A Report on Three .com Companies
By
Phanindra Gutta (MBA12098)
Hari Nagendhran(MBA12030)
Introduction of Zappos:
Zappos.com is an online shoe and clothing shop currently it is situated in Las Vegas,
Nevada. Zappos’ history starts in 1999. Nick Swinmurn, who was 26 at the time, visited a
number of shoe shops to find new Air walk shoes. Swinmurn could not find anything in his
preferred colour, style or size, and continued his search on the Internet when he got home.
Swinmurn was however frustrated by the absence of footwear-only retailers online. That
experience inspired him to set up the site, ShoeSite.com. The name, ShoeSite.com, was
soon changed to Zappos.com, because it’s easier to remember and has a recognizable link
to ‘zapatos’, the Spanish word for shoes.
Zappos focused on providing excellent customer service with the aim of making online
shopping as easy and as authentic as possible from the very beginning. Almost the same as
visiting a real shoe shop. Swinmurn mentioned that “footwear in the US is a 40 billion
dollar market and 5% of that is already being sold by paper mail order catalogs,” Hsieh
and Lin decided to invest $2 million through their investment firm Venture Frogs. The site
also offers free delivery, which contributed greatly to the company’s growth in the start-up
phase.
Mission & Vision of the company:
Vision & positioning:
The Brand Essence of Zappos is Delivering Happiness.
Core & Brand values:
They deliver WOW through service, embrace change and implement it. They Creates
pleasure and a bit of madness, be adventurous, creative and open minded. Strive for
growth and development. They build open and honest relationships through
communication. Company works on a positive team spirit. They want to do more with less.
Always be passionate and determined and be modest.
Brand promise:
Zappos offers the best service. They have every type of shoe in stock. Customers will
receive their order very quickly.
Mission:
Zappos has become more and more important to explicitly define the core values from
which
we develop our culture, our brand, and our business strategies.
Board of Members & Management Team:
Tony Hsieh, Michael Marks, Ann Mather are the main board members of Zappos.com
Tony Hsieh – Chief Executive Officer and Director
Fred Mossler- Senior Vice President of Merchandising
Jon Field – Director of Development.
Products & Services Offered:
Zappos’ primary selling base is shoes, which accounts for about 80% of its business.
There are currently about 50,000 varieties of shoes sold in the Zappos store, from brands
like Nike, Ugg boots, ALDO Shoes, and Steve Madden heels. They also serve the niche
shoe markets, including narrow and wide widths, hard-to-find sizes, American-made
shoes, and vegan shoes. In 2004, they launched a second line of high-end shoes called
Zappos Couture.
In 2007, Zappos expanded their inventory to include clothing, handbags, eyewear,
watches,
and kids’ merchandise, which currently account for 20% of annual revenues. Zappos
expects that clothing and accessories will bring in an additional $1 billion worth of
revenue by 2015, as the clothing market is four times the size of the footwear market.
Hsieh states that “our whole goal is we want to build the best brand of customer service.
Hopefully, 10 years from now, people won’t even realize that we started selling shoes.
The company’s customer service reputation has been augmented through viral spreading
as
well: “Shoe merchant Zappos has benefited from Internet wildfire. When Zappos offered
special return shipping assistance, beyond their company policies…the good word about
the company spread quickly throughout the blogosphere. On an average, Zappos
employees answer 5,000 calls a day, and 1,200 e-mails a week (except in the holiday
season, when call frequency increases significantly. Call center employees don’t have
scripts, and there are no limit on call times. The longest call reported is 10 hours 29
minutes.
Zappos employees are encouraged to go above and beyond traditional customer service. In
particular, after a late night of barhopping and closed room service, Hsieh bet a Skechers
rep that if he called the Zappos hotline, the employee would be able to locate the nearest
late-night pizza delivery. The call center employee, although initially confused, returned
two minutes later with a list of the five closest late night pizza restaurants.
Market Share:
Growth Rate for Zappos:
After minimal gross sales in 1999, Zappos brought in $1.6 million in revenue in 2000.
In 2001, Zappos more than quadrupled their yearly sales, bringing in $8.6 million.
We were close to breaking even in 2003 and were growing fast. Our sales were $70
million in 2003, $184 million in 2004 and $370 million in 2005.
. In 2006 we were doing $597 million in sales but were still making the same 1% or 2%
profit.
Zappos doubled their annual revenues, hitting $840 million in gross sales by 2007.
They expanded their inventory to include handbags, eyewear, clothing, watches, and kids’
merchandise.
Acquired by Amazon:
In 2009, Zappos started exploring an acquisition to Amazon. Within Zappos’ board of
directors, two of the five—Hsieh and Alfred Lin—were primarily concerned with
maintaining Zappos company culture, whereas the other three wanted to maximize profits
in a down economy.
Hsieh and Lin sensed that Amazon would be open to letting Zappos continue to operate
as an independent entity, and started negotiations. On July 22, 2009, Amazon announced
that it would buy Zappos for $940 million in a stock and cash deal. Owners of shares of
Zappos were set to receive approximately 10 million Amazon.com shares, and employees
would receive a separate $40 million in cash and restricted stock units. The deal was
eventually closed in November 2009 for a reported $1.2 billion.
Zappos Competitors:
Shoe Buy .com:
Shoe buy is the largest retailer on the Internet focused on all categories of footwear and
