Zappos

Zappos
Executive Summary

Executive Summary

Founded History Growth Products Culture

Employees Customers

Amazon

ZAPPOS
Situation Analysis

Internal Environment
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. 2. 3. 4. 5. 6. 7. 8. 9. 10. 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

Customer 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?

External Environment
Competition

Economic growth & stability

Online retailers such as shoebuy.com Conventional store front Online clothing has doubled over past 5 years Only 10% of retail clothing market Internet taxation Support for Nevada state margin tax

Political, legal, & regulatory issues Technological Advancements Sociocultural Trends

SWOT Analysis
Positive factors: Internal factors:
Large product selection Price competitive Excellent customer experience

Negative factors:
Large inventories Shipping costs Competitors

Strengths

Weaknesses

External factors:

Market penetration Lower overhead Customer convenience

Opportunities

State / federal regulations Reliance on carriers Reliance on internet providers

Threats

Key Questions
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

ZAPPOS
Market Product Focus

MARKET PRODUCT FOCUS

Target Market
Men Women Children

Product Market Grid Report

Agreement with West-Coasts shoe Pavilion to run its ecommerce site (shoepavillion.com) Zappos.com joined amazon.com

MARKET PRODUCT FOCUS

Market Development
Price comparison sites Deal with shoe manufacturer Partnered with AOL and several shopping sites Expanded its accessories line to include, purses, handbags, socks, wallets belt and diaper bags. Provide major shoe brand its own page

Product Development

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

Zappos
Marketing Program, Strategy, and Tactics

Product

Adidas, BCBG, Guess, Calvin Klein, D&G, Ed Hardy etc.. Find product and direct customer if they do not have item

Price

Competitive pricing No coupons-feel that level of service supersedes need for coupons

Place

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

Promotion

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

Zappos vs. The Other Guys

Key Variable Service as Marketing Traditional Media Spend Toll Free Number Invitation to Interact Openness To Talk

Typical Brand Low High Hidden Hard to find Business Only

Zappos High Low Everywhere All the time No time limit 24/7

Toll Free Number Hours Typically 9-5

Outsourcing
Employees as advocates

Common
Medium

No
Normal

ZAPPOS
Financial Projections

Zappos.com Financial

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

Amazon.com (2010 Financials in millions)

Net Sales Operating Exp
(Marketing = 3%)

$ 34.20 40% $ 32.79

Net Income

1.15 28%

Amazon.com Revenue Mix

(millions)

$1,075 , 3%

$15,417 , 42%

$20,439 , 55%

Media EGM Other

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

Amazon.com 2011 Forecast (in millions)

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

Zappos.com

$ 1.50

ZAPPOS
Organizational Structure
.

Zappos Organizational Structure

Relatively flat informal organizational structure Direct Response Team Key Management throughout organization Positive organizational culture Progressive leadership Worker Empowerment

Organizational Chart
Nick Swinmurn
Chairman & Founder

Tony Hsieh
CEO & Director

Arun Rajan
CTO

Alfred Lin
CFO/EVP/Ops/Chairman

Brook Schaaf
Affiliate Manager

Andy Kurlander
Sr. Marketing Manager

Qiana Jones
Affiliate Program Coordinator

Lisa Vagge
VP Marketing

Marketing Coordinator

Darrin Shamo

Direct Response Organizational Chart

Matt Burchard
Sr. Director of Content & Direct Response

Jane Feigenson
Marketing Director

Affiliate Manager

Ned Farra

Robert Avila
Marketing Coordinator

Marketing Intern

Nate Luman

Krista Augustson
Marketing Coordinator

Miguel Luman
Marketing Coordinator

Ashley Fortman
Marketing Coordinator

Vegas Toliver
Marketing Coordinator

Britni Delaney
Marketing Coordinator

ZAPPOS
Company Achievements
Let us WOW you!

ACHIEVEMENTS
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. Its like a way of life.

ACHIEVEMENTS

COMPANY MILESTONES
2002 - $32 Million in Gross Sales. 2006 First $3 Million in one day. 2007 Nike joins ZAPPOS. Let us WOW you!

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

FUTURE OF ZAPPOS Washout?

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 ZAPPOS
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.

Recommendations
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 Amazons global network to create an international presence (45%)