Zappos Case Study
This case study analysis is based on the 2009 case study from Stanford Graduate School of Business titled Zappos.com: Developing a supply chain to deliver WOW! It begins with the general overview of the background, philosophies and current problems faced by Zappos. This is followed by a hierarchal ranking of the four major presenting problems for the company, which are: maintaining the “wow” image without overspending, inventory management/distribution problems, transportation efficiency problems and customer behavior problems. Each of these problems is addressed in more detail in the discussion section and the recommendations section at the end of the analysis. Prior to the conclusion and recommendations section, a list of possible strategic alternatives is provided with a brief explanation, and potential scenarios that might affect the firm are presented and assigned a level of likelihood. A list of references is provided in APA style at the end of the paper.
When Zappos first launched in 1999, there was a great deal of reluctance about the notion of selling shoes online. Shoes are a product in which fit is essential, and most entrepreneurs and investors feared that people would never buy shoes that they could not try on first. Zappos founder Nick Swinmurn was able to convince investors Tony Hsieh and Alfred Lin that because 5 percent of shoe buyers purchase from catalogs, the Internet represented a huge opportunity to capture a virtually untapped market. The unique selling propositions of Zappos included 1) the ability to buy from a much larger selection of styles, sizes and colors than in brick and mortar stores; 2) the ability to receive free overnight shipping; 3) the provision of detailed information and visual access to the shoes; and 4) the “WOW” experience of a customer service call center whose passionate employees were trained to go above and beyond. The company went through many growing pains between 1999 and 2008, most of which had to do with supply chain management. Zappos’ distribution evolved from a drop-ship model, to a partnership with UPS, to complete management of its own inventory in less than 10 years. It also went through massive changes in its product offerings, expanding from an online shoe store, to a seller of everything from handbags to clothing to electronics to camping equipment. It also diversified itself by acquiring a discount shoe retailer known as 6pm, allowing it to move slow-selling items quickly without tarnishing the store’s higher end image. Some problems began to occur however due to the failing economy. The company had decided on several occasions that international expansion was not a viable option, but they needed to something to avoid declining sales.
1. Zappos has created a philosophy and image based on “wowing” the customer, even when it is cost prohibitive. If they want to raise profit margins, they may need to alter some of their practices. However, if they do this, they will lose a major part of what makes Zappos unique and special to customers. 2. Zappos owners want to have complete control over their inventory for quality assurance purposes. However this is proving to be less and less cost-efficient as customer sales are declining and inventory systems remain the same. 3. Trucks are often not running at full capacity, causing traffic jam problems and poor cost-efficiency. 4. Customers are changing the way they shop on line since the economy slowed down. They are not as quick to buy, often accessing the site through other sites and returning several times before making a purchase. Discussion
The reason that I ranked the “image problem” number one is because the company has succeeded largely due to its image of having exceptional customer service. The company encourages employees to think outside the box and do things like send flowers to customers in bereavement, or...
References: Beaudry, J.E. (2009, May 4) Zappos milestone: Customer service, Footwear News, Retrieved from http://about.zappos.com/press-center/media-coverage/zappos-milestone-customer-service
Bessant, J & Lamming, R. (1999) Managing successful total quality relationships in the supply chain. European Journal of Purchasing and Supply Management, 1(1), 7-18
Irani, Z, Love, P.E.D. & Li, H. (2000) Gaining a competitive advantage in a virtual supply chain. International Journal of Logistics and Physical Distribution 30 (3), 64-71
Lee, H. L. (2000). Creating value through supply chain integration, Supply Chain Management Review, 14 (4) 30-37
Zappos.com: Developing a supply chain to deliver WOW! (2009) Stanford Graduate School of Business, Case GS-65
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