Zappos.com

Focus on Customer Service

Background

Founded in 1999. Gave top most priority to Customer

Service. Ventured into Accessories & Apparel. Became Market Leader in online shoe

retailing. Launched discount website 6pm.com

WE will discuss!!! Customer Service initiatives Was it good to offer Customer service

at extra cost ?? Customer Service – Integral part of

Culture 5 Force Analysis TOWS Analysis Pitfalls for excessive reliance on

media

ZAPPOS ! – “Delivering happiness”

Zappos is committed to WOWing each and every customer

Zappos is powered by service• Allows the customer to return the shoes if they were not satisfied.• Free shipping service- Zappos took it as a long term investment rather

than expense.• Most customers are surprised upgraded at overnight shipping. Create wow !• Friendly, helpful “Above and beyond” customer service• Occasionally direct customers to competitors websites

Best Selection• Over 1100 Brands• Over 15000 styles to choose from• Photographed in multiple angles

Customer Service – A Competitive Edge Free shipping & generous return policy 365-days return policy Overnight shipping HR Activity Lowest price Some times Advice to competitors Large selection of Brands style. Narrow the convincing gap Toll free service-24x7 Zappos HQ was moved from San Francisco to LA for Csut

Service improvement Used media and Social networking sites to reach out

customers. Reduced convenience Gap, of people buying from stores.

Cust. Service – Built Culture Culture – part of hiring process Extensive recruitment criteria Aggressive Training criteria Practice exercise to improve

communication and trust at work place

Raised Employee morale Ten core value of Customer Focuss

imbibed

Disadvantages – Customer service

Free shipping was major drain on revenue.

Customer are reluctant to pay a premium only for customer services.

An expensive way of hiring & firing

Was it good to offer Customer service at extra cost ??

FACTS: 75% of customers were brand loyal Heavily relied on mouth to mouth

publicity Market leader in the US Best companies to work in 24/7 hour customer enquiries

Was it good to offer Customer service at extra cost ?? Breaks even after 7 years Drop shipping dropped No major marketing Heavy online advertising for suppliers Less media coverage 2000$ for leaving the companyTO – DO:1) Implement Drop shipping in a manner that the CSL

should be 80-85%.2) Have a process of Customer Retailer Customer3) Have an effective SCM to control costs !!!

Analysis- Porter’s Forces• Power of Suppliers: [ Low]Factors & barriers defining the bargaining power of suppliers1) Number of suppliers: Large number of Suppliers 2) Uniqueness of product or service :

a) Many manufacturers availableb) Vendors were On-line to access Sales, Inventory, rejections and could see the business from their point of view.c) Substitute of suppliers is availabled) Percentage bought by the purchasing industry : 1/5 th

of the Online sales • Threat of New Entrant: [ High ] :Entry Barriers1. Economies of scale :

a. Largest On-line Shoe storeb. Guaranteed Price protection & 110 % refund on excess

2. Product Differentiation :a. Customer Service

b. Culture – Customer Oriented3. Brand Image & Capital Requirements :

Rivalry with Competitors :[ High ]Number of Competitors:(online & office stores & perception)

Barriers:a. Invited Shoe manufacturers to work as Partners –

“Powered by Zappos”b. Design, Host, fulfill Orders, Own Partner Web sitec. Provide customer service & post sales support to

partners customers

2. Rate of Industry Growth : $ 40 Billion, On line subscriber growing @ 8%

3. Product or Service Characteristics : Product upto 90 % is still by hard sales, converting this to service is still a unique proposition.

4. Height of Exit Barriers : Major investment of time & money.

Threat of Substitute Product/ Service: [ Low] a) Product is service.b) Substitute products : There is no substitute to foot wear and most of major manufacturers are looped in by the company.

Power of Customer: [ Low ]1. Potential to integrate backwards : a. Integrated Product with Serviceb. One to one Customer contact by employees.c. Twitter & Blogs – direct & quick response of customer & employees. d. Zappos- Daily Shoe Digest Q & Answerse. 80% Customer-Word of Mouth, 75% repeatf. Connecting to Brand name, not product.g. Hiring-Customer oriented2. Number of alternative suppliers : Not many alternative

supplier with similar options.

3. Changing suppliers cost very little : Not many similar service+Product provider available.

4. Percentage of costs of the buyer : Low cost Guaranteed

5. Buyer earns low profits and is very sensitive to costs and service differences : Buyer is sensitive to service difference and transparency.

Continuum of Resource Sustainability:

Level of Sustainability

Slow:Can be created slowly

Standard Cycle:1) Can have economies Of scale2) Standardized Process3) Culture

Fast:1) Easily duplicated (entry barriers –low)2) Its Idea Driven3) Flexible and Dynamic

• They are somewhere in the middle of Standard Cycle and Fast Cycle.• Have to be fast as te market is dynamic• Mass Customization??? Example - IKEA

 

Strengths: 1)Culture 2)Online Distribution 3)Customer Service 4)Employees 5)Established

Weaknesses: 1)High cost 2)Only online 3)New ideas difficult

Oppurtunity: 1)Customization 2)Global Positioning 3)Online Users growth 4)Differentiation 5)Strategic AllianceThreats: 1)New entrants 2)PLC of shoe 3)Global demand may vary4)Trend of Superstore 5)Diffrentiation low

SO Strategy:1)Use Online Distr. and customize2)Use Online space to develop brand3)Use Employees to differentiate4)Use Culture and Online Dist. To develop globally

TOWS Analysis:

WO Strategy:1)Strategic alliance to create ideas2)Global presence can reduce cost with effective SCM

ST Strategy:1)Use culture as competitive advantage which is difficult to copy2)Use Assets “employees cust svc” to challenge new entrants3)Use Modular designs to customise

WT Strategy:1)Emphasize cost reduction to reduce BEP2)Brand & Diffrentiation use to delay Matuarity

Pitfalls of excess reliance on Media:

Lack of anonymity Negative Publicity Negative Publicity – Spreads Faster Employees Listening with only ear !! First Call conversions – may be less

Thank you !!!!