Clothing, Customer Survive and Company Culture

Submitted by Group 8

Agenda
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Brief history Happiness 3 Cs Company culture

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Core values Application process Cost of recruitment and training Fulfillment center Distribution Center

Customer Service
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Clothing Service delivery model Actual sales Requirement for merger

Tony Hsieh

1994-1995: Pizza business in college 1996-1998: LinkExchange (online advertising) Sold to Microsoft for $265 million 1999: Venture Frogs (investment fund) - Invested in Zappos.com, Inc. 1999: Zappos.com, Inc. Nov 2009: Amazon acquires

Company History
Year 2000 2001 2002 2003 2004 Milestones y Nick Swinmurn and Tony Hsieh function as co-CEOs of Zappos. y Zappos records $1.6 million in gross sales. y Sustained effort produces $8.6 million in gross sales for Zappos. y Zappos leases the Fulfillment Centers in Shepherdsville, Kentucky. y The brand elevates gross sales to $32 million. y Gross sales at Zappos rise to $70 million. y Sequoia Capital infuses a significant amount of cash into Zappos. y Zappos moves its Headquarters and call-center operations to Henderson, Nevada. y Zappos opens its first outlet store in Kentucky. y Employee input is solicited for the publication of the first Culture Book. y Gross sales at Zappos more than double to $184 million. y Sequoia increases its investment in Zappos to a total of $35 million. y Alfred Lin, cofounder of Venture Frogs, joins Zappos as CFO. y A quit-now bonus of $100 is offered to new hires so that they will consider leaving the company after training if they think they arent a fit with the culture at Zappos. y Zappos is named E-tailor of the Year by Footwear News. y Gross Zappos sales double again, to $370 million.

2005

Company History
2006 y y y y y y y y Nick Swinmurn leaves Zappos to follow a passion for creating other successful start-up businesses. Zappos expands and moves into larger Fulfillment Centers in Shepherdsville, Kentucky. Gross sales at Zappos climb to $597 million. Zappos launches a Canadian site. Ebags.coms footwear and accessories e-tailor 6pm.com is acquired by Zappos. Zappos expands its product categories to include eyewear, handbags, clothing, watches, and kids' merchandise. Gross sales at Zappos hit $840 million Zappos lays off 8 percent of its workforce after investor Sequoia Capital, anticipating a sluggish economy, sends the message to its portfolio companies (including Zappos) that they need to cut expenses as much as possible and get to both profitability and positive cash flow. Zappos Insights is launched to help leaders, managers, and employees from other businesses benchmark Zappos. Gross sales at Zappos hit $1 billion.

2007

2008

y y

What is your goal in life?

Grow Company
why?

Get a Great Job

why?

Boyfriend / Girlfriend
why?

Be Healthy
why?

Retire Early
why?

Make Money
why?

Find Soul Mate

why?

Run Faster
why?

Spend Time w/ Family

Buy A Home
why? why?

Get Married
why? why?

Run A Marathon

HAPPINESS
Tony Hsieh CEO (Zappos.com)

Three Cs

Company Culture

Clothing

Customer Service

Company Culture
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Differentiator that gave them competitive advantage 2005 they debuted their core values Value # 7 employees are encouraged to spend 10-20% of their free time socializing outside of work 2008 created culture book Started a pipeline
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225 hours of core training 160 initial/new hire training Additional courses: effective communication, coaching, overcoming conflict, & managing stress 39 Opt hours: Inspiring Great Teams, Leadership Zappos Style, & Cultivating Culture

Core Values
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Deliver WOW through customer service Embrace & drive change Create fun & a little weirdness Be adventurous, creative, & open- minded Pursue growth & learning Build open & honest relationships Build a positive team & family spirit Do more with less Be passionate & determined Be humble

Application Process
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Personal theme song Rate themselves on a weirdness scale Assess how lucky they consider themselves Two interviews: skill based & culture based 10-15 questions based on core values 4 weeks paid training focused on call center training, offered $2000 to leave

Recruitment cost Training hours

Recruitment and training let the cost of initial process per person cost of recruitment (at Zappos) success rate of initial training Compensation for those who return (pg 6) Cost of recruitment (at Zappos) after 4 weeks if 'n' employees are needed Total cost Retention percentage (given for call center) Total cost x 100x y 2000 (1 -y) 100x / y n(100x / y + 2000 (1 -y)) 20% (if generalized) .8n(100x / y + 2000 (1 -y))

Training course Training hours Core level training 255 Leadership training 39 Also grooming with other employees 10% - 20%

Customer Service
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Believe rapid growth was due to customers loyalty CLT team receives an average of 5,100 calls Goal is to wow customers & establish personal connection Calls times are not measured Call center turnover in 2009 was only 7% whereas industry average was 150% Help customers find shoes regardless if Zappos carries them or not Strive to beat customer expectations

Fulfillment Center
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Located in foreign trade zone so vendors can ship directly, bypassing customs License Plate Codes & 100% Random Three storage areas
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Static racks Freestanding shelving units Carousels Ferris wheel type shelving system Kiva Automated storage & retrieval system using inventory pods Computers set up in internet caf Karaoke, Wii guitar hero & rock band, free drinks, lunch & vending machines Employees know the job itself isnt great but all the perks really make a difference

Do not implement a pay-per-performance or reward system

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Fulfillment Center

Distribution
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Originally conducted drop shipping Brought inventory in house in 2000 Purchased shoe store in Willows, Ca Purchase abandoned building across the street & used as distribution center Tried third party fulfillment center Within 6-8 weeks, developed their own fulfillment center 2003-75% of orders shipped from fulfillment center Cut 25% of its business in short term, but provided to be the best decision

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Clothing
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2006 pursued additional lines of business U.S. clothing market was four times larger than footwear market Within 1 year Zappos had 130 different apparel brands 2007 clothing reached 5% of Zappos sales 2008 Zappos sold $31 Million in apparel Challenge was to get customers to see Zappos as more than just a shoe retailer

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Service delivery system

Clothing
Fill in volumes

Service delivery
Repeat purchase

Provided the basis for employee

Corporate culture
Creating y type employees

Customer Service

Sales figures
1400.0 1200.0 1000.0 800.0 600.0 400.0 200.0 0.0 2000 2002 2004 Year Old sales 2006 New sales 2008 Gross sales ($ millions)

Gross Sales