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 SwinmurmEntrepreneur Mode of Strategic Decision Making: Entrepreneurial

Logical Incrementalism

Timeline
2006: Zappos reached breakeven
2003: Started selling handbags, apparel, watches, other accessories 1999: Founded under the domain name ShoeSite.com 2004-05: Sequonia Capital made investment of $35 mn

2009: Amazon acquired Zappos for $1.2 billion

2000: Venture Frogs invested $ 1.1 mn, company renamed as Zappos.com

2008: Zappos largest online shoe retailer

FINANCE
June 1999

Swinmurn raised US$150,000 as initial capital Venture Frogs invested US$ 1.1 mn in the business for its expansion Sequoia Capital made an investment of US$20 mn in Zappos Sequoia Capital further invested US$ 15mn in Zappos

2000

Oct 2004 June 2005

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 Gross Profit Margin Net Profit Margin 36.6 2008 35.2 2009 34.3

6.2

3.4

2.5

Source: http://www.slideshare.net/Devcorporate/zappos-financials-1781754

Gross Profit and Net Profit

230000 225000 220000 215000 210000 US$ Thousand 205000 200000

Net Profit Gross Profit

195000
190000 185000 180000 175000 2007 2008 Year 2009

2007
Gross Profit Net Profit 192945 1768

2008
223361 884

2009
197316 2376

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 companys 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

Rivalry among firms: HIGH 1. Number of competitors growing 2. Low industry growth 3. Little differentiation strategy Barriers to entry: Low 1. Low capital requirements. 2. Focus is on cost reduction strategies 3. Little Product Differentiation Bargaining power of Customers: High 1. Saturated market 2. Switching costs are low 3. New e-firms offering discount schemes

COMPETITORS
Endless.com

Piperlime.com

Shoebuy.com

STRATEGY TYPE: PROSPECTORS AND REACTORS

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

SO Strategy: 1) Use online distribution channel and vendor base to expand globally 2) 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 WT Strategy: 1) Emphasize cost reduction 2) Product Differentiation through customization 3) Open to New markets

Threats: Rising costs Low product differentiation New entrants

ST Strategy: 1) Use culture as competitive advantage which is difficult to copy 2) Form strategic partnerships to reduce inventory costs and offer differentiated products

1. Customer Service is an Investment

2. Use of social media and employeegenerated media-

Four social media strategies

Participating with People Serving with Content Engage Influencers

Empowerment

Employee-generated media
If you want to amaze your customers, amaze your employees and inspire them to amaze everyone who comes on contact with your enterprise. They believed that every person is an advertising vehicle; with thousands of phone calls a day, multiplied by 365, those are a huge amount 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 Zapposs 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
Vendors:

1200 vendors provided information how customers perceive their product

Customer: e-mail feedback form

Shoe manufacturers: Powered by Zappos

5. Zappos Sponsors
"Zappos Rock 'n' Roll Las Vegas Marathon and Marathon," which draw 28,000 runners each year. Zappos WCC basketball championships. During the tournament, Zappos hosts "Kidz Day," which outfits local Las Vegas kids with a new pair of shoes and an event t-shirt

Is exceptional customer service an effective differentiator

Everyone cant 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
IMPACT ON THE FIRM Low High Environmentrelated / disaster Low/High Strategic

Low

Insignificant

Operational

FREQUENCY OF OCCURENCE

ISSUE PRIORITY MATRIX

HIGH HIGH Too much costs for overnight shipping MEDIUM LOW

PROBABILITY OF OCCURENCE

Cash tied in inventory: Customer delight cost-inefficient, high may increase inventory holding cost; expectations New entrants like endless.com ,etc Risks pertaining to drop-shipping; Crediting customers while goods in transit Privacy- related issues on regular emails sent to customers

MEDIUM

Re-directing to other websitescustomer loss; Saturated Market; High return rate: 20-40 %

LOW

Recession

Cannibalization due to 6pm.com

Over-dependence on social media;

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