Zappos Company Case Study
Zappos is an online company that deals with apparels and shoes. Initially founded as ShoeSite.com by Nick Swinmurn in 1999, Zappos has grown to become the biggest Internet-based shoe company that offers over 90,000 styles, 500 brand names, and has a stock of over 2 million shoe pairs. Zappos started as an online shoe shop but later enlarged its product line to eyewear, handbags, apparels, and other accessories (Hsieh 116). Currently, the corporation operates mainly in the United States but also has customers across the globe. Indeed, for the few numbers of years the company has existed, it has grown rapidly through the increase of sales and profits. Therefore, the discussion will offer a strategic analysis of a Zappos Company through identifying the company’s culture, the major successes and obstacles that the firm faced when it introduced the business idea into the marketplace, and its micro-environments. Therefore, the company’s prospects of expansion and SWOT analysis will be relevant tools in the attempt to guide the strategic analysis.
Culture Regarding Leadership and Internal Environments
Tony Hsieh, the CEO of Zappos,, has one goal, which is not to make the most sales, but to ensure that his customers and employees are contented and happy. In fact, his leadership and management style can be referred to as “holacracy.” In other words, he leads through a manager-free functioning structure characterized by equally privileged workers in various work-specific circles. Rather than the managers doing the “management by walking around” style of leadership, they walk the talk at Zappos Company. The executives are supposed to spend more than 20 percent of their time with their employees. As such, this is followed by get-together for parades and happy times such as pajama parties. In addition, employees are led by central values that include growth and development through learning, humility, excitement, and slight weirdness. In fact, the internal employee working environments are relaxed and, at times, wild, with atmospheres characterized by both strategies and fun.
Zappos’ Holacracy Compared to Hierarchy Style
The CEO believes that when the management structures combine while making sure that employees are satisfied with their work and a little wackiness. In essence, by giving them fun, the company and the employees are in a win-win situation (Keyton 232). In this approach, the employees become more active in their duties and initiate innovative ideas. Additionally, when interviewing new applicants, leaders look for individuals who are innovative, with a positive attitude, and a sense of individuality that create favorable atmospheres that flourish the required qualities. The qualified applicants are further selected for a month’s week training program. In addition, to ensure that the company hires individuals with a future with the organization, the successful candidates are offered 2000 dollars to see whether they would like to leave the company immediately after the program. Evidently, the company’s cultures regarding leadership and internal environments have played a significant role in the success of the company.
Zappos Company Microenvironment
Zappos Company revolutionized the shoe market through the introduction of various brands in the e-commerce industry. Numerous aspects follow such changes. For instance, individuals will tend to compare the brands with the traditional industries, whether the selling of shoes, cutleries, or other products. Secondly, e-commerce industry requires companies to rely heavily on technological advancements, especially the newly developed ones. Failure to be at par with the current technological advancements can have detrimental impacts on their sales and profit margins. The e-commerce companies such as Zappos are regulated by the same regulations as the customary businesses. Therefore, Zappos Company must strike equilibrium amid technological advancement requirements and the marketplace demands.
In addition, despite this company being entirely an e-commerce corporate, it does not turn out that its rivals are engaging in e-commerce venture. In other words, other companies that operate in the traditional business, as well as online platforms, are the major competitors of Zappos Company. The chart below places Zappos as number three in revenue collected through online platforms from January 2015 to March 2016.
Moreover, even the traditional companies have joined the online social networking sites where they display their products and get platforms to interact with their customers, a factor that increases competitors. Numerous brands and companies have created websites that increase customers’ interaction and knowledge of information they may require. Zappos main competitors include Collective Brands, Inc., Coldwater Creek, and Bluefly, Inc.
|ZAPPOS’ SWOT ANALYSIS|
Focus on customer service
Improvement of customer service
Decrease in technical support
Problems with technology
SWOT analysis as a technique of strategic planning refers to Strength, Weakness, Opportunities, and Threats of a given company (Robbins and Coulter 138). Zappos strong customer-oriented culture and a strong customer relationship are one of its strengths in that it helps offer customers’ satisfaction. Its online market enables the company to reach potential customers across the globe. It also has a strong brand name and varieties, which are factors that give customers confidence and varieties of products and brands to choose from.
The online platform has increased the company vulnerability to various cyber crimes where more than 24 million customers’ information, including their credit card data, were stolen, indicating one of the company’s major weaknesses. As such, the instance made customers question the safety and security of the company. In addition, their decision to focus mainly on customer service and neglecting various marketing strategies such as adverts means that the company underestimates the power and influence of marketing on business decisions (Armstrong & Kotler, 78).
The fact that Zappos has a great culture has kept royal customers and attracted potential numbers of customers who purchase from the company. Improving clients’ service satisfaction, reduced return issues, and speeding up the delivery would go a long way into increasing and expanding their business. Zappos should also launch all new products to lower the rate of dependency, which is 80% on shoes. Finally, it should train its personnel on various technologies that lower the rates of cybercrime, such as system anti-hacking measures.
Cybercrimes are the most significant threats that affect Zappos due to decreased technical support. There are also wide varieties of substitute products that create intense rivalry and competition. In essence, the technological issues have also compromised the quality of their product. Hence, reporting many cases of customers’ dissatisfaction.
How Zappos Introduced its Products to the Marketplace
The idea of an online shoe shop was born when Nick tried to look for a certain pair of shoe from one shop to the next in all malls with little success. Upon arriving home, he also tried to search for the specific shoe online and again bore no fruit. Knowing that no major company had an online platform for selling shoes, he decided to venture into the business. He started the ShoeSite.com, where he offered the best brands and selections of shoes based on color, size, width, style, and brand. He started with a method known as drop ship model that entailed transferring the clients’ shipment details and orders to shoe manufacturers, who in turn shipped the products directly to the clients. However, many manufacturers were not for his model. He opted to buy the shoes in bulk and carry out the shipment orders from its inventory. Currently, Zappos operates on a mixed chain supply system that enables the company to supply a wide range of brands to satisfy their customers, a factor that has seen the rapid increase in sales and profits, and hence the success of the company.
Zappos Major Obstacles
One of the major obstacles that the company faced was inadequate investors due to the idea that individuals would not purchase shoes on an online platform, as it does not allow them to fit the shoe before buying. Secondly, many of the preferred shoes’ manufacturers turned down drop ship model that seemed to be the best option for Zappos; as it did not require the company to stock the shoes. In order to access these shoe brands, Zappos was forced to buy the shoes in bulk. The final major obstacle was that during the time the company started, most people did not believe in the authenticity and honesty of online retailers.
Zappos Future Plans
One of the future prospects of Zappos is to establish initiatives that will be used for educational and community platforms with the aim of enabling individuals to meet and share ideas that can turn into huge business ventures. The company also looks forward to investing in local people to build better business enterprises.
Zappos online company is a very promising corporation that has earned the confidence and trust of many people across the globe. It has a great culture that has formed the basis of its uniqueness from most of its competitors. Zappos hopes that its expansion, especially in the apparel and accessory categories, will eventually make a revenue of more than a billion dollars annually and hence outdo their annual revenue on shoe sales.
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Business Insider. Zappos’ CEO says this is the biggest misconception people have about his company’s self-management system. 2016. Accessed from http://www.businessinsider.com/zappos-ceo-tony-hsieh-on-misconception-about-holacracy-2016-2
Hsieh, T. Delivering Happiness: A Path to Profits, Passion, and Purpose. New York: Tony Hsieh. 2010. Print.
Keyton, J. Communication and Organizational Culture: A Key to Understanding Work Experiences. SAGE, 2010. Pp. 232.
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