Zappos Case Study Free Essays

Case Description: If you like shoes and shop online, you probably have heard of Zappos. com. Nick Swinmurn was inspired to found the firm after a frustrating shopping excursion in San Francisco where he failed to find a properly fitting pair of shoes in the right size, style and color. We will write a custom essay sample on Zappos Case Study or any similar topic only for you Order Now Swinmurn translated his unpleasant shopping experience into new business expressly designed to meet the demanding needs of serious shoppers. As a result of his entrepreneurial zeal and his shrewd exploitation of the tools of e-commerce, Zappos grew from its start in 1999 to over $1 billion in gross annual sales by 2008, and was such a success that Amazon. om decided to acquired the firm for $ 1. 2 billion in 2009. In 1999, the U. S. shoes industry was estimated to be a $40 billion market. As of that date the shoes industry was heavily dependent on direct retail channels such as established chain stores. It is also noteworthy that approximately 1 in 3 retail sales were lost due to out of stock issues, including: inventory limitations, constrains on the number of brands sold in a given location, the number of sizes and styles carried in each store, and so forth. Like its now parent company Amazon had done with books, Zappos overcame these limitations through the stocking of a vast inventory of all makes, styles, colors, and sizes, displayed and sold through their e-commerce platform. From Idea to Business Venture In 1999, there was no web site that had a large enough scope of shoes online. To his surprise, Swinmurn found that there was no major online retailer who focused primarily on selling shoes. Knowing little about shoe retailing, he decided to test the idea of an online shoe retailing web site by approaching brick and mortar shoe retailers close to his home and he asked for permission to photograph their shoes. He posted his pictures to a modest eCommerce Web site. To fulfill orders that were placed through his Web site, Swinmurn would physically go to the store that carried the product buy the pair of shoes and ship it to the customer. This prototype of an eCommerce shoe business provided Swinmurn with the proof of concept he needed to build a real online business. Soon, he signed a collaborative relationship with three major shoe distributors, whereby they would drop ship shoes to customers who ordered them off Swinmurn’s Web site. Zappos. com grew out of this initial set of activities – a new eCommerce giant was born. As Zappos rapidly grew, order fulfillment became a challenge. The firm could not always guarantee the timeliness of supplier drop shipments to individual customers. To meet the expectations of its online retail clientele, Zappos began to open its own warehouse and fulfillment centers, employing approximately 1,600 workers. By 2004, these centers carried in excess of 3 million shoes, handbags, and other clothing items and accessories, drawing on over 1,100 different brands. As a result, Zappos. com offered the best selection of shoes available anywhere online. Customer Service While the original idea behind Zappos was to create a web site that offered a huge selection of shoes, the founder also believed that to compete in the eCommerce marketplace, the firm must provide the â€Å"best service† as well as a vast product mix. Therefore, like Amazon, Zappos’ fulfillment focused on fast and accurate order processing and speedy delivery to the customer. The firm offered free deliveries and returns as well as a guaranteed 4-day delivery window and a 365-day return guarantee. Furthermore, Zappos allowed its fulfillment center personnel broad latitude in addressing customer needs and complaints. The focus was on customer satisfaction and hence there were no call center scripts, time limits on calls, or predefined responses to customer issues. Every employee was given four-weeks of training in the company’s business strategy, culture, and customers focus. New employees were paid their full salary during this training period. Use of web-based Information Technology Zappos embraced Twitter as a valuable tool for building company culture. From its beginning, everyone in the entire organization was expected to use Twitter for communications within the company. When the CEO saw that it helped people connect at a more personal level, he began to encourage everyone to use Twitter to create a more collaborative corporate culture. However, Zappos also realized social media’s value in building an interactive customer community – deemed â€Å"Zapponians. Customers could send a tweet to Zappos from most of the web pages on firm’s Web site and Zappos directly interfaces with Twitter servers in order to monitor and track Zappos-related conversations (including setting up a separate website called â€Å"Zappos Conversations†). The employees also used blogs to interact with customers. Of course, not all interactions were positive, but the overall result includes 1,200 social media â€Å"con versations† with customers per month, 600 positive monthly fan tweets, and over 2. 6 million Twitter followers. As its business grew, the firm opened more web sites, including Couture. zappos. com, Outdoor. zappos. com, Rideshop. zappos. com, Running. zappos. com, Blogs. zappos. com, and Deliveringhappiness. com. [Note: Students should visit at least one Zappos Web site and assess its quality in terms of content, design, and functionality. ] Worker Retention In most retailing companies, employee turnover was generally high. Zappos had a unique way of dealing with the problem. New employees went through an intensive four-week training program, immersing them in the company’s culture, strategy, and processes. After a week or so into this training program, the firm proposed what was known at Zappos as â€Å"The Offer† to its new employees. The firm offered to pay its newest employees money if they chose to quit at that point in their tenure with the firm. The offer went something similar to this: â€Å"If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $ 3,000 bonus. † Zappos actually offered an incentive for its employees to quit! But of course the objective here was to ensure that only those committed to the success of Zappos stayed with the firm. Culture Zappos’ employees live by a set of core values. First among these was that the employees were encouraged to create a fun atmosphere at work. For example, the staff could dress in funny costumes. They could bring their pets to work and organize entertaining events during office hours. All these activities were intended to maintain a creative and open atmosphere in the work place, and a sense of â€Å"coolness. † For his part, Swinmurn was very much part of this fun culture, communicating with the company via blogs and Twitter. Overall Zappos’ corporate culture celebrated and embraced diversity and each worker’s individuality. Even with all the fun, the firm achieved considerable business success. [pic] Tony Hsieh, chief executive of Zappos. Photograph: Zappos Twitter account Case Questions: 1. What is the business model (re: how do they make money, what is their value proposition) for Zappos and what are three critical success factors for the firm? 2. List and describe the application software supporting the respective business process and the IT infrastructure enabling the application software. Business Process |Application Software |IT Infrastructure | |Order processing | | | |Supply chain logistics and warehousing | | | |Customer servicing | | | |Human resource management | | | |Financial management | | | 3. Describe the role the Zappos’ Web site and related services support its customer intimacy and operational excellence business objectives. Your answer should address the web sites design (layout, functionality, and content). 4. Describe the reasons it made sense for Amazon to acquire Zappos. Separately, describe the expertise (in terms of information systems and the use of IT) that Amazon brought to the deal that might improve Zappos’ eCommerce capabilities. How to cite Zappos Case Study, Free Case study samples Zappos Case Study Free Essays Before starting the analysis It should be taken In consideration that Zappers business is done thru e-commerce and it managed to introduce itself at the early sass’s when society had trust issues with making business online, which is the platform that Capos used to create trust and enhance it’s value proposition. 1. Acquisition Capos strategy for calculations Is to aim to prospect customers by: Word of Mouth – The best policy for quelled a client trust Is thru a good referral, this fact is exponentiation when applied to e-commerce Excellence in Customer Service – Achieved by an easy contact either thru the website and most importantly thru the call center, whose goal is not only help the client to complete their transaction and resolve any problem they may encounter, but to go beyond and create a connection with every customer. We will write a custom essay sample on Zappos Case Study or any similar topic only for you Order Now Actions speak louder than words. This is true for the WHOM policy on Capo’s which have made them famous since the company started, Capo’s understood in their early stages that the influence of â€Å"external effects† such as advertising or direct marketing, where not good enough tools to convince society to engage with the new rend of e-commerce. One of the mall problems with e-commerce Is trust (Specially In sass’s), Capos managed to break the trust barrier by making themselves available 24/7 and by implementing one of the most flexible return policies in the market. This two elements take away the risk of buying online, since the client has the chance to give back the product if they don’t like it or it doesn’t fits, because of these, the buying experience Is just as if you go buy the same product on a store. Once the risk has been stable, capos creates value by providing an easier shopping experience here customer can go thru an online catalogue and buy from home. Retention By excellence in customer service, clients are constantly in a delight stage bringing high satisfaction levels since they receive way more than what they would expect from any other company and even from capos Itself! Client service and returned policies have created several switching cost, which enable them to retain their clients and also very important they created strong imitation barriers against competitors Evaluation cost – once the customer has tried and trust Capo’s service, buying the risk, which makes it simpler Just to stay with capos. Benefit loss cost – This is not a â€Å"premium customer† benefit, but the generous return policy is given to every capos client, and it represents a big switching cost that might be stronger than strong price reductions, since the money being saved on buying the product, might not be worth nothing if they can’t trust that the product will be delivered in time, with the quality expected, with a return policy, etc.. Relational Switching Cost – The call center staff is instructed to create personal bonds with customers, even if it means to talk about non-purchasing themes for hours, everything so that clients have a personal relationship with the brand (not only one staff member, but all of them) Development All these combined had created both attitudinal and behavioral loyalty, which translates into positive whom and continued repurchase habits. No matter the cost, the repurchase habits on clients must be kept specially if we take in mind that capos might constantly increase their product assortment. Having this in mind, even when the cost of the returned policy and the call center seem high, the company is investing in the Customer Lifetime Value, as said in the article, once a customer gets acquainted with the shopping experience thru Capos their repurchase levels increase as Capos keeps growing their catalogue it’s assuring future purchases of their loyal customers. As seniority in clients grows so does their social value, which completes a cycle for new clients acquisitions by making WHOM a major drive for consumption in this industry, thus making the investment on loyalty measures completely worthwhile. . Returned Merchandise Policy Capos brand has been built from gained trust from clients, this is what makes it exceptional, since it has created customer experience of delight that comes not only from exceptional operational process but from the service provided, making client’s needs a first priority. As previously explained, the returned merchandise policy is a main component in the customer life cycle, not only is present in all stages, but its relevant for throughout acquisition, retention and development. As if it wasn’t enough, this policy is crucial to the product value proposition and its a main differentiation factor from all competitors, since there’s no other company that’s so flexible on the returned researched. Customer equity, might be affected â€Å"negatively’ by high acquisitions/retention costs, but rather than an expense, this should be counted as an investment (as Capos attract more customers induced by a social network effect. If Capos decided to cut down on returned policy, it would create a â€Å"dissatisfied effect† since as we had learned, the problem with delighting customers is that from now on this special treatment is now an expectation that if its not fulfill would bring to disappointment. Secondly, e-commerce is filled with competitors, big and small, you can find any kind f product assortment on the web and most importantly most of this companies try to attract their clients thru advertisement (mainly on web) and low prices. If Capos applied the same strategy, it might destroyed value, since it won’t be able to differentiate from the rest of competitors that rely on publicity instead of being a one of a kind company that you will discover thru a very good referral. The proposition of cutting down on returned merchandise to invest on advertisement should be completely rejected, rather than advertise, it would be a better idea for the many to invest on social network management Just to make sure they are present and to empower their spokespersons to amplify the social network effect. The merchandise returned policy might have room for improvement for profitability purposes, we haven’t been provided with the numbers, but for instance the time lapse of a one year could be cut down without having a big negative effect on clients, allowing the company to recognize profits accounting wise at an early stage. 3. Client Service by Ranking As discussed before, the call center is the key for profitability, since its the element hat creates a personal bond and the element of trust. If Capos decides to apply a distinctive service to their clients, they will no longer be providing an exceptional customer service, at least not to all of them. The commerce industry is still in the initial phase, they are new customers buying products for the first time, they are the late adopters and they might need an incentive to take this step. The call center is exactly what this potential customers need, they are interested enough to try to contact the company, they need to check that everything is legitimate and a good client service will assure them that they can trust Zapped. The call center is even more important for new clients, by applying a priority service based on seniority, Capos might lose a big share of their potential customers, since they will provide a disappointing first impression and some of them will defect even before they become customers. If the company is forced to cost reduction, they must do everything in their power to keep providing the excellence in customer service, because this is what the brand transmits to both new and current clients. By changing this factor, the brand will lose reduce its operational cost on logistics, their inventory, anything else before affecting client service. How to cite Zappos Case Study, Free Case study samples