April 15, 2010
Zappos.com Case Briefing
Zappos.com is an online retailer who began selling shoes out of a house in San Francisco in 1999 and has grown to an online superstore with sales of over $1billion. They claim that their success is due to their commitment to customer service and their positive internal culture. Their growth strategy is unconventional. They reinvest most of their earnings into improving service for customers, rather than spending money on traditional marketing/advertisement. In this way, they rely on word-of-mouth to generate new and repeat customers. To deliver the best possible service, they offer money-back guaranteed returns and free shipping. Additionally, they will often upgrade orders to next-day delivery in order to impress and “Wow” the customer. In the beginning, Zappos.com operated on a “Drop-ship” model, forwarding orders to their partners who would hold inventory and fulfill orders. However, with fulfillment out of their hands, they were faced with problems of control over service quality and began to hold inventory while suppliers became more comfortable with the idea of online retail. They continued to adapt this internal fulfillment model. By 2003, all shipments were made from their own inventory. Additionally, their inventory management system has developed into an extremely automated process, allowing them to more easily scale the company up to the size it is today (showing 2,851,610 products available for shipment on November 25, 2008). As online retail has matured, it has become clear that Zappos has superior quality and efficiency in the industry and many companies have begun to use Zappos as a primary method of fulfilling online retail orders. The operations are still the same; Zappos purchases shipments of shoes from the manufacturer, takes orders via the web, and ships orders to the customer. The difference is, Zappos integrates their inventory system with their partner’s...
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