customers may get the first hand information about
the inner processes and culture of Zappo.com quite easily. This strategy is now being
successfully implemented by many traditional businesses. It became clear that the problem
of communication between the companies and their customers has deepened seriously and
without the changes in the existing communication strategies many present day and future
customers may be lost.
This seriously influenced the type of human resource strategy that Zappos.com uses
when looking for new employees. On the whole, Zappos structure corresponds to the type of
business the company is in, while such strategies as integration of Twitter and The Facebook
into the corporate structure make it structurally corresponding to the stated mission and goals.

6. Control Features.
As well as in any other online business, the most important means of control over the
services and products quality, as well as the control over the employees attention to the
customers, are online. There are phone lines and e-mail services; there are means of
describing the impression from the work with the company and many different mean of direct
and indirect communication between the customers and the companys managers and leaders.
For instance, the integration of Twitter into the work of the company gave another
direct method of control over the quality of services and employee work. However, the
question of product quality is more difficult than the question of control over the employee
work and services quality since Zappos does not produce any of the products it sells.
As a result, it can control neither the process of production or materials used; there is
no way to control the process of storage and transportation until the company gets the
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products to its warehouse. Moreover, while the drop ship model of product delivery is still
used by the company, the quality of products delivered with the help of this model is
absolutely impossible to control. Thus, in addition to the online control services that Zappos
has, it had to launch other important control services like the control over the storage of the
products in the warehouse and the outlet store and control services over the process of
transportation of individual orders.
Control features over the way products are storage in the warehouse includes not just
control over the temperature and the level of dust, but also control over the way the products
are located through the warehouse. It is important to find quickly what is needed, that is why
classification of products according to the brands, size and other features is really important.
Lack of control over such simple things may lead to the poor level of work among the
warehouse employees and deliverance problems.

7. Organizational Culture.
The issue of organizational culture is one of the most difficult for the type of the
company Zappos is. According to the Zappos site, the culture of the company is based on its
core values that have already been mentioned above. Firstly, the company promotes the
importance of wow services and, secondly, it promotes the importance of fun as the core
and one of the most unique cultural values of the company.
Positive attitude inside and outside the team resulted in a specific recruitment process
that the company developed. There are two levels of recruitment process: during the first one
a person is interviewed as to the potential technical and knowledge skills, required by the
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company. The second level is a purely human resources department interview, during which
a person is interviewed to investigate whether he or she fits into the companys culture.
Zappos cultural belief that customer service should not be just a department; it
should be the entire company (Keyton; 2010; p. 101), promoted the importance of customer
satisfaction services. While some companies, like Southwest Airlines, for instance, promote
the importance of employees first as the mean of customers satisfaction, Zappos belongs to
the larger part of companies, where the importance of customers is promoted to be higher
than the importance of employees. For instance, Zappos employees are allowed to go the
extra mile for their customers through actions such as sending customers flowers if they had a
bad day or bending company policy by accepting returns on worn shoes and sending a new
pair (and thank-you note) in its place (Ainsberg; 2010; p. 41). Still, it is possible to suggest
that the leaders of Zappos understand that only happy employees may provide fun and high
level of customers satisfaction.

8. SWOT Analysis.
SWOT analysis as a method of strategic planning, is an abbreviation that stands for
Strengths, Weaknesses, Opportunities and Threats. Zappos strengths are: customer oriented
culture and services, untraditional means of customers satisfaction and high level of internal
communication. Moreover, the fact that Zappos.com is already the leader of the market is
also an important strength that helps to attract more attention to the company without
spending a lot of money on advertising and many other promotion strategies. Another
strength is that the company has large number of brands for a customer to choose from.
Online customers often search something they need by brands and the larger number of
brands they can reach, the better. Another obvious strength of Zappos is that the company
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works not just with shoes, but also with accessories and apparels for different target layers,
including kids.
Weaknesses of Zappos concern mostly the type of industry the company is in. Firstly,
online retailers depend greatly on the type of technologies used and the problems with phone
lines or website access may result in the high level of customer dissatisfaction. The decision
to focus on customer service rather than on marketing enabled Zappos to grow to a billion-
dollar company (Boone, Kurtz; 2011; p. 359). Still, this factor also means that the company
often underestimates the influence and importance of the marketing issues on the everyday
business decisions.
Opportunities that Zappos face are numerous: enlargement of the target layers and
improvement of the customers services satisfaction through improvements of transportation
and return issues, enlargement of the inventory to improve the speed of the delivery to the
customers and many others. There are a lot of opportunities that are based on the unique
culture Zappos developed. At the same time, the unique culture of Zappos is one of its serious
threats. Today many customers of Zappos like it thanks to its unique culture and
communication opportunities it suggests. The change of the culture is one of the greatest
threats that Zappos faced and still faces. After the acquisition of the company by
Amazon.com many customers feared that this process will change the existing culture and
customers attitude of Zappos. Fortunately for Zappos, the type of acquisition the company
faced did not touch its culture; however, while the company is a part of larger one today this
threat still exists. Among the other serious threats are the decrease of technical support and
high level of customers dissatisfaction as a result. Problems with technology are common
with online business. As such, to prevent dissatisfaction, customers need to be notified and
be given explanations to why they were deprived from some or all services.
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9. Conclusion and Recommendation.
Zappos, as a leader of the industry, should pay attention to all internal and external
threats that may influence the process of the companys work. While the biggest threat the
company faces is the change of the corporate culture, it is important to communicate to
customers that the weird organizational culture, accepted in Zappos from the very
beginning, is still promoted and maintained. Moreover, it is important to protect the issue of
cultural independence of Zappos. In keeping with their final core value of Be Humble
Zappos needs to maintain a open policy regarding any technical problems that may affect
customer account security. Security problems will most likely be the first to influence
Zappos clients as to whether they like its culture or not, they are not likely to accept security
troubles, especially when the later result in steeling the clients personal information.


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References
Ainsberg, A. (2010). Shackleton: Leadership Lessons from Antarctica. iUniverse, 120 pp.
Boone, L. E., Kurtz, D. L. (2011). Contemporary Marketing. Cengage Learning, 800 pp.
CEO Letter. Retrieved April 16, 2012, from:
http://blogs.zappos.com/ceoletter
Fitton, L., Gruen, M., Poston, L. (2010). Twitter for Dummies, John Wiley & Sons, 312 pp.
Graham, M., (2008). Warped Geographies of Development: The Internet and Theories of
Economic Development, Blackwell Publishing 776 pp.
Keyton, J. (2010). Communication and Organizational Culture: A Key to Understanding
Work Experiences. SAGE, 232 pp.
Lamb, Ch. W. (2011). Marketing, Cengage Learning, 648 pp.
Orlov, Z. (2007). How you can reach wealth by using proven millionaires ideas, Zoran Orlov,
365 pp.
Part of the Zappos Family. Retrieved April 14, 2012, from:
http://about.zappos.com/
Rabinovich, E., Laseter, T. M. (2011). Internet Retail Operations: Integrating Theory and
Practice for Managers. CRC Press, 268 pp.
Smith, Sh., Milligan, A. (2011). Bold: How to Be Brave in Business and Win. Kogan Page
Publishers, 320 pp.