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Zappos case study

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Kacper Winiarczyk

on 20 September 2013

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Transcript of Zappos case study

"We are a service company that just happens to sell shoes."
Tony Hsieh, CEO Zappos.com
Manuel Stollwitzer
Clémentine Masson-Lecomte
Martin Lesieur
Kacper Winiarczyk
What does service company mean?
I'd rather spend money on things that improve the customer experience than on marketing.
We run the warehouse 24-7--it's not very cheap or efficient, but it allows us to get the shoes out more quickly. We have a 365-day return policy with free shipping both ways.
We have to untrain employees' bad habits from previous call centers, where they're trying to be more efficient by minimizing the time they talk to the customer. If someone is looking for a specific shoe and we happen to be out of stock, we have employees direct those people to competitors' sites.
How big is it?

What are Zappos core competencies and their source of competitive advantage?
It's simple. They are predominantly a service company.
Highly competent and customer oriented call center
toll free
24/7 service
still in US
In-house (complete control of quality)
industry's fastest service
Flexible and easy return policy
Strong weapon against consumer anxiety
Up to 365 days (industry's best)
Free of charge
Highly efficient supply chain management
1. Deliver WOW through service
2. Embrace and drive change
3. Create fun and a little weirdness
4. Be adventurous, creative and open- minded
5. Pursue growth and learning
6. Build open and honest relationships with communication
7. Build a positive team and family spirit
8. Do more with less
9. Be passionate and determined
10. Be humble
These are not empty slogans that they put on the office wall. These values are actively pursued by hiring teams, training exercises and promoting practices.
The company prefers to promote people from within the company. Highly skilled managers from outside are not hired if their egos are too big.
A customer bought shoes for her sick mother that has since passed away.

The call center employee went out of his way to arrange UPS pick-up of the product from customer's home at no charge. Flowers and a condolences where delivered the next day.
You want proof for the strong corporate culture?
Employees do not go the extra mile in companies with weak corporate culture.
How important is the next day delivery for customer experience? Is it worth the cost?
Short answer: Yes.
As we said before Zappos is a service company and their competitive advantage comes from superiority of the customer experience. Even in cost conscious environment (2008) companies cannot jeopardize their core competency, something in which they are better then everyone else.
Under-promising and over-delivering
is a key element in the company's DNA.

This time the academics also agree - it their world it is called
Management of Perception of Expected Service
- one of the pillers of creating value for customers in services industry.
When Zappos started to guarantee next-day delivery, customers' satisfaction went down, because the WOW effect is gone once something is delivered exactly as promised.
Gap model of service quality
How would you expand their business?

More Products?

Private Labels?
Costly, different culture, european customers less likely to buy online, fragmented market

Possible, but potentially harmful to brand equity, partially done (outdoor equipment etc). Recent acquisition by Amazon prevents them from becoming a general retailer.

No expertise in shoes production, design, branding. Possible backlash from suppliers.
SOURCE : http://blog.shop.org/2012/06/05/u-s-vs-europe-the-future-of-e-commerce/
How can we become more profitable?
By selling your expertise and know-how. Lots of service companies have huge problems with the quality of their services. Zappos can help with that.
Establishing a consultancy and a training center for other organizations can become a big part of Zappos business. We know it works - SIA already does it.
How to maintain sales growth in cost-conscious environment?
Do not mess with the core competencies of Zappos! Prices shouldn't be lower then industry standards - price reductions, that will influence the margin can be gained through negotiations with suppliers.
Exclusive deals with suppliers.

Offer cheaper shoes through 6pm.com

840M USD
2,6B USD
14,8B USD
In 2010 they hit 1,5B USD

The world's largest online retailer of shoes.
In 2007 Zappos hit 840 M USD vs 2,6B of Sears and 14,8B USD of Amazon.
Thank you.
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