ZAPPOS ANALYSIS
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Zappos analysis
Student’s Name
Institutional affiliation
ZAPPOS ANALYSIS
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Zappos analysis
Introduction
Zappos is an online clothing and shoe retailer headquartered in Nevada, Las Vegas. It
was founded by Swinmum Nick in 1999 who launched the firm under a domain name
Shoesite.com. Just a few months after its inception, the company name as changed to Zappos
such that the firm would not only be limited to selling footwear. By January 2000, venture
frogs had invested more capital which allowed the firm to move into their own offices. At
this time, Hsiech was on the board and the co-CEO with Swinmum (Greenfield, 2015). In
2001, the organization brought in approximately $ 8.6 million which represented a significant
increase in terms of net revenues from the previous year. By 2005, Zapposs had recorded
$184 million in the gross sales (Kopelman, Chiou, Lipani and Zhu, 2012). This increase in
sales elevated the company which in turn received its first round of venture capital of
approximately $35 million from Sequoia Capital. At this time, the organization then moved
its headquarters from San Fransisco to Nevada. Over the next thirty-six months, the
organization doubled its revenues hitting a $ 840 million in its gross sales. In 2007, Zappos
had expanded its product line to include eyerwear, watches, handbags, kid’s merchandise and
clothing. By 2008, Zappos attain a $1 billion annual sales. This growth continued to the
extent that Amazon acquired the organization in 2009 for approximately $ 1.2 billion.
Consequently, this essay will analyse Zappos capabilities and how these factors relate to
critical key success factors, the main stakeholders and the organizational culture.
Company capabilities
As a web-based retailer, Zappos key capabilities accrue from the fact that the firm
enables an in-store shopping experience to customers at the comfort of their homes. While
the firm started this experience using shoes only, it has expanded its array to include eyewear,
clothing, kid’s merchandise as well as other products (Kopelman, Chiou, Lipani and Zhu,
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2012). The firm’s business model has also improved its capabilities. The organization is built
on the promise of providing its customers with an exceptional experience. In doing so, the
firm has built a loyal customer base. Some of the key components that make Zappos
shopping experience exceptional include, customer service available for twenty-four hours a
day for seven days a week, a three hundred and sixty-five-day return policy, and free
shipping. The free shipping and return policy applies to all orders irrespective of the size and
price (Kopelman, Chiou, Lipani and Zhu, 2012). This allows customers to order various
items such that they can try them from the comfort of their homes. Zappos business model
has been a key capability that has enabled the firm to expand and grow substantially since its
inception. For instance, the unwavering emphasis on service underlying the firm’s operating
model has been a key force impacting key operating decisions. This model has helped the
firm fit perfectly in the online market platform.
Zappos warehousing and inventory capabilities have helped the firm attain an
impressive success over the years. At its Launch in 1999, the organization was initially
designed to act as a “middleman” and operated on the “drop ship” model. The company held
no inventory as it simply connected its customers with producers who then filled the
requested orders. However, in 2003, most online retailers began to go bust ruing the dot-com
crash. Zappos strategized through differentiation to ensure a worthwhile shopping experience
for the customers. However, they could not achieve this under a drop ship operating model as
the company did not have any control over deliveries. Consequently, the firm terminated its
drop ship business and began to keep inventory on its own warehouses. Moving a fulfilment
of in-house orders, the firm now owned and controlled its customer entire shopping
experience thus giving the firm a competitive edge (Kumar and Mukherjee, 2018)
Call centre operations at Zappos significantly contribute towards the success of the
organization. The company understands that interactions of the customer with the firm
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through call centre is a crucial aspect of the entire customer experience. Nevertheless, with its
headquarters in San Francisco, the firm experienced some challenges trying to find serviceoriented and committed individuals to become the call centre staff. With a savvy-tech and
first lane culture of residents, the Bay area did not produce individuals who took the call
centre job seriously. This negatively impacted the firm as the employees did not delivery the
standard level of customer experience. In addressing this issue, Zappos relocated its call
centre operations to Las Vegas whereby the culture was unique and the cost of living was
relatively low. Given that Les Vegas heavily emphasizes on hospitality, Zappos could easily
find the appropriate staff for call centres as residents could work during odd hours and
viewed customer service as a legitimate entry job for career development. Additionally,
Zappos does not have a limit on the time one customer care representative spends talking to a
customer (Ford, 2017). Unlike other firms, which substantially reduce time used to resolve an
issue, Zappos encourages its call centres to spend as much time as possible to understand the
customer such that the firm can help accordingly and retain that customer (Ford, 2017).
Moreover, there is not script for call centre representatives as the organization encourages
them to build a personal connection with the customer and to be authentic when handling
each customer’s complain. The emphasis on healthy interaction has brought a great deal of
success to Zappos and has helped differentiate the firm from various online retailers.
Holacracy, or looking forward is another capability that has helped Zappos to excel in
this dynamic and rapidly changing online environment. As the firms grows, it constantly
looks for innovative ways to optimize the customer experience. Currently, the firm has taken
an holacracy form of management (Van De Kamp, 2014) This new organizational structure
does eliminate the bosses and is comprised of various self-managed circles. This idea helps to
prevent bureaucracy bottlenecks. Therefore, Zappos structure is more like an incubator that
attempts to attract gifted employees with an entrepreneurship orientation (Samantarai and
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Perepu, 2015). As part of this structure, whenever a customer complains repeatedly about an
issue, a different circle or team is assigned that customer to address the problem. This helps
to generate several innovative ideas used to solve a problem. Overtime, these ideas have been
developed into a sustainable solution (Gelles, 2015). Through the holacracy structure, the
firm has horned its capability to stay innovate and to optimize its entire customer experience.
Stakeholder theory
Stakeholder ecosystem entails anyone involved and invested in or affected by the
organization. Stakeholders include employees, vendors, environmentalists near the firm’s
plants and warehouses, government agencies and the society at large (Jensen, 2017) In
accordance to stakeholder theory, an organizational real success does lie in satisfying the
entire stakeholder ecosystem and not only those who profit from the firm’s stock or those
who bring returns to the organization. Without the support of the various groups in the
stakeholder ecosystem, an organization can cease to exist (Freeman, Wicks and Parmar,
2004). These groups include the media, local communities, suppliers, employees, political
action groups, financial institutions, customer as well as other groups that affect the firm
directly or indirectly. In order to keep an organization successful and healthy in the longterm, it is important to ensure that the various groups in the stakeholder ecosystem are
considered and satisfied. A healthy firm does not lose sight of everyone who has been critical
in its success. For example, if a firm treats its employees badly, it will eventually fail.
Additionally, if a firm forces its project on the local communities to the extent of detrimental
effects, it will eventually fail to attain real success. Essentially, an organization cannot ignore
any of the stakeholders and attain real success especially in the online platform which is
dynamic and constantly changing. While a firm can attain short-term success by mistreating
some of the stakeholders, the organization will not survive in the long-term (Steenkamp,
2017).
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Zappos understands the need to treat each stakeholder appropriately as the firm’s
success is anchored on stakeholder happiness. First, the business model is customer-based as
the firm seeks to develop long-term relationships with its customers. The firm does not
compete on the basis of price as it believes customers will buy if they receive an exceptional
shopping experience. In this case, the firm strives to make the customers’ shopping
experience enjoyable (Eremina and Puhakka, 2017). It does so by ensuring an addictive and
unique shopping experience by offering a wide selection on accessories, apparel, shoes as
well as kid’s and home products. On top of this wide selection, the firm also offers free
shipping and full refunds on returned orders backed by an authentic twenty-four hours’
customer service. With such a combination, the shopping experience at Zappos is exceptional
and keeps the customers coming back for more orders. That way, the firm has established
itself in the online market platform and has attracted a loyal clientele.
In regard to its employees, Zappos has created a transparency culture that ensures
employees are updated. Employees receive information concerning the organizational
performance are even allowed to share the information. The firm believes that its employees
should be allowed to practise honest and open relationships with the firm and other
stakeholders to assist in company reputation maintenance. Additionally, the work space
environment is wacky and relaxed (Waber, Magnolfi, and Lindsay, 2014). Employees are
free to and have built a unite culture such as employee antics which include ugly sweater
days, nerf ball wars, donut-eating contests and officer parades. At Zappos headquarters, there
is a nap room for employees, an open mic at the cafeteria as well as a wellness centre.
Another quirky activity at the workplace entails the “reply-all” hats worn by employees who
sent a company-wide mail accidentally. Clearly, Zappos work space is extremely fun and
strategic as the employees have fun at their work but still the firm benefits as happy
employees have increased morale to deliver quality services to the customers (Wirtz and
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Lovelock, 2017). On top of the fun work space, Zappos does provide its employees with
competitive perks such as extensive health plan.
Corporate social responsibility is another strong aspect eminent at Zappos. The
organization understand that the local communities form an integral part in the organizational
success. While various firms take the conventional approach towards corporate social
responsibility in supporting a specific area or course in the community, Zappos prefers
extending its support to various programs based on the employee interests and community
needs (Kumar, 2018) For example, the firm is involved in several philanthropic efforts such
as donating gifts and shoes to elementary school students, creating cancer awareness by
wearing yellow. Additionally, Zappos donates money to various non-profit organizations
such as Nevada Childhood Cancer Foundation and the Shade tree.
As part of its sustainability plan, Zappos has recently begun a campaign aimed at
improving the firm’s environmental impact. Certain employees started an initiative called
“Zappos Leading Environmental Awareness for the Future.” This initiative is focused on
various environmental efforts such as a new recycling program and community gardens. A
recent environmental effort by Zappos was the Recycles Day which was aimed to raise
recycling awareness as well as other ways the firm can use to reduce its carbon footprint
(Kumar, 2018). Additionally, the organization’s blog has included an “Eco-friendly
Products” section. In this section, the organization highlights the new organic products or the
products manufactured through eco-friendly procedures. In these postings, the firm also
highlights the various ways in which its customers can lead eco-friendly and sustainable
lifestyles. Clearly, Zappos has been amongst the few firms which realize that long-term
success is ensured using the entire stakeholder ecosystem and not just focusing on one
segment.
Company’s culture
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Zappos culture is anchored in exceptional customer experience (Warrick, 2017). Tony
Hseih, the CEO emphasizes on delivering happiness. The firm has evolved from drop
shipping to a fully-fledged firm with its own stock and a warehousing network. While the
drop ship business model was easy money without any inventory risk, or problems of cash
flow, customer service challenges were considerable. Precisely, the firm was not able to fulfil
fiver percent of the orders. Various brands did not ship orders accurately and quickly.
Therefore, Zappos was forced to shift from the drop ship model and established its own
inventory and warehousing management. Originally, the firm used to outsource inventory
management to eLogistics which offered fast delivery and lower shipping costs. As the firm
expanded, it opened its own warehouse which now competed against eLogistics that was shut
down eventually.
One of the fascinating supply chain aspect at Zappos is its vendor relations. Zappos
has taken an unconventional approach towards the supplier relationships compared its
competitors in the online retail industry. Precisely, the typical approach in the industry is
treating vendors as the enemy. Most firms show no respect to vendors, make them wait for
appointments, fail to return their calls, blame them, and doing anything possible to squeeze
every dime out (Warrick, 2017). Conversely, Zappos understands that it is the supply chain
which compete and not companies. The top management at Zappos understand that vendors
cannot invest on research and development if they do not make profit. Without a considerable
investment on research and development, products brought into the market become less
attractive and demand starts to decline gradually. As the demand declines, the retailer
business will deteriorate as the products are not appealing and customers are not willing to
buy them.
Zappos supply chain philosophy is anchored on collaboration and extends to the B2B
e-commerce as well as information supply chain. Traditionally, information in retail business
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has been kept as a secret and hoarded. Retailers have traditionally used this information as
leverage against vendors in the bid to get more out them. They would not want a vendor to
have access to information on their revenues so that they can exploit the vendors and increase
their profits (Hutt, 2015). However, Zappos has created the culture of transparency such that
vendors can profit too and invest more on research and development. As retail firms struggle
to offer vendors fair prices, Zappos has realized that it is a win-win strategy if they offer fair
prices to their vendors.
Future development strategy
The online market is becoming more saturated and more firms are entering the market
creating more competition. To survive these shifts Zappos will need to re-align itself such
that it can fit in the market and be able to relate to the customers in terms of current trends.
While the firm has specialized in footwear, eyewear, clothing and kid’s merchandise, it
should diversify its products to include technological products that are fast moving and in
high demand. For instance, the firm should consider including electronics product line in its
inventory (Pasmore and Woodman, 2017). For example, the smartphone industry has grown
substantially with the market looking for new smartphones and more savvy technologies.
Therefore, the firm should tap into this opportunity and leverage its growing capital and
customer base to become a leading online retailer of smartphones.
Additionally, the firm has not penetrated into most emerging markets effectively. To
increase its customer base, Zappos should focus on penetrating considerably large emerging
markets such as India and China. For example, China’s middle class is approximately seven
hundred million which is a considerable market to venture into. Tapping into this market can
be a game changing strategy for Zappos given that the unit sales will increase considerably
thus increasing its revenues considerably. Most of the Chinese consumers are in the urban
areas and are gradually embracing online platforms to conduct their shopping given the busy
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schedule in this increasingly growing economy (Clemes, Gan, and Zhang, 2014). As the
economy grows, the consumers in this market have increased disposable income which
implies they form a potential gold for Zappos. However, expanding to China should be
accompanied by a strategic shift in culture to ensure that the ethics and marketing strategies
align with the conservative Chinese culture.
Conclusion
Summarily, Zappos is an online footwear retailer founded in 1999 and headquartered
in Nevada Las Vegas. Zappos focuses on providing an exceptional shopping experience to its
customers. While the firm started as a shoe retailer, it has gradually expanded its product line
to include kid’s merchandise, clothing, eyewear and other products. Key capabilities at
Zappos entail the exceptional call centre operations which establish a close connection
between the customers and the firm through authentic service. Zappos has also expanded
considerably over the years to the extent of establishing its own warehousing and inventory
management. This ensures that customers get deliveries promptly and accurately.
Additionally, the firm delivers the orders for free despite the size. Stakeholder theory posits
that no company can succeed without the support of its stakeholders. These stakeholders
include employees, customers, government agencies, environmentalists and the local
communities. Zappos understand the importance of these groups and treats them accordingly.
For example, the firm gives its employees competitive compensation perks such as the
comprehensive health plan. Zappos has also established various eco-friendly initiatives to
protect the environment from degradation. To its customers, exceptional experience is
important. That said, Zappos should consider expanding its product line and expanding to
emerging markets such as China and India.
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