Introduction:

If you like shoes and shop online, you probably have heard of Zappos. Nick Swinmurn was inspired to found the firm after a frustrating shopping excursion in San Francisco where he failed to find a properly fitting pair of shoes in the right size, style and color. Swinmurn translated his unpleasant shopping experience into a new business expressly designed to meet the demanding needs of serious shoe shoppers. As a result of his entrepreneurial zeal and his shrewd exploitation of the tools of e-commerce, Zappos grew from its start in 1999 to over $1 billion in gross annual sales by 2008, and was such a success that Amazon decided to acquire the firm for $ 1.2 billion in 2009.

In 1999, the U.S. shoes industry was estimated to be a $40 billion market. As of that date, it was heavily dependent on direct retail channels such as established chain stores. It is also noteworthy that approximately 1 in 3 retail sales of shoes were lost due to out of stock issues, including: inventory limitations, constrains on the number of brands sold in a given location, the number of sizes and styles carried in each store, and so forth. Like its now parent company Amazon has accomplished with books, Zappos has overcome these limitations through the stocking of a vast inventory of all makes, styles, colors, and sizes, displaying and selling them exclusively through eCommerce running on the Internet.

From Idea to Business Venture

In 1999, there was no web site that offered a sufficiently large enough range of shoe products online. To his surprise, Swinmurn found that there was no major online retailer who focused primarily on selling shoes. Knowing little about shoe retailing, he decided to test the idea of an online shoe retailing web site by approaching brick and mortar shoe retailers close to his home and by gaining permission to photograph their shoes. He then posted his pictures to a modest eCommerce Web site.

To fulfill orders that were placed through his Web site, Swinmurn would physically go to the store that carried the product buy the pair of shoes and ship it to the customer. This prototype of an eCommerce shoe business provided Swinmurn with the proof of concept he needed to build a real online business. Soon, he signed a collaborative relationship with three major shoe distributors, whereby they would drop ship shoes to customers who ordered them off Swinmurn's Web site. Zappos grew out of this initial set of activities - a new eCommerce giant was born.

As Zappos rapidly grew, order fulfillment became a challenge. The firm could not always guarantee the timeliness of supplier drop shipments to individual customers.

To meet the expectations of its online retail clientele, Zappos began to open its own warehouse and fulfillment centers, employing approximately 1,600 workers. By 2004, these centers carried in excess of 3 million shoes, handbags, and other clothing items and accessories, drawing on over 1,100 different brands. As a result, Zappos offered the best selection of shoes available anywhere online. [Have a look at the Zappos Web site and ask yourself in what ways is the site specifically designed to sell shoes to the fashion conscious shopper. Think about Web site content, design, and functionality.]

Customer Service

While the original idea behind Zappos was to create a web site that offered a huge selection of shoes, the founder also believed that to compete in the eCommerce marketplace, the firm must provide the "best service" as well as a vast product mix. Therefore, like Amazon, Zappos' fulfillment process focuses on fast and accurate order execution and speedy delivery to the customer.

The firm offers free deliveries and returns as well as a guaranteed 4-day delivery window and a 365-day return guarantee. Furthermore, Zappos allows its fulfillment center personnel broad latitude in addressing customer needs and complaints. The focus here is on customer satisfaction, and therefore no call center scripts, time limits on calls, or predefined responses to customer issues. Every employee is given four-weeks of training in the company's business strategy, culture, and customers focus. New employees are paid their full salary during this training period.

Use of Information Technology

Zappos embraced Twitter as a valuable tool for building company culture. From its beginning, everyone in the entire organization was expected to use Twitter for communications within the company. When the CEO saw that it helped people connect at a more personal level, he began to encourage everyone to use Twitter to create a more interactive customer community. Customers could send a tweet to Zappos from most of the web pages on firm's Web site. The employees also used blogs to interact with customers. As its business grew, the firm opened more web sites, including Couture.zappos, Outdoor.zappos, Rideshop.zappos, Running.zappos, Blogs.zappos.

Worker Retention

In most retailing companies, employee turnover is generally high. Zappos has a unique way of dealing with the problem. New employees go through an intensive four-week training program, immersing them in the company's culture, strategy, and processes. After a week or so into this training program, the firm makes what is as "The Offer" to its new employees.

The firm offers to pay its newest employees money if they chose to quit at that point in their tenure with the firm. The offer goes something like this: "If you quit today, we will pay you for the amount of time you've worked, plus we will offer you a $ 3,000 bonus." The objective here is to ensure that only those committed to the success of Zappos stayed with the firm. It seems to work!

Culture

Zappos' employees live by a set of core values. First among these is that employees are encouraged to create a fun atmosphere at work. For example, the staff can dress in funny costumes.

They can bring their pets to work and organize entertaining events during office hours. All these activities are intended to maintain a creative and open atmosphere in the work place, and a sense of "coolness." For his part, Swinmurn is very much part of this fun culture, communicating with the company via blogs and Twitter.

Overall Zappos' corporate culture celebrates and embraces diversity and each worker's individuality. Even with all the fun, the firm has achieved considerable business success through an interesting combination of novel management techniques and savvy exploitation of Web and social media technologies.

More and Shoes and the Web .....

A number of clothing and shoe manufacturers have leveraged the Web, supply chain management, and eCommerce to offer so-called "mass customized" products. Nike is one of these companies.

The way this works is that the manufacturer provides customers with instructions and interactive tools to design their own customized pair of shoes, or jeans (or their own computer in the case of Dell or their own car in the case of VW).

Similarly designed individual customer orders are then batched by the supply chain management system to ensure manufacturing economies of scale.

This process engages the customer and provides a greater sense of connection with the product and brand loyalty at or near the same price points as mass production. Mass customization is a growing trend among consumer goods manufacturers and something that now makes sense thanks to advances in SCM ERP systems and Web 2.0 design capabilities.

-Why was eCommerce the best approach to achieve Nick?

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-How does the overall construction of the Zappos Web site contribute to the success of the business?Organization your answer around the three elements of Web site design: content, design (i.e. look and feel, and ease of navigation), and functionality (i.e. user interactivity).

Content

Design

Functionality

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-What steps did Zappos take to ensure that the firm's work culture fit well with the so-called "Internet Generation?" Why is this important to the organization's success?

A) steps taken:

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b) imporatance

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- What advantages did Amazon bring to the merger/acquisition of Zappos and what did Zappos bring?

Amazon's Contributions

Zappos Contributions: