Case 13 Lecture Notes
Zappos: Delivering Happiness
Case 13 Zappos: Delivering Happiness*
Synopsis: This case examines Zappos’ unique marketing strategy and corporate culture,
both of which focus on delivering happiness to the company’s varied
stakeholders. Despite a few stumbles along the way, Zappos has been a role
model of success since its founding in 1999. The company survived the dot-com
collapse because its charismatic CEO, Tony Hsieh, created a corporate culture
that put its customers and employees ahead of financial success. The case looks at
Zappos’ business model and how it influences the company’s relationships with
customers, employees, the environment, and its communities. The case also
discusses some of the challenges the company faces and how it plans to move into
the future.
Themes: Marketing strategy, ecommerce, branding, long-term customer relationships,
customer satisfaction, corporate culture, employee relations, social responsibility,
customer loyalty, corporate reputation
Case Summary
The case discusses Zappos’ unique management style of focusing upon employee happiness as
the key to the firm’s success. According to Tony Hsieh, CEO of Zappos, the company’s
emphasis on employee happiness translates into high quality service for customers. The care that
Zappos shows to its employees, customers, and other stakeholders has earned it praise for its
ethics as well as its fun work environment. According to Hsieh, the Zappos brand is “a brand
about happiness, whether to customers or employees or even to vendors.” When Hsieh assumed
the CEO position of the company in 2000, he was at first skeptical about selling shoes over the
Internet. However, he saw this as a wonderful opportunity to transform the company into one
that emphasizes employee fun, a “zany” corporate culture, and “WOW through service.” Zappos
developed ten core values that it uses to direct all of its activities. In 2010, Amazon acquired
Zappos for $1.2 billion with the agreement to allow Zappos to continue its unique corporate
culture.
Zappos remains committed to serving its customers and employees. So far, the company has
retained its unique culture and continues to expand into new product categories. In a recent
interview, Hsieh talked about the growth of Zappos and how he believes that expanding into the
clothing and merchandise market will help the company to grow. Hsieh says that “the sky is the
limit” for Zappos, and that growing and expanding into many different types of businesses is
Zappos’ future. During his interview, Hsieh states, “Although Zappos is a long way from
becoming a company that is similar to Virgin, it does consider Virgin a role model in how
Zappos wants to shape itself.” (Virgin Group Limited is a successful U.K. conglomerate.) As
Case 13 Lecture Notes
Zappos: Delivering Happiness
Zappos expands, it will have to work harder to hire the right people, avoid technical issues, and
maintain its quirky culture.
Teaching Overview
Although most students will know of Zappos as a shoe retailer, this case is not about shoes or
even retailing per se. Students should see Zappos as a culture and a way of doing business. The
question is whether this culture and the Zappos way can be applied to other industries and
product lines. This is also a case about CEO leadership and how Zappos can ensure the
sustainability of its culture when Tony Hsieh is no longer at the helm. Finally, it is instructive for
students to learn about Virgin Group Limited, Hsieh’s model for the future of Zappos. Students
could speculate on what the future of Zappos might look like if it follows Virgin’s lead.
SWOT Analysis
Internal Strengths
• Dynamic and innovative CEO
Internal Weaknesses
• Price competitiveness is questionable
• Affiliation with Amazon could jeopardize the company’s culture
External Opportunities
• Shoe retailing is an undifferentiated sector
External Threats
• The vast majority of shoe/apparel buyers prefer to buy from a retail store
Case 13 Lecture Notes
Zappos: Delivering Happiness
Problem/Decision Statement
How can Zappos continue to leverage its unique culture and business model by expanding into
different businesses? How can “happiness” be used as a business model to expand the Zappos
brand and line of businesses?
Strategy Alternatives
1. One easy way to expand Zappos’ footprint is to more closely align the company with
2. Zappos could expand into different product categories. The question is which products.
and IKEA.
Strategy Recommendations
While any of these alternatives could be pursued, Zappos appears to be most interested in the
second option. The first alternative would certainly expand the company’s operations, but it
Implementation Issues
Leadership is a key factor in the success of any company, and for Zappos, having Tony Hsieh as
Teaching Questions
1. How would you define Zappos’ target market, and how would you describe its strategy to
serve this market?
Case 13 Lecture Notes
Zappos: Delivering Happiness
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Zappos clearly serves a younger demographic that is more concerned with style and
brand than it is with value. The company also serves the Internet generation—consumers
who like to shop online and appreciate that Zappos makes shopping easy for them. The
company’s quirky image and strong focus on “happiness” fits this target market exactly.
Prompt students to suggest other words that might fit the Zappos culture. One is hard
pressed to think of a better term than “happiness.”
2. Has Zappos’ emphasis on customer satisfaction contributed to its profitability? Explain.
3. Has Zappos developed long-term customer relationships that provide a competitive
advantage in the purchase of shoes and other products?