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Zappos Case Study

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by

Steven Ng

on 15 November 2013

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Transcript of Zappos Case Study

Zappos Case Study
Kenneth Chan, Ulrich Aaby, & Steven Ng


Overview
Problems
What if we do nothing?
State of the firm
Accept Amazon's Merger
Capitalize on expanding infrastructure and working alongside Amazon to expand market
Conclusion
Zappos in 2009
Valued at $807 Million by Amazon Inc.
Largest online shoe store since 2000
Just became a $1 billion retailer
Competitive Advantage
Industry & target market
Upper middle income online shoppers
Time constrained with a liking for variety
$37 billion market in 2000 for US footwear
Online footwear - $1b in 2002, $2.9b in 2006, $5.3b in 2010
Threat of competition from mega-retailers Amazon (Endless), Gap (Piperlime)
Business model
Three C's
Customer Service (delivery, returns, call center)
Company Culture (service quality, happy team members)
Clothing (Large selection, variety for all customers
Results in loyal customers (75% of sales are repeat buyers)
Continuing Growth
Need to reduce capital expenditures & debt
Increase cash flow
Need to fund full inventory
Pro
Potential independent growth
Maintian company/brand reputation
Full control of company operations
Con
Compete with big players
Lack of investment capital
No growth in cash flow or reduction in debt
Pro
Consistent with current business model
Large potential growth area
Maintain customer integrity- More loyal, repeat customers
Con
Lack of funds - Lack of variety in clothing could undermine brand
Adaptation/expanding into new market has learning curve, requires investment
Compete with Amazon's infrastructure
Pro
Con
Pressure to perform even more profitably
Potential loss of company brand an reputation
Loss of potential independent growth
Why
Capitalize on growing market more efficiently
Capture full potential of possible sales
More likely upside in profitability
Even better infrastructure for operations
Easier access to capital
How
Utilize Amazon's scale
Use their R&D resources for more accurate targeting
Synchronize operations to streamline customer experience
Outcome
Opportunities will come for new markets
Potential growth in new markets
Gain additional competitive advantages
Increased Market Share
Based on Jim Harvey's speech structures
Competition
Online competitors (piperlime, endless, amazon)
Physical stores
How to gain more customers moving to online shopping

Company structure and customer service reputation
Streamlined fulfillment operations in warehouses
Deep product portfolio,
Zappos carousel system held over 1.5 million items, was largest horizontal merchandise carousel
Goal
Focus on growing company and clothing
Larger database of customers
Customer network effect
Increase cash flow for operations and expansion
More R&D resources
Fund new inventories for expansion
Origins
Formed in 1999
One of first online shoe stores
Major challenge: competing with physical stores
"We are a service company that happens to sell shoes. And clothing. And handbags. And accessories. And eventually anything and everything."
Grow over $1 billion in sales by 2010, which they achieved
Amazon's offer?
Full transcript