Zappos

ZapposExecutive Summary

Founded – History Growth Products Culture

Employees Customers

Amazon

Executive Summary

ZAPPOSSituation Analysis

Current objectives, strategy, & performance:

Zappos is a service company that happens to sell clothing, shoes, handbags, eyewear, watches (and eventually a bunch of other stuff).

Zappos is “Powered by Service” Providing the best online shopping experience

possible. Fast, Free Shipping. Free return shipping. 365-day

return policy. Fast fulfillment. Expedited delivery. Fast, friendly &

expert customer service.

Internal Environment

Availability of Resources:

Best selection Over 1,000 brands Millions of items in warehouse 100% of products inventoried (no drop ship)

Internal Environment

Organizational Culture & Structure:

Zappos operates separately from Amazon.CEO Tony Hsieh manages the company the same as pre-acquisition days. Terms of the arrangement with Amazon allows Zappos to remain committed to the values and mission of the company that has been in place since day one.

Internal Environment

Organizational Culture & Structure:

1. Deliver WOW Through Service2. Embrace and Drive Change3. Create Fun and a Little Weirdness4. Be Adventurous, Creative, and Open-Minded5. Pursue Growth and Learning6. Build Open and Honest Relationships With

Communication7. Build a Positive Team and Family Spirit8. Do More with Less9. Be Passionate and Determined10. Be Humble

Internal Environment

Who are current & potential customers? What do customers do with our products? Where do our customers purchase our

products? When do customers purchase our products? Why/how do customers select our products? Why do potential customers not purchase our

products?

Customer Environment

Competition Online retailers such as shoebuy.com Conventional store front

Economic growth & stability Online clothing has doubled over past 5 years Only 10% of retail clothing market

Political, legal, & regulatory issues Internet taxation Support for Nevada state margin tax

Technological Advancements Sociocultural Trends

External Environment

SWOT Analysis

StrengthsStrengthsLarge product selectionLarge product selection

Price competitivePrice competitiveExcellent customer experienceExcellent customer experience

WeaknessesWeaknessesLarge inventoriesLarge inventories

Shipping costsShipping costsCompetitorsCompetitors

OpportunitiesOpportunitiesMarket penetrationMarket penetration

Lower overheadLower overheadCustomer convenienceCustomer convenience

ThreatsThreatsState / federal regulationsState / federal regulations

Reliance on carriersReliance on carriersReliance on internet providersReliance on internet providers

Internalfactors:

Externalfactors:

Positive factors: Negative factors:

Where is the industry now?

What are critical success factors in the industry?

Product selection Price competitiveness Free shipping No hassle returns which included free return

shipping Fast delivery time

Key Questions

ZAPPOSMarket Product Focus

Target Market Men Women Children

Product Market Grid Report Agreement with West-Coast’s shoe Pavilion to

run its ecommerce site (shoepavillion.com) Zappos.com joined amazon.com

MARKET PRODUCT FOCUS

MARKET PRODUCT FOCUS

Diversification Offers over 1000 brands of shoes and apparel Endless inventory of shoes in virtually every style,

size, and color

MARKET PRODUCT FOCUS

Differentiating Attributes Stocks more than 3 million pairs of shoes, handbag

and accessories Selection and Service

Positioning Strategy Exclusive footwear and apparel Fortune 100 companies 50 most innovative company Ranked significantly higher than other companies

in fashion industry

MARKET PRODUCT FOCUS

Marketing Program, Strategy, and Tactics

Zappos

Adidas, BCBG, Guess, Calvin Klein, D&G, Ed Hardy etc..

Find product and direct customer if they do not have item

Product

Competitive pricing No coupons-feel that level of service

supersedes need for coupons

Price

Falling under the umbrella of Amazon, they are visual to the largest online retailer in the world

Place

Engaging commercials Word of Mouth Collaboration using social media Customer service and liberal return policy Zappos Insights

Promotion

Key Variable Typical Brand Zappos

Service as Marketing

Low High

Traditional Media Spend

High Low

Toll Free Number Hidden Everywhere

Invitation to Interact

Hard to find All the time

Openness To Talk Business Only No time limit

Toll Free Number Hours

Typically 9-5 24/7

Outsourcing Common No

Employees as advocates

Medium Normal

Zappos vs. The Other Guys

ZAPPOSFinancial Projections

• Increased to over $1.2 billion sales• 75% repeat customers• Raised tens of millions from outside

investors• $48 million from Sequoia Capital• 2009 only 5% profit• CEO Salary $36,000 per year• As of November 2009-Amazon.com

Zappos.com Financial

Net Sales $ 34.20 40%Operating Exp $ 32.79

(Marketing = 3%)

Net Income $ 1.15 28%

Amazon.com (2010 Financials in millions)

Amazon.com Revenue Mix(millions)

$15,417 , 42%

$20,439 , 55%

$1,075 , 3%

MediaEGMOther

Zappos.com accounted for approx. $1.4 billion of EGM in 2010

Net Sales $ 36.80 Operating Exp 35.73 (Marketing = 5%) Net Income $ 1.07

Zappos.com $ 1.50

Amazon.com2011 Forecast (in millions)

ZAPPOSOrganizational

Structure

.

Relatively flat informal organizational structure

Direct Response Team Key Management throughout

organization Positive organizational culture Progressive leadership Worker Empowerment

Zappos Organizational

Structure

Organizational Chart

Direct Response Organizational Chart

ZAPPOSCompany Achievements

Let us “WOW” you!

From humble start-up in 1999 to #1 online shoe retailer in 2011.

One of first companies to capitalize on the emerging SEM market (Search Engine Marketing).

Success due to superior customer service rather than a glitzy marketing campaign.

“Word of mouth” marketing.

ACHIEVEMENTS

ZAPPOS Corporate Culture. Fortune – “100 Best Companies to

Work For.”#23 (2009) – Highest Ranking Newcomer

Tony Hsieh, “ This is not just a company. It’s like a way of life.”

ACHIEVEMENTS

COMPANY MILESTONES2002 - $32 Million in Gross Sales.2006 – First $3 Million in one day.2007 – Nike joins ZAPPOS. Let us “WOW” you!

ACHIEVEMENTS

ZAPPOS/AMAZONIn 2009, Amazon acquired Zappos for $1.2 Billion in cash and stock.Amazon CEO Jeff Bezos allows CEO Tony Hsieh to run Zappos independently.

Fast, Free Shipping Free Returns on Shipping 365- day return policy 24/7 Call Center 75% of sales- Repeat Customers #1 Online Shoe Retailer

FUTURE OF ZAPPOSWashout?

Centralized warehouse location in Kentucky. Allows for faster delivery time.

Zappos stocks over 3 million shoes, handbags, accessories from over 1,136 brands.

Social Media Fan Favorite- 1.7 Million Fans on Twitter.

FUTURE OF ZAPPOS

Increased profit margin Reduce inventory and shipping cost

Drop ship with select vendors that can provide transparent customer experience

Eliminate low profit product lines Partner with suppliers on customer

recommended products as opposed to in house investment

Utilize Amazon’s global network to create an international presence (45%)

Recommendations