Zappos
Katrina E. Johnson
MGT 4800
Thursday May 10th 2012
Linda Mohr

Abstract

Zappos.com is an online clothing and shoe store. Zippos’ was founded in 1999 and has grown to be the largest worldwide. The CEO Tony Hseih’ leadership has brought Zippos to a level of rapid growth in less than 10 years. He is innovative with his use of relationship marketing. Hseih believes strongly in diversity, ethics, character, and personality within the workplace. Hseih has a clear understand of the use of technology, social networking, and its value within the market place. Tony Hseih use of growing strategy is pivotal in his success.

Zappos
The original founder of Zippos is Nick Swinmurn. Swinmurn was out shopping one day in the San Francisco area and could not find what he needed. The very same day Swinmurn went to his small home and has an idea for an online shoe retailer. In 1999, the dotcom boom was on the up rise and Swinmurn site was one of the hundred upstarts. Although, most of the dotcom boom went broke, Zappos was experiencing and exponential rise to success. In 2008 Zappos reached $1billion in annual sales and made, it to the coveted listed of the Fortune Magazine’s list of best companies to work for and that same year reached its 10th anniversary.
In December 1999, Swinmurn and a few of his partners realized they had used up their investors seed money and were nowhere near close to realizing a profit. One evening the group met at a bar for drinks to commiserate and develop another plan of action. In this group there was a man by the name of Matt Burchard, who currently directs Zappos online marketing team. Burchard received a call from Tony Hsieh (current CEO of Zappos). Hsieh was the primary investor and indicated to Burchard that he would give the company enough money for one more month but they had to show serious improvement. They did.
Zappos corporate headquarters was located in Henderson, NV until 2005. CEO Tony Hseih has continued to lead Zappos to the forefront by not defining themselves as a shoe retailer but as the king of customer service. In 2011, Hseih decided to their headquarters from Henderson, NV to downtown Las Vegas City Hall. In the lease Zappos agreed to begin $60 million in renovations and move all 1200 employees into this new headquarters in October 2013. In recent years, Zappos began to expand it retail line to additional products such has clothing, accessories, luggage, housewares, and sporting goods. In addition, they added another website 6pm.com; this is the online outlet for out of season items that are left over.
The mission statement of Zappos is “Our goal is to position Zappos as the online service leader. If we can get customers to associate the Zappos brand with the absolute best service, than we can expand into other product categories beyond shoes.” (Zappos.com 2011). The goals and visions of Zappos is that, they intended to have 30 percent of future online sales of all retail sales in the United States. In addition, they will be the company with the best service and selection such as offering shoes, handbags, eyewear, watches, and accessories for all online sales. Zappos also intends to become the online service leader and drawing in and expanding into selling a more broad rage on retail items. Zappos will also focus on the delivery of goods sent to the customer. Customer Service is most important within the company and they continue to focus on making sure that the deliveries of their products are received when they are promised and as quick as possible. The main objective is to make the customers shopping experience easy in an effort to make sure that their customer receive their products in the most timely and efficient way Zappos located their warehouse next to UPS’ airports and make the hours of the facility 24 hour a day 7 days a week. The CEO of Zappos as I mentioned previously is Tony Hseih. Tony graduated from Harvard University with a degree in Computer Science. While Tony was attending school at Harvard he managed a pizza restaurant that serviced the students on campus. Upon graduation Hseih started with the company Oracle. After five months with Oracle he decided that the corporate life was not for him and quit and started his own company LinkExchange. LinkExchange is a online advertising agency. This company was made, for business’ that became members and was allowed to advertise through banners ads that would run across the website. In 1998, LinkExchange sold to Microsoft for $265 million dollars. Following the sale of LinkExchange Hseih then co-founded Venture Frogs. Venture Frogs was an investment firm. They invested in Zappos, OpenTable and Jeeves. Then in 1999 Nick Swinmurn contacted Hsieh and his partner about starting Zappos and this is when the “seed” was planted.
The leadership qualities of Hseih are actually very simple. The “King of Culture.” this is the title bestowed upon Hseih by the media. Hiring is the key part to the success of Zappos. The company hires in by looking at the potential employees willingness to commit to culture. Hseih definition to culture is “committable core values.” He wants to know if someone is able to work and build personal relationships not only with the customer but with each other. Hseih vision includes employees building long lasting relationships with other employee and breaking down the co-worker stigma. Hseih requires managers to spend at least 10%-20% of their time out of the office and with their employees building lasting and trusting relationships. There are five structures that Zappos does to help cultivate and build the company focus. Number one, hire for culture: just be someone that is open to cultivating him/herself and be committed to that thought process. Second part entails five weeks of training. Every person hired in at Zappos is required to receive the same training. The first part of the training is about the history of Zappos. In the second part, they receive customer service training. The third part, they all take live calls from live customers. This is required of every single employee, no matter what department you work in or what your title is. If it is the busy season, you will be taking calls to help with the workload. The third phase is the $4,000.00 offer. When a trainee has completed the training, everyone is offered $4,000 .00 to quit, plus the pay for the weeks of training. Hsieh says this will weed out those that are simply looking for a paycheck. Those people are not a right fit for the Zappos culture. The fourth; the culture book. Each year employees are asked to write a few paragraphs on what Zappos culture means to them. The fifth and final one is Twitter; employees are encouraged to tweet all the time. Zappos encourages employees to network and build relationships with customer through the network in addition they can communicate to coworkers and work on projects or find out what another department is doing and be able to join in or assist if they wish.
The five forces as it applies to Zappos are as follows: the threat of new competition is Bluefly Inc. Bluefly is an e-tailer of designer apparel and accessories for men, women and teens at a 30%-75% less than retail value. Since Blueflys inception in 1998, they have yet to see a profit. The next nearest competitor is Coldwater Creek. Coldwater is an online women’s apparel for the demographics of middle to upper middle class at the age of 35 and over. Although, Zappos has a demographic that cover a much broader genre. The only threat of new entry of any competitor will be futile now. Zappos has established a loyal and satisfied customer base. The only possible threat would be a company that could provide a better price for similar products. There are not any products or services offered that would cause additional threat of a substitution. The fact that the customer has no bargaining power in the transaction simply makes the bargaining issue a moot point. Zappos utilizes a wide range of suppliers; because of the diversity of amount of outside vendors the threat of bargaining power are suppliers, is also almost nonexistent. The bargaining power of the suppliers is in the control of Zappos. There is a great deal of intensity of competitive rivalry. Zappos is always feeling the crunch of competitors. There is a good chance that another online company can pop up and sell products at a lower rate and offer better products. The best idea Zappos can work with, would be to remain on top of offering its customers the best price it can and maintain the user friendly website and try their best to grow it demographics.
The external and environmental trends are many. One of the factors involves the location of clothes and shoe manufactures. The location of a factory will greatly affect the delivery and delivery cost to Zappos. Another factor for rising trends is the security threats to online purchasing. Recently Zappos suffered a credit card breach and thousands of their customers were at great risk of having their personal information released. It is imperative that any company providing online transaction make the purchase as safe as possible, no matter the cost to the company.
Internal environment at Zappos is constantly evolving because of the existing culture that is created for the employees. Culture is what Zappos is based around and by creating this; creative and evolving situation ideas are constantly streaming from all employees. Hseih provides an atmosphere that involves every employee and all ideas are welcome and discussed. Internally Zappos is very strong and has a strong sense of comradely. This aspect and culture of Zappos make it a very strong entity with in the online retail market.
The solvency ratios are being met since 2000. When the current CEO Tony Hseih took over as CEO the company has been not only profitable but has met all long-term goals past and current. The growth in Zappos throughout the years has grown exponentially since its inception. The gross revenue are listed as follows: 200 $1.6M. 2001 $8.6M, 2002 $32M, 2003 $70M, 2004 $184M, 2005 $370M. The most viable formula for Zappos commerce would be the method of search engine marketing (SEM). (Gabby, 2006).
Zappos has been global since the first day business opened. The only change would be the endeavors they decide to collaborate with and the collaborating is ever growing.
The corporate strategy indicates that it is concerned with the general ideas and concerns that will meet stakeholder’s expectations. This idea is iatrical part because this is what will sway investors in the business and will make a pattern on how future strategic decisions guide the company. In addition, the business unit strategy plays a role in how a company competes and excels in in a specific market. These decisions include choices of new opportunities and endeavors, types of products that are and will offer, and for Zappos the specific needs of their customer base. The operational strategy deals with the logistics encompass the resources and employees and the direction of the company.

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