Philip Dackweiler . Ingen de1 af nogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkärene, er forbudt. De personer, der foretager en sädan overtrredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
Zappos.com: Dqveloping a Supply Chain to Deliver WOW!
STANFORD GRADUATE SCHOOL OF BUSINESS
Zeppos.coM: DevnloprNc
"^'*:bff:,3; A SuFpLy CHArN To DELTvER
wow! Our rleckion r**s a/r+'erys to focur on ser"r,ir:s bet*tuse we gal instunl feet{be& whenever we delivery. Customers were wawed by the experienrc, and rhxn they told a banch of peaple. Änd u'ord of mouth *'arh.s u lat faster on the Internel than it dots persfln'to-pr:rscn because you cün jus! e-ft?üi{ out a bunclr af your friends and say, 'hey I just hatl lhis ilmüzing expericnte.' That wan ene ofthe re^qons that we wanted ta fteep upgrading shipping. Lin. Chairman. CüO. and CFO of Zaonas'
-Alted
In late 2008, iess than
tr0 years
after its founding, Zappas anticipated reashing annual gross säles
of Sl billion, When its founder first proposed the idea of selling shoes online, the coücept was greetcd with intense skcpticism. Despite the chailengos, the c$mpany had achieved dramatie success. It was the world's largest online retailer of shoes, was profitable, growing rapidly, and had an outstanding reputation for customer service. Its employees were passioüately. engäged in their work. While shoes still provided the vast üajüriry of reyenues, Zappos had expanded its product offerings based on feedback &om custcmers and the enthusiasm of employees. There was still a huge untapp€d sustomer base*cnly 3 percent sf the U.$, population were Zappos customers-suggesting that the cornpany was not close to saturätirg its lpportunitics in the u.S., lel alone other international regions.
However, the c*llapse of the financial markets, and the prospeüt of a prolonged re*ession. created new chaileng*s. Zappos had never been lavishly funded-it had always been intcnscly conscious of cash. Unlike most relailers, il was continuing to grow, but early signs were that the rate sf grCIwth was slowing. As rhe eompany's leadership looked forward, it considered ways that Zappos could sustain the high quality expcrience that it was known for-to deiiver "w-ow" ro its customers. supplitrs, and othqr affrliates. The cornpany's supply chain management häd cvolved as Zappos had grown, and was one of its sources of excellsnce. Yet, perhaps therc were opporhrnities fur continued irnprovement. ' Qrotations are from interviews with the auihor. unless orherwise specified. David Hoyt prepared this case uader the suprrvision sf Michael Marks, Lecnrrer in Operarions, Information, and Technology, and Professor Hau Lee as the basis fsr class discussion rathcr than to iilüEtxare eithrr effective or ineffective handling of an administrative *ituation. Copyright Q 2AÜ9 by the Eoard olTruslees of the Letand Stan{ord Juniar Unive.rsig,. All rights resen'ed. To order copies or requesl Feftnission ta repraduce nurt$rißls, e-mail the Cue Writing A"ffiee at: r*.o@gsö.slanlord.etfu ar write: Case Wriling Affirc, Stüttford Grüduttle Sthoal af Business, 5I8 Memorial lllay, Stanlard University, Stünford, CA 9#A5-SAI5. Na part of this publieatian may be repraduced, stored in d rrtrievül system, used in a sprudslseet, ar transmilted in any form ar by any means alecffanic, meehanical, pfuttotopying recording, or olherwise wirhaut the permission af ths Stürlford Gruduate Schaal af Business.
*
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Philip Dackweiler . Ingen del af nogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkärene, er forbudt. De personer, der foretager en sädan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
Case Studies in lnternatisnal Marketiog Management
Zappos,caa: Developing a SapplS Chain ta üeliver
lf0l$!:
6,3-65
p.2
Zarpos.con In 1999, Nick Swinmurn was frusffated in linding the right size, color, and style of shae. After trying several stores, he felt there must be a better way. Stores carried e relativeiy smail selection of styles. and usually did nol have a full compiemsnt of colors and sizes eveil fi:r the styles they did stock. This was not surprisiüg considering the physical constraints of shae storesr the lirnited number of shoes that an ayerage store could stock, änd the small lac*l population sened by individual storcs. But this was 1999, and the Intemet bosm was in full swing. lf Swinmura, who was an ordinary $hoe customer (not a shoe fanatic), was frustrateq it seemed likcly that many others rnust be feeling the same way. What consumcrs nseded was a way to access a huge selection of stylcs, cülors, and sizes. Since nsne existed, Swinmurn decided tü create one, using the Internct to addrsss the selection problems faeed by traditional shoe retailers--despite having no experience in retail, let alone the shoe industry. Raising Capital Swinmum raised 5150.000 frorn family and friends and recruited Fred Mossler, a senior shoc buyer at Nordstrom, to join him. Swinmun tried to raise venture capital, but had difficuity finding investors willing to put in large arnounts of money. Onc of the venturc firms that he approached was Venture Frogs, foundcd by Tony F{sieh and Alfred Lin. Hsieh was a young Harvard graduate, rvho had cofounded an laternet advertising firrn ealied Link Exchange with Sanjay Madan, a college roornmat€. They sold the company to Microsofl for $?65 million in 1998, when Hsieh was 24. Lin hadbeen a friend üf Hsieh's at Harvard {and a custümer of Hsieh and Madan's college pizza-making business}, who left a PhD program at Stanford University to join Hsieh at l-ink Exchange. Hsieh änd Lin then founded Venture Frogs, which funded Internet siart-ups, including companies sueh as AskJeeves. Tellne Networks, and Zappos.
ln 1999, at the height of the Intcrnet bcor'.1 Swinmum leli a voicemail with Venturc F?ogs, explaining *rat he had started a cümpany to sell shoes on the lntemet. As Hsieh and Lia were about to hit the delete button, thinking that this "sounded like the posrer chiid for bad lntemct business ideas,"' Swinmum said that the shoe market in the United States was S40 billion, and that 5 percant of this business was being done by mail order. Hsieh and Lin realized th-at if people bought $2 billion of shoes from catalags, tbe lnternet-with its capacity to rcach large sections of thö population and to provide detailed information vastly better than a catalog could-was going to be a substantially larger market. They decided to invest, putting about $2 miliion into the cümpany over the next fcw years. Hsieh also invested pcrsonally in Zappos {whose näme was an adaptation of thc Spanish word for shces, "zapatos"}. Latcr, Sequoia Capital, a premier Silicon Valley vsnture firm, also invested in the company. While Hsieh, Venture Frogs. and Sequoia put money into the company, Zappos was never funded on the lavish scale of lnternet start-ups such as WebVan*the total investment in the
'
Hsich quoted in Duff McDonald, "Sole Purposc," CIO /nsr'gÄ1, November ?006, p. 45
Philip Dackweiler . Ingen del afnogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvaliltceret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkärene, er forbudt. De personer, der foretager en sädan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder überragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen lestgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schitte eingeleitet.
Zappos,cor*: Developing a 9uppiy Chain tü treliver WOW!
Zappos"ro*: D*eloping a Sappty Chain to Daliver
lf0l*!:
p. -l
GS-65
c$mpany was less than Sl0 million for the first five years of the company's existence. Sequoia Capitai would later lead an investrnent round r:f $54 million, ssme of whirh was used to buy out early inve$tors. In tire long run, the lack of sub$tsntial funding was a benefit-Zappos was forced tö focus on those factars which were essential to success, operate effrcienfiy, and avoid
the excesses that led to {bilure for many other Internet srart-ups, The difücult challenge
of
cr€ating I sucffssful online shoe retailer, which inhibited access to large-scale investment, had another advantage-lack tf competition. As Lin said, "It was act$lly tsmpting to invcst in a company where everyone thought this couldn't be done, bccause you knew that in the early stages, ycu were no1 going to have a lot of competition."
However, in the shsrt run the relalively low funding raised by the company was painful-thüe were times when employees worked for months without paychecks in ordcr to help thc company survive.
Financisl Success
Aftcr investing, I{sieh began to work closely with Swinmum, and in ?ü00 they became
co=
CEOs. Lin joined as CFO in 2005, later adding the roles of COO and chairman. Swinmurn left Zappos in 2ü06, and Hsieh became the sole CEü. Zappos had strcng growth from its first sales througb 2008, when it expected grcss merchandise saies of S I billion {Exhibil l). This strong growth was largely depcndent an a happy, loyal custorncr base. As thc compauy developed, the percentage of repeat customers grew-from 40 percenl in 20043 to 75 percent in 2008." Hsieh viewed this as essential for sustained sucüess, saying, o'Yüu can get arryon€ to buy ftom you once.... The hard part is getting people to buy from you again and again."' Zappos became profitable in 2006. but did not have an objective af maximizing profit, preferring
to invest in grcwing the cornpany. That year, Zappcs wss able to achieve gross margins of 31 percsnt, even after shipping and returns (with more than one in four orders returned).b Shipplng, both sutbomd a*d for return$, was a substantiai part of the company's cost sBucture, at abüut S100 rnillisn.? or almost 17 pcrcent of the company's gross sales of i:g: *iltioo in 2006. This percentage had remained relatively constant over time, despite increasing return ievsis and deueasing delivery times.
In latc 2008, Zappos had about 9 million eustomsrs*_a iarge aumber, but just 3 percent of the U.S. population, leaving plenty of roorn lbr continued growth. It had about 1,5üü employees, half in its Nevada headquarters and call certer, and half in its Kenrucky fulfillment c€nt€r. The colnpany was still private, with no immediate plans for an IPO.
' Richard Waters, "Trial and Enor Shows the Fath to Success," The Financial ?'imes, March 9, 2005, p. delined repeat custömers Es eny cuslomer that had prcviously purchascd from tbe cömpary. * Jeff Morris, "service a 'Shoe-In' for Zappos.com," Maltichannel Merchant. April 2008, p. 7. 5
Philip Dackweiler . Ingen del afnogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrpder servicevilkärene, er forbudt. De personer, der foretager en sädan overtradelse, vil blive retsforfulgt, i det omfang ioven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopie* oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Scfuitte eingeleitet.
Eoppos,tam: D*elaping a S*ppty Chein ta Dcli*er
WtlW!: GS-öf
p.4
Ccrporate Culture and VflIues Zappos had a strong company eulturo, which was dcveloped and nuitured by managemant. This cultsre, together with company valües, was a srong influencc on all aspccts of the business, including the supply chain. Hsieh and Lin recalled that the srong cuitwe rhat existed in the early days of their firsr start-up, Link Exehange, had disappeared as rhe colnpany grcw. As Lin explaiücd, "At the end of the day, one af the reasons we sold the company was because it was no longer a fun place to work." They were determined that this would not happen at Zappos.
As a result, when Zappos leadership considcred what it needed in order to meet the next year's business objectives, the queslion "How are we gCIing to grow the culture',)" was as important as issues such as "How many people do we need to hire, how many more servers, or how much üore office space do we need?" Hsieh described \Mhat the culture rxeant to him in 2ü08:
To mc, the Zappos culture embodies many diffcrent elements, It's about atrways looking for nerv ways to WOW everyone we come in contact with. It's abcut building relationships where we trsat each other like family. It's about teamwork and having fun and not taking ourseives toa seriously. It's about gpowth, borh personal and professional. It's about achieving the impossible with fswer peoplc. It's about opeflness! uking risks, and not being afraid to make mistakes. But most of all, it's about having faith that if we do the right thing, then in rhe long nrn we will succeed and build something great.o
Hiring and training werc particularly important in maintaining and gowing the culture and the company's values. Hsieh said, "We want people who are p,assionate about what Zappos is about--*ervice" I don't care ifthey're passionatc about shoes."o (Zappos' cultrire and values are discussed in
dekil in the Appendix.)
Tns Zlrpos SHopprxc Exprnmxcn From the beginning, Zappos set out to provide an exceptional shapping experience for its customers. It wanted customsrs! after any interaction with the cr)mpany, to say "'Wow!" To illustrate the priority placed on serving its customers, Hsieh reftrred to Zappos as "ä service company that sells shses," which he later amended to inelndc the wide range of other products sold by the company. Hsieh elabcrated on the impartance of customer service: "It's no1 rcally a seffet., .. Peopie have known. _for a long time that companies that provide good service do realiy well. Yet no one does it."10 Hsieh saw custom€r service as an investment rather than an expsnse.
-'20S8 üulture Back," Zappos.com, p.
'
12.
Christopher Gergen and Gregg Vanourek, "Zappos Culture Sows Spirit,'" I&e Wrchingtan limes, July 16, 20Sf,, p.
ß2. 1o
waters. loc. cit.
philip Dackweiler . Ingen del af nogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrader servicevilkärene, er forbudt. De personer, der foretager en sädan overFedelse' vil blive gleich, mit retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopien oder übertragen werden, ganz Bei welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen t-estgelegte Verwendung ist verboten. Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
'Zappos.com: Developing a Supply Chain to Eellver
Zaryos.eam;
ü*slapinr a Sappb Chain to Delimr WAW!: GS'65
WOW!
p'
S
The drive to provide a "wow €xperienüc" infsrmed every aspect of the company. The Zappos website loaded faster than any other retaii website. While most orders were made online, telephone support was essential for maximieing the custromcr experience. Unlike other popular retäil sites, he company's tcll-free phone number was prominently displayed on all its web pages, the average phone call was answered in less than 20 seconds, and call center operators had the authority to resolve virtually any issue' Zappos knew that its primary competition in the shas business was brick-and-rnortar slores, and that in order to be successful" customers needed to bE comfortable buying shoes snline. The company addressed this challenge in ä number of rvays, including ftee returnsn providing extensive online product information. maintaining a tall eenter, and free overnight shipping.
Fit" and the Return Policy
A key aspect of making customers willing to buy shoes anlhe wäs dealing with the issue of fiteustomers needed to feel comfürtable that they would receive products that fit, and that they rould rerurn thsse that did nst. Zappcs quickly realized that this cüuld bc best addresscd by providing frce retums, initially for 6ü days, latsr extended to 365 days {although most returns came back within 60 days). Customers could thus pr.uchase several pain of shoes, of different styles and fits, keeping those they wanted while retuming thüse that did not fit. Zappos closely monitored cu$tomcr behavior. It found that the rnost profitable customcrs were not those that returned the fewest products. Customers who rnade use of the free return policy rended to experiment with different brands and styles-while they had a higher rehtm rate, they also made more net purchases" Overall, retüns were about 35 percent af gross sales.
Online Product lnformetisn
It was also essential to provide as much information as possible to customers as they made their purchasing decisions, This was done in several ways. Retail websites t)?icälly had small photographs of produets, with swatches of the available colors. The pictures were generally from only a few angles, and often did not show importänt detsils. Zappos provided substantially better insormation to customers. When new models (or models with new colors) arrived at the Zappos warehouser a photography team took pictures from several angles {by 2008, eight photos were taken of eaeh style and color)" Cuslomers interested in a particular item eouid easily see large picturesn in the desired color,
ftoü multiple
perspeetives'
The site also included detaiied descriptians of the shoes, as well as information that would ordinarily be provided by experts at a brick-and-mortar shoe company. For instance, a person's gait (the way that they ran or walked) was important in Iinding the proper running shoe. The lappos site had a detailed discussicn of gait. and how ctrstomers could detcrminc which rype of shoe was appropriäte for ihem. The site also provided customer feedbaek. Customers could write comm€nts on the shcles they purchased, which Zappos did nst edit (except to remove profanity). The rnost rscent customsr comments were displayed for each type of shoe.
servicevilkärene, er forbudt De personer' over kvalificeret og rimelig anvendelse), som er ulovlig elleiovertraeder ** oder übertrasen werden' ganz gleich' mit darr ohne die vorherige zustimmuns des verlags kopiert .?*, Bei ist verboten' verwendung "u.n, die geseulich oder in den servicebedingungen festgelegte als welchen Mitteln dies geschieht. Eine andere verwendung eingeleitet' Zuwiderhandlung werden gerichtliche Schritte
ä
:.äffäiT::l:ilffi',:ä;ffiää;
Cöse Studie5 in
lflternational Marketing Management
ChaintoDr,liver IFOW!:
The Zappos Call Center (*Customer Loyalty") which handled about 95 percent of c,rders' Mosl customer interactiüns were through the website, rettrns, or other issues, were handled by ptoducts, äborrt The rest of the orders, piu, qrr**tions by about 40ü people il the Las vegas 241? staffed *u,
rhe call center.
tn zbgg, ihi,
headquarters.
all Las Vcgas cmployecs went As described in the Appendix on company culture and vaiues, the end of ths cour$e' regardless of the through the same C-*"*t new-hire training sourse. At with spent ät least two week* in the call center working :"U äT* lhry **r* frireJ ior, they custoüers.
"cuslomer
including the call center {or Zappos rneasüred mosl evcry aspcct of its business. time a cuslomer ealled to the n9m loyalty', in Zappos ,*ttori. ti*Ät**A how long it took !h1 number was astonishingly this 2008 ti,ne the call was answeied by a call center op;rator-in measure call center however, nat' did low, consistently averaging less than 20 seccnds' lt objective was to Thc took' they calls nulny as.how
;t;;";;-or, **ti*, or""ffi*i*"y,
such
meant having an extensive provide the customer with the best possible experience' If that call cefter operatsr was the running, in interest tonuersation with a custoiler about his a specific shoe that was for was looking customer tbe encütuaged to have the conversation. If to look on at least thrce othcr not available at Zappos, the call center üpsratsr \tras trained then talk the customer througlr finding lntemet websites ta find what the customer wanted, and websita .{*ppos would lose that ord€r, but the custorner would the product on the "o*p.-tG "We scorc lüäll center operators] based likely retum to Zappos in the futur*. Hsieh iommented, We don't cars if +*y,.ltud* j on whether or not they **ot uUout and beyond for the custÜmer' " " oppor-tunity'"l .cfficient' is a branding interaction *rery us, ro, were.... they the sale cr how
and beyond tustomel one widely cited example of a call center operatol gCIirg äbove uF on shoes that following was expectations took place in "tuty zoo;. A eall center opffator
The custsrncr replied ftat she :v.as vcry ehould have been returned, anä c-mailed the custorner' who had since passed away' and had not mother, ,**__rO. had boughrthe shoes for her sick an'anged for UFS to go to the opeRtor center call gotten arorllld to retuming the shoes. The arrangem€nt and condolence card to custoffier's hcuse to pickip the shoes, then sent a {lower 6y this concern on the part of a the customsr. Needless to sayr the customer $'as overwhelmed a biog, wiich were widely cireulated'l? cümpany! *nd postcd *o**"nt, about her **p*d*t"" on
by themselves' They were given Call center operators were trained to handle mort any situation to escalete the matter to a the authority to do so using their best judgment without nesding purposes' calls were monitored by Zappos supcrvisor or manager. For quality,
"onttot to ensure that the operator had exceeded ernployees, not by an"outside ug*"V. i4onitor* listened ,o*to*., expectatioils, and thaithe custofier's experience had been exeeilent'
;'-*ffi:Zappos.eomBelievesHappierStaffersLeadtoHaFpycu5,tonüfs,,'ärrecr. October 2ü0?, P. 35. itnJ.n Uoitt*v, "Th*se Brands Build Community"'ldoeeÄ'carn' May
l?' 2008'
philip Dackweiler . Ingen del af nogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over loralificeret og rimelig anvendelse), som er ulovlig eiler overtrreder servicevilkarene, er forbudt. De personer, der foretager en sädan overtüedelse, vil blive gleich, mit retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz Bei welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
?appos.com: Developing a Supply Chain tö Deliver wOW.
Zsppos.ram:
$*elnping a Sd+pt!
Cheia to
Deliftr WOW!: GS'65
ln late 2008, the eall center received about 5,000 calls daily. Zappos viewed each ofthese as a rhancs to "wow" a custom€r in a personal way" As Hsieh said, "At that poinl you have the full attention of thc customsr..." That's the timc *her* you havc a huge appärrrurity .". tü Ehine."l3 A customer that had irn exceptional cxperience was likely to tell friends about it. With the ease of e-mail communieation, positive or negative tustüm€r experiences could be rapidly spread to large number$ of peüple. Zappos wanted to ensure that its word-otmouth testimonials were ovenvheimingly positive. Free, Rapid Delivery
The hnal asF*cr of providing exceptional service was rapid delivery at rrs additiüryl :harge. Zappos alweys fied to beat customrr exp€ctätions, under-promising and over-delivering. Utrtimately, this meant opemting the rvarehou$e around the clock, cvery day, with deliveries rnadc ovemighr by UPS. An order reccived in the evening would usualiy be delivered the nexl day, even though the standard delivery terms were for UPS Üround, which had a 4-5 day delivery €xp€ctatioü. Lin elaborated:
I
in thc early days we didn't really have a choice; we couidn't afford anything else except ground shipping. Then we started understanding thät whatever morrey we had left over we wanted tü rcinyest in the growth of the rompany. We can either spend it on marketing, rying to g€t ncw csstotrnets' or gucss
we cän spend it on our existing customcrs and lct them drive lhe word of moulh" *come back." You know these customers are gr:ing to buy and let them drive the shoes at a later date, sc our decision was always to focus on service because we got instart feedback whenever we upgraded somesne. They were wa'wtd by the sxpsrisnce, and thcn they told a bunch of people. And word of mcuth works a lot faster oa the lntsrnet than it does person-to-person because you caR just e-mail out a bunch of your friends and say. 'trey I just got this amazing experience.' S0 that was on€ of the reasüns that we wanted t$ keep upgrading shipping. The other rsasün is that we've ahvays thought about our real ccmpetitian as the instant gptification you can get waiking i:rto a brick-and-mortar store, trying on some stuff, and walking out with the sruff you like. Our idea was that over time. \Me werß going to get as elose ts that as po$sible, and that would really bring the $tofq to your homc.
During tbe 2006 holiday season, Zappos guaranteed aext*day delivery for all orders, and continued the policy tlgough 20ü?. Howeyer, sinc.e customers expected üexl-day delivery, "they were no longär as wowsd as before, when it was a 'surprise' upgrade," according to l-in' Furthermore, guarantecing next-day delivery set cuslomers up for disappointment on thosc rare occasions when the delivery was late due to unavoidable problems such as weather impacting plane schedules, or if cornmunisations lines were down and Zappos was unable to comnunieate orders to the warehouse. Overäll customer satisfaction decreased very slightly in 2007, and the company dccided to uo longer adveßise overnight delivery. It provided the same level of r.r"ic*, but ünly guaranteed 5-day ground shipping. Zappos fomd that when customers no
Ii Mi.hu"l Bush,,,Cusromcr
Servicc a Brarding Oppomlniiy," Tirq Busin*s, May l?,2008, p. 35
philip Dackweiler . Ingen del afnogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkärene, er forbudt. De personer, der foretager en sädan overtrcdeise, vi1 trlive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schdtte eingeleitet
,'t "" ' T'ft
Case Studies in
Zappos.eom:
lnterilalional Marketing Manag€ment
fr*eloping a Sxpply thein to Delivet I$OW!: GS'65
p.8
longer expected n€xt-day delivery, they were again $urprised when packages arrived lhe next day, especially when they had placed their orders late at night. Äs Zappos continued to increase delivery speed, shipping cost as a percentage ofnet sales (ailer returns) remain€d constatt, even though ths percentage of returnri increased. By 2008, Zappos w*s on€ of the tüp three UPS oyemight shipptrs, and worked closely with UPS to increase efliciency and drivc down shipping cüsts. If Zappcs decided to back off from its desirc to ship all orders for ovemight delivery, for instance, using ground delivcry for all customers that were within a two-day deiivery &om its warehouss, it estimated that savings could be signiftcant. UPS estimat€d UPS Ground coul*l reach l l percent of Zappos customtrs within one day, 49 prrcent within two days, l8 percent within three days, ?l percent within fow days, and the remaining I pcrccnt would taks five days.
Tnr DrvnxrPMEl\TÄi\D Evolunoti oF ZAPPoS' Opsnnrto*..s in San Franeisco, in the second floor of a Victorian house, with the founder of Craig's List living downstairs" By 2004, the eompany needed to expand, with particular emphasis on its call centcr. Hsieh and the senior manag€mcnt believed tha: it was important to have the call cent€r as part of carporate headquarten, rather than outsource sr remotely lccate this function-a{ter all, the eompany's primary focus was orr providing the very best custorner experience, and rhe call center was central to achieving this objective" The Bay Area was cxpensivc, but it alss did not have üc right environm€nt, nor access to suitablc employees to stsffthe type of call center that they believed was essential to the company's success.
Zappos began
They decided to move Zappos to Henderson, Nevadq ün the out$kifrs of Las Vegas. Las Vegas u,as a service-oriented city that operated on a 24*7 schedule, was already home to many call centers, and had exbemeiy good Internet connectivity. Of thc 90 employees in San Francisco, 70 moved to Las Vegas.
Attracting Brands In the early years of the company. it was difficult to get brands to sign up tbr cnline distriburion. Shoc companies had made huge investments in their brand cquiry. In 1999, Zappos wss an unknown start-up, and established rctailers viewed the Intemet as, in Mossler's wordso "kind of a {iea marker.... They saw the lnternet as a place where everghing would be discounte4 and their brand would be ruined." In addition, the existing retailers prcssured the brands to rssist oniine sales, as they did not welcome the new cornpetition.
An additional complication was that brands were more successful when grouped-athtretic shoe brands" for instanee, fared better when grr:uped with other athletic shoes. If a retailer offered only one athletie shoc brand, there would not bc enough selection to attract customür$. Thus, it was difficuit to collvince companies to be the first brand of a category to be carried by Zappcs. Once the first brand signed oR, however, subsequent brands were easier ta ättract. ln its first year ofoperarion, the eompany signed up 60 to 7ü brands. Zappos focused its attention on signing brands that customers searched fior or asked for when taiking to call center operators. The cornpany reviewed logs of customer searches fur brands that
Philip Dackweiler . Ingen del af nogen bog mä reproduceres eller gengir,'es pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrader servicevilkärene, er forbudt. De personer, der forerager en sädan overtredelse, vi1 blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gieich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
Zappos.(om: neveloping a Supply Chain to Beliver WOW!
Zappos,com: O*elepinp a Supply Chain to DeliveT
\I'OW!:
p.9
GS-65
w€re nüt on its site, and its buyers investigated those brands and evaluated whether they would be valuable additions to the Zappos offering. As the company grrw and became well knüwn within the industry, brands bcgan to contact Zappos about being $old tksugh the sitc. As Steve Hill, the company's vice president of merchandising in 2008, said, "flThe buyerl will get in touch with the brand, talk to them, ätrd look at the product. if there's a compelling reason ro have the product, then we'li go ahead and open the brand. ln a lot of cases. it would be duplication of sornethiüg we already have, so we may not go dswn that road."
High-end brands, initiälly r€luctan1 to parfner with online rclaiiers such as Zappos, eventually cam€ on board for several reasrlns. First, as con$um€rs became comfortable buying oüline, this became an importänt disribution channel. Second, they began to realiäe that if customers could not purchasc authentic high-end brands, it made it casier for counterfeiters--customers searching for their brands on the Internet would end up on sites that sold fakes.
A third incentive for high-end brands
arose when Zappos began creating '"vertical" sites within Zappos.com. Thc hrst such site, "Couture," was crsated in 2003, and fearured high-end fashion products {initially shoes, later expanding to clothing and accessories). By 2008, Zappos had ädded verticals for running, outdoor activities {such as hiking), and a "RideShop" featuring products for skiing, skanboarding, surfiRg, and off-road bicyciing. Brands were eager to paftiüipate in vertical sites, since thsse visiting the sites rvould be passionate consumsrs-the types of cuslorners that wanted high-cnd brands, and that those brands wantcd most to aü,ract.
As cuslomers wers wou/ed by the compaily's high level of service, they bcgan asking Zappos to carry products beyond *hoes. Zappos added additional products based on the passion displayed by cusfomers ar emplcyecs. Lin explained:
A iot of companics
looh at lproductJ categories from a market point of view, and chase after big markets-they think f, market is strategic and want to go into that
market. We have tcnded to lssk at thing* as: 'if we want to get into this product category, do we have passionatc people, whether it's a customer, or an cmployce, or s pärmer, that would love for us to be in that product category?' lt's actually worked out yery well in those situations. So, if customers want us to get into h*ndbags ür ac.cessories because we sell shoes, we go into that eategory.
Zappcs began selling electronic entertainment producti begause some of its emplayees were passionate gamerst and wanted to sell gaming equipment. Lin observed, "We found that people whs are passionate about a product cätegory tend to run it much better and much more efficiently than pcople who just think, 'this is a big markeq I want to get into thar business."'
By late 2008, some of'the non*shoe products that Zappos soid included: handbags,
luggage,
clothing, eyewear, clectronics (eameras, csmputers, video games, phones, and CPS devices), watchcs, houseware, and jervelry. Its ouldoor verti*al site also included items such as tent$, stoves, water {iltcrs, lanterns, and other items important for outdgor eilhusiasts*these customers were not just interested in hiking boots, they were passionate about the outdoors, and wanted to be able to get a wide range of products. Other vertical sites included a range af irerns important to customers interested in those sites areas of foeus.
. ,. - .^*#' ffi? xTH#ll::$lJ'l-*....ä*'-:1ff ji:|,jiJiff companles' shoe :H"#H::ff :ll.::lT[T'-T:}.1"ili be forwarded to the
Evolution of the Operational
tulfillment costs' tle zappos'ä*i*irär*o g- "i-"äuld ä-"fJ""t incur.inventory or pricc' :t*s,.zappo's over ttme' ;;;.' the which would fulfill pnce. ,"äo;ä-i;;;;4"1f-tH"llholesalc invenmry' This reuil ,u**oä*i*iir* own its Zappos charsed all z"ppir'rrrip*en$ were notn changed, *iii uv 2001,
shoes ftom
this msdsl
foeus on customer satisfaction' driven by ttt" evolution was primarily "ompuoys
*'
{ff 3fJ'JfjäfJ-X;ip"'approach liil::.y';llTi#l; ilTJ;,llJ1l'lii:si,Tfg" websitewasonlyaboutg5perccnt.accuratc..rr,*.ompanyrcceivcdthisinformationfromtts vendorsinrnany*";,:*,ü*'":r*::;lil-l1i;i**ffig:f"5;1.?'i#:-iäö'ö'", prace ror custom;;' since thev courd l*iXi;f:r:S"X*:t:&""*'1"?*Jüä;;a;.ation or long delivery ttmes' stock, leading ls cancellation orders for products
,fr-i*J-äiin
when a customer was that Zappos did not know the drop-ship approach davs' but if it ferv a withir: The seccnd problem with orCer *ftip be order had been shippä"fi-l*ia-, zuppoi cu$tomer's order might n until problcm reeeived a targe *oJi'fro* *oufä not know that there was a *ä delayed. The custo*r order' called to inquire about the
ä qt6tä;;* *.:* *-p-nä,äää,;ü Zffi ä;"h;öy,
,-i*l*i***
its own inventory' one ?000 Zappos began to stock November in would physical store before thev ln response to tirese ä;u'üä o*ndo.tliäu*iärt*Ja , retailing' and manufacturers of the requiremenrs ä-J;;;ii or *u* in'nJi*it
o ase ß ri*gin6 I nv entarY I n'H
+-t: lntTer tbis requiremenq zappos sign up to be oniineltppü*"i'li* the \r.€re unsure uuo*r "f carifornia irat *as going out cf busirress but c*nied witto**, had purchasea u *rroä*läin aPProPriate brands'
rti."5ä*ä;ä
-*trä-äigl''rt1tg-t: **t
an abandoned oneoftheaftractionsofWillowswlt}atitwasmuchlersexpensivethantheSanFranctsco .-rw it- own inveamf it purchased i" dec;ded aüd wareho"se a *#ä.-."*p-"V Bay Area, *o ano-tr''rnea ii into ä*'lr'Ä*-i'L**' fro* *ii**, idealiy not uär-rfrä was *or* deparunent of Sacrarnento' äii-t üo*ever, Wiltowr, a;;t*löö ""nft äu?fft nearby, and shipments distribution rnajor was center. There
"*rrr*r, 1o distribution located to be an lntemet *ar*nouse was a manual operation' ra* were made
l, upiääLä
Whilebringingsül.lleinventoryin-house,Zapposeontinuedtousct]redrop.shipapproachwith manY
cf its vendon' had oniv 30,000 $quare
reet' ups
center, which Under this program' Zappos fffifi"Jfffi #*rtr1fffr"fffitfiftoü re manage i - i;;;;,Y *J'fotf'tmtnt'
approaclred rfr" ,u
*oäp*y
to Zappos'combut this was latcr changed rvebsitc was shsesile'com' Th* **puny,s original
forudgäende tilladelse t:rus \uu "Ogiverens overtredelse' vi1 blive sädan en der foretager ganz gleich' mit kopi'ert Jer übertragen werden'
*t'1ri:n
ot
" personer'
servicevilkärene, .i rot"tua'' som er ulovlig eller?"*äd", verlags ver lsralificeret og rimetig anveiolrse), die vorherige- zustimmung des n,i.t . ou.r ist verboten' Bei iiiiJo'ä"r.ra"in "ir,., ä* g"r.oran oder in den s"ruicereorngungen festgelegte Verwendung eßforfulgt, i det omfang rov.n verw€no"r, andere Eine "i, velchen Mittein dies geschieht. Schritte eingeleitet' ,"*tlon*Otung werden gerichtliche
o*.
r.'
Choin to Üeliver
lfOW!:
wouldcontinuet0o\#ntheinventory,butitwouidbestoredinaUFsfacilitynearitshubin uv a thirf parw' The proposal offered *ouoäLiur-a o;ä;äfirffint Kenrucky. could reccivc Louisvine. U**g ä;ä;;ui t"vs-thirds"of customers mogt the willows' advantages, from several shipping 'iqilt-ry ups crouncjula u:t u 1o**' *o*t than be more would deliveries within two days using which be manaBed *ing *'gl"utef tolls' a major make ra lnventory and fulflllment woutd withaut zappos having
u**ä u, rüiii"** ü* efficient than the *r";;;;ih$moved its inventory to pcrtbrming - au"ii*O analysis' Zappos capital investment. t" ääöi, "n* the UPS facilitY. wÖIk. The Zappos clsar that this approach would nÖt within 6 to 8 weeks, however, it was handle' since each could r iilrgrl-lra1*e :v*l:T *";;;;-lieepine invoived of shoe could business * *"p*ä* sgu' thur. an individual style *u* combination stylcisizc/color shoe to 80'ü00 SKUs'
*l
require many SKUs'
"i'üt "*-'
Zappos had about ?0'ü00
Center in Kent*clE freueloping the Zeppos Distrtbufion it would need to provide *-r.pionur sJruicc to--its-customcrs' Thev Zappos decided tt at ln n J., *o its of necds c*rieo-dä;; irre irieh-sfu 3ü minutesbusiness' l-iPs the devciop its own o,rrniuiiä"rntäi frcm than less shepherds"ur",ä""i*r.v' in building irexpensive as an found coqpaly needed to build iß warehouse or. lack a rü Due bar Louisville. hub in hand-held tit-V^"i-a stati; in;entsry shelving and r*rult,"apltai,-iü* inexpensively u, po*riilt*.- Ä*-u man, gemeilt inventory ta the that was later uplsaded code scanners, *fri.h'r]äd infannation beyond the between scanners and servers was servers-the cost of ;;;i;, communication comPanY' s budget constraints'
TheZapposteamdidnothavepreviouscxperienceindevelopingcomplcxinvsntory that had addressed tir*y Iia-oot find othcr compäniJs managemenr *yr,**J^*rorthermore, the company resultu a in-house' As
systems that prcblems similar ,o ir.-*;" they develop*J-trr"it on a highly SKU-intensive business procedures"f;;*ä Hsieh developed irs own systems and warehsuse' new io-help^bring up the required virtually perfect inventory "."*u.y, tire *äft**" eoding himsclf' of muc, ät fr"- *"rtrt*l ao;og
rnoved
ß
Kentuchy
place in Fromthecompany,searliestdays,{appo.shaddevelopeditsownsoftware,opdrnizedtomeetits *ioi-*ite tosts'. This practice wa$ still in using open source qrgerams. in ouO*''in scftware needs,
,*q,,o.i"*nntinuJ upgrading oficth
h*d*I^:.Tl
2008. The company's rapid growth experience' At volume and to dEliver a supcrior custornsr Jscalating ä* *irrr up keep ro ordel in smatl, ccnsidering the settingseäson, the lr group {always holiday year,s each of end the to provide double *louigoä*ä;d;itiqü1;;'1ü make plans They company revenue. ä;;üig **ä*o io' the foilowing vear's holiday seasan'
holiduy rhe capacity of the just-finished -*;;;;i;ysterns could üe thoroughly testcd beforc the mid-year, by plans implemented rhese new caPacitY \ryas requred' stock bin might hold up were randomly assigned. A siven In its new warehouse, stock locations brand' The random same not be'the samä sryfe, o' *u*'ith* to l0 pairs oi rt u**,iut;*,**;,"-ld a given brand &om shoes ali stoekins approach shipping' and started they "r "0"ä.äe-r:*hii-,*-:nlig, är*"t*d prcbl-eps when it was arrived' $gether sounded ril.- g*a organrzation,-it shipmurt a when U'iogluo6o* *toeking' worker missing crearing bins' The stock which were pläed in the nearcst available separated inra pairs oi uho**,
irä';".;;;", -ö;;;;üilh-
tiliadelse' Brug (ud vi1 blive overtredelse' nt pt"ottt'' der foretager en sädan sewicevilkäreng ganz gleich' mit ulovlig er werden' som "?iÄro'' übertragen anvendelse), oier kopiert over kvalificeret og rimerig "tter-o,r"rtäoe, die vorherige zustimmung des Verlags Bei det.Kein Teil eines Buchs darf ohne festgelegte verwendung ist verboten' retsforfulgt, i det omfang toven tillader servicebedingungen den in oder gesetzlich ai" a. verw".rorng andere welchen Mitteln dies geschieht. Eine Schritte eingeleitet Zuwiderhandlung werden gerichtliche forudgäende es pä nogen mäde_ uden udgiverens
Marketing Management Case 5tudier in lnlernational
p.li the
p}acing the box into 1bin, telling the system had been ordered' it ficier went to get a box that different stylcs of with located i;;"1d;-
-wlr*nwhen scännsd the shoe box and location a stocrt lacation of that purt *orJJiÄ, rh. in bax was eäsy to find rhs appropriarc
bT:;;;
the size äiC not need to distinguish berrveen shoes frcm different gH shoes of the same üodei sitting next to itshoes stocked next to the Size
***iu"r**rs-.-the *otm
I
Asitsbueines*grelJf'Zappouincrea*editswarehcusingcapacity.Thcinidal265'0üÜsquarefoot ;";p1?v opened a new 832'0ü0 square foot facility was frlied ," ;äil;;F6Ftth" gror*'th-'Wirehouse operations also became more facility, of which ha1; wäs ,rtio*O for fulure The new static shelving and simple co$Yeyors' sophisticated. The initiaiwarehouse consisted;f car*usels eutomated uutoäi*O *on'*uyo'i' It also had facility had some static sieiuing, but with dry iioo,, *u*tt liie syrtems commonly uscd in needed rhar spun unril they;;;ä"i1" per units 32 contained ioops in_place by.2008 cleaners--except thät each of the 13t carousel its to automatiorl müte zäppos icaea floor and were stackfi-iou, stories high. In zobt, tutti*t' totott picked up shelves that warehouse operations by installing a robotic rystem'in plac*s fsr irems to be stocked)' and brought the contained rhe items to bs picked (or cmpty rvorker effrciency-in the f'st year it was msre shelves 1o the workers. This $eatly increaseä since o, ca'o''s*i methods' it was also more scaiable' than twice as efhcient as ei*rä me ltatic of photographs 2 for easily added when needed. (see Erhibit new shelves anc rouots courJ u. thc ZaPPos distribution centcr')
arthough the
irs vendors for drop-shippins, ilHf;f-'{"#f*rä-"-ti,t sending ordersownto inventory increased äs it grew' The source of percentäge of snpme.ots from the
"o*!uny'* or drop-shipp"d ry9.m $e v;nd31 was rhe delivery, rvhether frorn the Zappos warehouse that cvaluation of customcr satisl'actron showcd transpärcnt ta the üustomef. However, customersservedbytheZapposwarehousewerehappierthanthosewhoseordcrsweredrop. shipped'
The were bcing shipped from üe zappos warehouse' By March2003, about ?5 pcrcenr of orders by standards own its to not prcvide *utto**t ö*ii* that lived up company decided tt *iii decided and situation' "ärrC leadership evaluated the cantinuing the drop-ship business- ffr" .o*!*y J'seruice comRanl.t.hat happ^ens,tn sell but as a *o*p*y' shoe that it shCIuld tlefine itself not as a to stand for somcthing more than just shoes.,' Hsieh explained,"We decided ttui*i'*unted the other results ät that time were not what Hsieh and rnaking money sellürg shces." Thc,service the what on atlention focus helped cÜncentäte leaders wanted thern to be, but thc revised service' for superior needed to do in order to be recognized üompany
Zapposimrnediate}ystoFpcd-$ingdrop.shipments,cuttinglf?5po"*nt0fitsbusincssinthe its inventory to include those itEms short tcrm. Zappos Uoiit'i.i* busiäss U-*frö".liirr*r.urid that had previously bcen drop-shipped'
allowed Zappos
to tahe those systems and
Thc dccision to bring all inventory in-house When inventory accufircy to nearly 100 percent' procedures i*prou.Ä*?ts icquirea to incres$e website' the on appeared
was sold, thai item no iooget the last item of a particular style/color/si1* *as i" stock-the only exception beirg when onäu* Thus, any it*m tf*at"a cu*toäer selecte4 at lhe wo *urio*em had that item in their shopping ca$s there was just on* t*n lo inventary, una
i*Ä**e
o'*' "ugleich' mit :ffi::l"än"' #:äää:'Jl3läl"ol'iq werden'-ganz übe(ragen a"' v*t"gt
oie.rorte.ig" lov.ririlo.r'*'o"i. r"' "in., e,;.rr-;lu,i.tr," oo", ,r o.r ,.*."o"oinä*gtn irär. lo.ou.n geschieht. Eine andere verw..o"",
emfortulgt, i det omfang velchen Mitteln dies
k";;;;;;er
ist verboten' Bei festgelegte Verwendung
Supply Chain to Zappcs'eom: Developing a
DetiverWOW!
:
Chainn Ael/l'.er WOWI:
this casc' the sametime.The|rf$tÖnetocheckoutwouldreceiveth€it€m.AswithallZapposactlvltle$' ;-rvice dro*re ,h* *o*p*y's operations-in accuracy. pcrc$nt lÜ0 oroviding oü$randing ;;-;;;; accüracy, with an objective of iequircment for cxcepuonal inventory
20ü8' for instance' the on its home paFe'--9-T::**T125' sutisties inventüy showed Zapuüs -,vr--,'t;,i,z'lz uPCs, and 2'851'610 tstal products l,4t? had warehouse 15
i*oj;;]ä.oii
uÄruur* for shiPment'
SurrlY Cgatni AtL'ulAüE]IElir Buying that manufactursrs wa$ to develop,l-* :1::,1Y1es The *aditionat practice followed by shoe selling ph"" orders for the upcoming
R-b;;;-;;da w*u1d be introduced ; ;;1" shoÄ. with a 11." *u"ui'*turers built to these orders' season' the throughout deiivery season for ordered retailer a poaular't* lf ttre st'tes becllrre -hielr.ly relatively smali surptus uoäifuUf* in case si generally by selling at ditpos*d to b* had that inventCIry toü many unitt, it *oold hurr* excess hit, ths manufaclurcr would not bc able to ä stsep discoirnr. However, if a style U**u*J*-ftug* lose potential sales' rcstafi prcduetiori, and the retailer would increase deliveries, as it could not
for specific schedule' and retailer$ would place orders Eaeh brand had a monthly *vailability "*on'tt ,nas based decisions purchasing Frutdng optimal u- ä.iit.t*J *urt numbers of unirs These tirning' delivery and uoits trt" iu"i5*i of on sening the right dciivery scheduls*-botit This m"arker' the ol sense gcod a and buyers, pun nf tn* -i*ritue decisisns required erperience on the the and shoes over the lnternet was $Ew' was parricururrr was oio*t sales. Mossler's experience in the indu*try thc most relevant model *uläuiug *uil your feel' You g*t a scnsc for this tiric' U* **pluin*4, "It's about particularly critical how rhev were.doing. You had a sense for brands that werc have"" You just made your bets"' how big ä potentiel a new"brand Äuld
*
r**Ti'äpä;'äfi"td;;g ,*äät:;lö;;ilili.,
*i
By200E,themgrchandisingdepartmenthadaboutl00empioyees,abouthalfofwhomwcre Zappos had *.r* ,h" pF"ty points of c.ontact for vsndofs' buyers and assistanr;ö;: fiir* saw' buyers Zappos the thar ta see'the .Ä* urot*ution an Extranet. which vendors cÖuld use from benefit to zappos pricing, uJ *".dn*. This _enabled such as on-hand inventory, sales, the inventory' lf a ;t;"d;t personncl) *valuatingstsch Zappo* having rlousands of buyers (both s'tre might cail ädditlonal trad tü" u"nOot vcndor saw that pr""i,i;ä;;dö'**ff-äC hand' if an ather the on inventory. " suggest rhur zuppo* putg** more rhe appropriat* uoy*, distribution "oä the tendor needed more produc't for other item was selling slowly at zappos' but channels,s,{remight$uggestthatZapposreducefuturescheduleddeliveries.
;ffi;,ll'iryw.arippr.qa-* 16
An
Crocs
s'lovember 25' 2008)'
For a du:scription of the
the manufacturer of plasric shoes aüd.sandsls' exccpticn to tiris practi'"c *u, Cro"r, Supply Chain Msdcl for case' "Ct*;;'R-;;l"tionizing an lndustry's supply chain, see rrt"'ir*r*aGSB
mtt ganz gleich' ,"t, verlags kopiert oder übertragen werden' darr ohne die vorherige Zusrimmung des Bei verboten' festgelegte verwendung is1 ",.n, die gesetzlich oder in den servicebedingungen verwendung als welchen Mitteln dies geschieht. Eine andere eingeleitet Zuwiderhandlung werden gerichtiiche Schdtte
er urovrig over kvarincerer og rimelig anvenderse), som
::'r#$;:::::1""t
i*
*?ru!|ffi:::äffiH1tr".'i
Case 5tudies in
lnlernatiönal Marketing Management
e'!a
*Powered by Z*pposo: Operating a Supply \#eb
-
its as the linear pfocess of placing orders with The Zappos supply chain was nÜt a$ simple Zappos in 200?' instance' For to customers' suppliers, stocking roo*iä'y, u"d shippingorders in rnore detail below)' When 6pm was i*tuit"t shoe {described onfine purchased 6pnr, a ai*.ount producl that- was in the Shepherdsville sold integrated inm zappos,--G 6p*.*o* ye$itl in zuppot.*om-website-lhe ptÜdufts were handled warehouse, exactly * t}"'t*** *ay as the bin inventory an in sitting mightbe wcbsite on tt *.Opäcom exactly the sarne *uy,
rexr ro a product products.
"r
":116ffinn"i ä" Zffir."o* website, even thaugh each website displayed different
ThecapabilitythatZappcscreatedlosellonlinetoindividuaicustomerswasalrovaluabletoirs of retail prcducts had distribution systems l,endorsu direct sales lnitiatives. Most rnanufacturers large numbers of goods to retail stores' or tc thät were built arounä'tüp*""rt of relatively For instance' a manufacturer selling $hoes to distribution centers operated by large ,tot .,*Jiou' Nordstrom,xoulddeliverlargebulkorderstoaNÖrdstromdistributioncenter'Nordstromwould ftu* tftit distributian center' The transfer of then supply a relatively smill numbe, of.rrÄ oücur at the Nordstrom retail storeindividual pairs of shoä to custcmers would
As the Internet
public' some as a credible, pcpular, '*'ay :f selling to the to develop needed they this' do To to te able to scll dirccily to *usto**n'
developed
manufacturers wantcd n"iwolk to deliver products directly to customers-in websites to sell producls, and a distribution For companies that had previously sent large srnall shipment$ to large uumbers of.destinations' tlis was a difficult chailenge-tr: say nothing of the shipmenrs to relativeii-f** J"stloa6ons., products' handle billing to
new requirem*n, ,o
single units of the ir**ss lots .o,f gt{."t*. for retuins' Thc companics wouid have lo develop
individual ronsuners" and deal with individual to desigrr ald.run a retail website' a call center t0 severai areas of **i*o.*, the technology to and a disribution system optimized for delivery deal with cu'torner questions and problems, retail cust0me$. ln order to help manufasturers sell directly to These were all areas in which Zappos excciled. called "Powered by zappos''" under th.is,plotrutl]' consumerst Zappos developed a progßrn ttese-compa*ies, Än *t* call center' and distributed
r-ifr* **U*li* fcr ;h; ;""uf****, was the hvpothetical "Smilh Shoe Companv'"' i;;;;directly to custcrners] smithshoe'com' which would display all the Custcmers would go ;1il company website, by zappos" logo- The
Zappos developed uoJ
included a prorninent "Powered availablc shoes. rrre s*itb srru* weuiite it was sent to tit* Zappos disu'ibution center' where customer orderEd a shoe, and the orde.uas nunber that hsd a qlestion or problem called the handled jusr like any other order. customers by an operatoT at thc Zäppos eall center' Smith on ths Süith Shoe website, which was snswered at the call centcr' and run the.website,'end to handle its customers Shoe paid Zappos for ilerns sold on tn"r was sold on *re bmitl Shoe'i/ebsite' as it did Zappas purchased
h;;;1;p i-ät".y
theZapposwebsite-infact,t}reinventgr-Ywa$thesame'evgnthoughitwasoffered0ntwÜ a customer ussd to place an ordcr' Zappos wcbsires. In all eases,;;;lli--; of whicü website at retail prices' bought producrs
e";ä;pplier
at whslesalc prices, and sold to the customer
ffi
mit riiipDackweiler.pcu"r*",,J6frll"lie":.:l_":,?:-mm.ff:"?Tllä'iä'Jl"*::lH:';"'ä':'äffi;ä;'viiblive oo'*ut"n werden' sanz gleich' un,",'oilse), som er ulovt'?
ä:l':H;:ffi"ä. il$o"o"' J?iläff'$ffi ti":"llmffim:"ffi ::ä::#ffi l**ää'ätrffi :'nT'ff *i*;*'ä:Jäf stuü' zer
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WOWI a 5upply Chain to Detiver Zai:por'com: Developing
oneintcrcstingaspsttofolrbusincssfromasupplychainperspectiveis.thatin *:*t ::** to have lts own world, *u*ry u*, yoo op*n rhe brick-and-morrar
same disptayrpu.*,i'*ownshelfspace'andiisowninventoryspace'Thewaywe've äiir*t*ot windows t0 access the stores online, vou *rt*u*
opened up these
inventsry;youcanjustcreate"n"l*tt''Öurmainsiteh*sacccsstothesaine running' for ,*r*"iiäo ;f *t verticals related to inventory, ., *;äi,;;liä*a by Zappos Powered oI * up""in"t Utuod Yo:Uh example. Or, I can show ycu or on the OYerstock people sell ; p*d*:lt:,T-t much site, or through letting other much' be will it time ss-üvet 6pm site. It's accessing Fq 1u*t,lnventory' world' rnore effreignr tt'an in thle brict-and-mortar
through the sarne inventory could be accessed bv Pawered Thus, Zappos created a supply Y11'-i" i.lich the through 2008, ,*uuä;;;;;i-t sold shies many websit*s qg*t iuitli' in ZapPos Program'
Scheduling Praduct DeliverY
suppliers tü the was scheduling deliveries from its one of the challenges facing Zappos piu*.J orderJwith more than 1'4s0 different brands' company distribution ffinter. In 200g, the dclivcry windows' to dciivea' dates' Zappos gävc suppliers i"t'nio"ä-äitiplc orders typically smooth the recetvtng to try and to
at 15" Olst'iluticn center' help schedule when prÄ-t- arriuea *gerc 1u*o thougtr the warehouse, op:rated fir. schedule. Zappos received products eompany's pnmary folshrpping products-to customers*the *är. I clock, the around of a customer ordcr' * t***. ttäo iä tlps *itttin four haurs objective was getringl;;;;*o o"
;;;-;
**ääö
diffrcultiEs for the
frornja vendors led ro tralTic management *u* that it had ji*lt*C visibility into the wxehouse. one of the challengr* Z*ppu*"fÄJd-gree ofuncerrainty as to the actsal day that
The large nurnber of shipmenrs
*t;;i;Ä
therp on manufachrrers' supply chains, and a*manufactursr might state availability warehour*-*füi" rhe u, practice' a shipmenr wsuld uäo* in availability' * q,runtlty ,o-LtLtiu*oa from thaf Ausust l, and Z*ppos mighr speci$ days in which traffrc at the were there a result' As e'ugtt*t'' rtre*shipment might ää*äy!i**-io which relatively few ue untcu*ec, and other days in to waiting up backed warehouse was shiPmcnts arrived'
for was än issue that was difficult
warehcuse operation'.but 'än within the This created ineffrciencies -"iwe **rl ,o wo* not;ust our custoflers and our ernployees' ot.***a: Zappos to address. thern ta change that' and a p*'tJ *rä- *inää*, ano't ask them give we pa$ners. our but also ä"t;irt"lO tirem lro specihc rcquiremcntsl'-"
tlealing witb Exctss InventorY arrived each
products that clear space to prepere ml th: new Brick-and-mortaf stores had to for sandals by August used ä store **"rA rtt"Ji" clear sheif.space seassn. during the fall and selling uuu:il;;i" io, iloo*, which would sell or Septcmber, in order to make *p*".
F";;;;;;
rerrdei.e;, som er )ver kvalificeret og rimelig an
vil blive
der foremger en sädan overtradelse' ganz gleich' mtt kopiert oder übettragen werden' vortrerige zustimmung des Verlags Bei eines Buchs darf ohne oie verboten' festgelegte verwendung ist ur;or" gesetzlich oder in den s"-i."u"oi.,gu"gen
ri rÄuat' uiovlig ett"iorr.rt ä0.. servicevilkäreng
ot p""on"''
tiliader det.Kein Te' rctsforfurgt, i det omfang roven Eine andere verw..ro*g werchen Mitrc1n dies geschieht. eringeleitel geri:hlliche Zuwiderhandlug werden lchlitte
.
üS , t.
Case Studies in
lniernätional Marketing Managernent
in July until the end-ofwould häve t0 drop prices starting winter season. To do that, the store $eason inventory was dePleted'
redsced ZapposwasllOtconsrainedbytheneedtoelearspacetomakeloolforeachseäson'sincoming t*eio r.yrog io g.1 rid ol stock until custümers when new i.nventory. lt dü;;i neee to fall' the .*,uä*i* io"*grt, sandals well into were based demand" For instance, it found ,t
", prices*but thc reductions custornefs slowsd rheir pr,rrchaser, Zappos the next sesson's products' Coaversely' for rosm th- o**a ä make on customer teha.rrior, *-ff before the end-of-season-agai4 the* if a model sold slowly, the price could be A* ffiff explained' "]Yhen we make a decision to demand' decisions were based'oo no longer interested in customers are *ffini us thal they're beeause it's down, something mark 'Hey' now I'm rcady say, rhey **ln**'" rhe price ä - p"i"i"i*ftich this product at tfrar prile, to buy it again'"' werc ruade priee in order to clea' slow-moving stock In Zappos, early days, decisions tg reduce nade' they would r,"rt r.i oo Juyt, and no sales had been manuaily. lf a shoe sellwas automated. The Üorupany assigned lower the price. As the company grew,-this. sell-thraugh to instance, ir might expect a given style -iri. rhrough percentages . days' it wauid maintain the an initial p*tinO. *o*ft as tie nrst 60 at 25 percent p*, *on*. tltc did not,achieve its target sell-through' price regardless of ,ri**. ano that, if salcs If plan' *,if lt aehieved-thc sell-through O";^*.tfy sysrem would aurom",äf'ä*t the price might be adjusted back up' ptan, rte t;ey exceeded picked up ro rhe
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Zapposdidngtwantitssucce$stab*basedondiscountiRg'how€Yer,Thebasicoperating to dispasing of tn* öUrrt sirvi.cl.1T*' with respccl principlc of *r* cs*pun; *** ," J*fir* have the right to wanted Zaopos decjsion' wes oo tl'* üu'ittg--ro excess inventory, the primary bcus rhese decisions made it extent"tlat the ti#. produüt', in the righi q,ranriti*r, at the right to deal with' inventory slow*moving [-*-rfv. it would have less the cÜmpany adoptcd a there be some excess inventory' and However,
it
was inevitabie that
numberofapp,ou*hestoaddresstheissue,ltwouldonlydiscounttoalimiteddegreeonthe was not enou€*l .ite,'noitt''Aä tftippi"g änd retums' there Zappos.com *ensite]-as a iull-seruie* dilute the would -rotdeep'discounts on the site margin to $uppon deep diseounts. Furthermore. and new shoes' initun"e, ifa runner needed *oorr*. Zappos brand and inhi;ir salcs ofnew tew the se'l to difficult model' it would be uoa d;-;;"
thit';;;;ä*i
rhe site had both mr:dei if the old one was heavily discounted'
Tosupplem*nttheautomateddiscountingpfogralnforsellingexccssinventory,Zapposopened in 20t)4' t" ä*?o*p*y's Keituckv warehouse, opened several outlet storss. The first, adjacent loeations' ln other four in storÄ r:pened stand-aläne-otttlet Beginning in 2006, tü;-*üi sold surplus or end-ofo*. rumlun, op*, a discorinter that ,t oniine 200?, Zappos bought the viewed service as very cuitomer base"' Zappos custüm$rs typically sea$on shoes to
* ilff*r*n,
for the bcst price' thus
wcre toking *d *;;;;;;;rv lovur'.*r'lt" "toiiPt",T,-'..s zappos now had an onlhe purchase, 6pm tu" to shop *"*ä-ioi iir* best deals. wirt ttto* products to the 6pm site' where they
important. rended
could
*u*
outlgt for siow-moving inventory-it couldbediscountedasmuchasnecessarywithoutdamagingtheZapposbrand.6pffcustomers
: :
':
forudgäende tr pä nogen mäde uden udgiverens overtraedelse' vi1 blive sädan en foretager o" p""on"" der servicevilkärene' rilot-orot' werden', ganz gleich' Vertags kopiert oäer übertra'en ou," die vortrerige zustimmung des Bei verboten' isr festgelejte verwendung
:::-f 'l ;:
r"rio"tr.y, som er ulovlig e'"r?"näoo rver kvalirrceret og rimerig un gr;cr,; o*r "in", J.'Jä," gesetzlich oder in oen ser.riceueor'g*g.n :eßforfulgt, i det omfang iov* iittua..'a.t.t<"h Eine andere verw.,]a:ig welchen Mitteln dies geschiehr. Schritte eingeleitet gerichtliche Zuwiderhandlung werden
r.'
aisopaidforshipping{bothfordelivcryandreturns).Thus,Zappos.cauldbepreservedasafull. be discounted as requircd to while prices ; il;';6 ;i* *oofA service, fult-margin move inventotY'
"p;;;;
were handled After6pmwasintegratedinrotheZapposoperation,alltheinventorywasbeldatdreZappos or**o n.* ,i- ääpil;..; and.6pÄ'cr:m sites boxes' and warehouse in shepireriüiir*. Zappos-branded trtat zappsslrältt *rtipp** in idenrically at thc warcilur*, ****p, wcre shipped in ordinary brown comrgatedboxcs'
ö;;#-
ln200s,Zapposalsoinitiatedarelationshipwithoverstock,anonlinediscguntretailer,asaway shepherdsville ur*rrg*;:o*, zuppo* drop-shipped from its to liquidete exüer$ invsnrory. ln this disnibution
crlft
tor t'o Overstock' s c u$tomers'
Opportunities for ImProvemeüt earlier' was contained inefüciencies' one' as discussed Hsieh realized that the suppiy ehain still *as difficult to coordinate and resulted in uneven the problem *r mn*uoä-ää*& which. ttr" o"*r"ü supply chain reaching o-"-:::3*,.tno" deliveries. rn"r* *ul'Jro iri*ia"i*o"y in in china, then sent to the shoe companies in the production. t"tor, *nu"r- *rr* **o*ractured sorne then sent t0 zappos in Kentucky' shipping u.s., where they were stored. The shoes were eenter distribution Kentucky m* iuppu* diättv to rhe z*ppos or all of those shoes effrciency' chain woutrd increasc overäIl supply
ä;t.-d
("less than truckload" were-mäds with partial.trucklcads Many of the deliveries t0 zappos also resulting in a suppliers' individual of trt" *t*rt*.-es or LTL). These LTL shipments-ca*: froT (*eating trafäc tnrcks *ti"G ;t4 Zapposdistrib'rrtion center larger-than*necessary nu*b*, of some
ty:p*ttltl,lartiatiV
t'ull tn:cks' At
problems). as weli u*"tfl*"**on.*ic inefficieric{ "f could make pickups Zappos to huu* its own fuck fleet that volume, it might ns moie efficient for *up".ity.. There was a high concentration of from supplier *arcr,o,,ses and optimize "u,gu in the areas around Ontario and Long supplier *rr*t ou*** in-*.'JuttreL baiiro6".'in*tl*.1ariy g*u"h, as well as in a few lacations on the East Coast'
the efficiency of outbound freight' even if the There were also passibilities for inereasing cne day' r,aunf.u*tn**", *ouid receive shipments within overnight objective was still retained' expcnsive lcss by Eu"n *oro rrr tu* .ounry couid be served ovemight using
ups üround.
ground shipment ovcr weekends, where
"ou*äidftf
day' was considered to be the next business
THE QuEsrIoN oF IrirERriÄTIoliAL ExPANsroN
a freight in canada. Initially the company shipped to zappos had a passionate customer base set up a Canadian Zappos shrp1oE1ry-'. 1;111*11V, forwarder in rhe U.S., who would then cuslomers' and sinrplified the customs issues for ord'*o üadianwebsire. *hirtr iranäiä ö not seli could Zappos so parhlers' other to rights Many brand* rr"a uäiJi*iaian cist iaurion pcssible for the With an existing customer base' it was these brands un itrl'C*nuJi* iit*' achieve substantial center and disiribrrtio* center' but to eornpany to establish a-Cana*iun call m*ny brands' with sgree',ents distribution voturne would r*qrri.*;wäG canadian
mit
ganz gleich' mtt
ärti*ru"g a"r vrrlags kopiert Jer tbertlsen 1e^r-11' ,::T'#f, :f :;,;n',ffi ',,":3.ffi Bu.r.r, a*r om" oi" uort ".ig" verboten' Bei eines Teil üiruao'ao.raein festgelegte verwendung ist retsforfurgt, i det omfang lov* Eine andere Verwenorru welchen Mifiein dies geschieht. Zuwiderhandlung werden
gi,
t'
J, är" geseztictr ooer
g"titrysddftt gngtlttg
"
o* t.*..*oirr!*g""
CaseStudiesinlnterilationalMn*etingManagement
Chain ta Deliver WOW*
Thecompanyperiodicaliyconsidered|urtherinternationalexpansion,buttheopporilrnitiesinthe .";;;;;h;J nevär favored expansion outside North u.s.. and rhe cosrs of moving into other Amcrica. Lin cxPlained: Thedebatehasalwaysbeen,oeanwebesonsiste[t10Üurbrand,providinggreat rtäringl al*tribution center or call center?' serviee in tire other cormtry without g*ing;n ;; to anothct countrv and estabiish la The ansv,'er i$, 'No'' If you're noio?iy do- you havc to- put in .- !y:1,11 distriburion cenrcr and call ccntcrl, thä culture there. [An equivaienl stze money, u,rt you ur*o-h*u, to undÄrstand different of gurope. Europe is aagmented with rnarket to the u.s.] is to serve a[ of understanding of i*r** urra different eultural i**"**, *"0 aiffer*nt levels layout
thc dcsire for scrvice'
u's" and significant
chailenges and costs
in with substantial opportu$ities stitl ta be tapped markets, zappos had rejected major io-r**igt *.r""*rJ required to replicatelt* ***puoy'u and csnridered. The company did sell footwcar intcrnational **p*ri* *u"t, rime-it had been that required and retums, and for bags to intemational--.**to**r*, uut "irutg"J ^shipping and Ordärs fäm customers outside the U'S' themilfver duties and taxes of customers take care the
on the Zappos'com website' Canada were accepted oniy by phone' not
THn Ecqwolflc CHALLEncss on ?008 seen a major imp'ael T: fu frnalllt-3artet As of November 2008' Zappos had noi yet lncleases compäny had recorded sigirificant rsvsnue coliapse and economic'sto*äor"r,. The reported r'tailers brick-and-moflät rtieh-e"d üil-iü y.*ff. rhrough the first three quarten of the at a albeit grow' to and Octsber, Zappos eontinued double-digit sales Oecräses in September somewhat slower rate'
into addition to the inrmediate impäct' this brought Margins were decreasing, htwever. ".1n tim*sgood sconomic be considered even in quesrion an issue *rai*ä"ro eventually "*ä-io to thc eustomefs and to the company resulted important factoi scatrability. So** oi tlr"--'wow" as the eventuaily becoms unwieldy ar unaffcrdable &om iabor-intensive *riul,l** which mighl company grew. wcutg zappos
,ri"iuiiffi
successfully groo ten Internet rctailers.)
in order to oll- l"..rJu pio.Ä* and organizational changes of the top uiltion in'sales? (see Exhibit 4 for 200? sales
or $?0
|o the to be changing' Tradirionally' customers- came noticed Ho*Ju.i as the ecsRomy sh'uggled, Zapp.gs plaeing zappos.com site and purchased direetly, rime; tl"Jgh muitiple ehannels, before fin*lly rhat customers came to the sire many r"q* iht*]rgh affrliate sitts, through comparison orders. tirey might ;;,h" site directty,' customer behavior also seerned
rtr"ppitg.ogio"r,iu*ugh
a Google ad' and then finaily buy'
to prepare for on üutlly fronts" In-loolring at how best The changing economy posed challenges and irnprovements for u'p**t* of its busines*
diflicult
economic;äit5il;ö;;;"1""ü;-ät
efficiencies, including its supply chain'
philip Dackweiler .
Ingen de1
urnol*G
tilladelse' Brug (ud pä nogen mäde.uden udgiverens forudgäende rna reproduceres etter gengives
som er ulovlig eiler-overtÄder over kvaliriceret og rimerig anvendetse),
se*i"e"i1kä'e";;-;;*::::iä:::.tiiin:ä:i#äJJffiff:"#lgiffi, In. ganzgleich' mit
:J,:"triä,","ä""';*?l:''lnffi::xilJ;$il:',#;#;äTtrI#;:ilä'J^"immungdesVerlagskopiertoäerüberfasenwerden' festgeiegte verwendung ist verboten' als die gesetzlich oder in den servicebedingungen
Bei
andere verwend'ng welchen Mitteln dies geschieht. Eine Schritte eingeleitet' gerichtliche Zuwiderhandlung werden
to Deliver WQW Zappos.csrn; Developing a Supply Chain
ZaPposeal,r:Dnelopin|
a
S':PFi! Chdln
P' 19
b nelb* t4OW!: üS'45
Srunv Quusrull$s
l'WhatareZappos'eofeGomp€tsncieandSgurce$ofcompetitiveadvantage?How corporate cuiture play in these questions? sustaineble ** ä*yi urout roi" does
2.
io the $$!üIfler experience? ls it wortb the ccst? How tnpürtent is next day ailshipment environment ftcing the cornpany in late How miglrt you change it in the cost-conscious
?008?
3.
r_._a-
*^ra rm'*nl
'
you add more products' more geo6raphie*' How would you expaud the business? $fould G business,-how can üre company become or by selling pnuate labels? As you elFand associated with the focus on service? i"1iäitt urlt* _
,_-
more pmfitabl-, ;;;;üiy "o.t* 4.Howwouldyoue}rpgcttheenvironncntofamsrecost-consciotrscoilsrrfteltoaffeet in such *n envirorun$t to maintain sales zappos, uusinessi what can zappos do $CIwth?
forudgäende ttt nogen mäde'uden udgiverens overtr-delse' vil blive sädan en foretager der ioil'a'' n" pt"ontt' mit rervicevilkärene, eti"r-ou..täa". "i tofit't oäer über*agen werden' ganz gleich' an rerr-dllre;, som er ulovlig rver livalificeret og rimelig gu.h; ou.r on r" aie vortrerige zustimmung des v"rtug' Bei verboten' r.it ist tillader-det.Kei' festgelegte Verwendung "in", etsforfulgt, i det omfang ioven o* Verwtno*' ä'" **tzlich oder in '"*lt"t"otn!*g"n Mitteln dies geschieht' Eine andere
it
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t
werden gttitryhtht' Stin'tt"
'tntt'
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Case Studies
tlg"lttttt
in lnternational Markeling Maflägement
Chain rc Oeliver
lY0fi'!:
APPendix ZaPPos Culture and Values
*ollege StepintothelobbyofZappos,headquartersolrtsideLasVegas,andyouknowyouarevisitinga lik- t wäl used [but well cared for)sitting on -f*dt püpper *Äp"oy with a *iq:* .utt**. The room a from ana tfre-aroä oipop*o* wafu
dorm activiry room. I ne liglrts are-low Dance Revolution"'awaiting large *d-""d;;;;;;'iD*** the reception;*t,* a*rt. ää* is a sofa. The:e are bcokshelves filled with you wait on.a bath visitors and ernployees. "oäio*[r* The rules for this library are simple: *ori""i"i"iü*ts. ,rra urpoporuJiäir.** copies rnany
Thcuniquenanueofthecompanyculturedossnotendatthelobby.Eachworkareainthe walls' buildingishighlydecorated..Employees.*".ti'anopenofftceenvaonmenlbutnotn ui*fts ate A*not'd by iow (four foot) rnodular conventional, discreteäuüioi**. roJt.*6, between wall is no dividing
u* to*.
*nrr.*purer {ere Divisions berween cxecltivcs' "a:*ää*äpro-v** thaJ" on the othgr, The company's senior and lisie uitrr. ,iÄone on workspaces an aisle' such of Hili, are locatsd in the rniddle a inciuding Hsieh, Li;, M;;;l*. and. reinforces environrnent ä short, the working indistinguishabte tcrn ;y ;th-; empl.oy.ge, part o'f a ar€ teams a*d tiam' op**t* ** ioiita*ft, U"t ä* part of a beiief that employees ä" conlributes eveivone and rslc, larger
"ät pf*vt organi"urioo*-ii.r|;;-l;;"1";O
ä
i*pntiunt
together.
by in each aisle give a warm welcome-sornetimes one As a visitor tou.s the offiees, the employees case' by other furms of recognition' ln one giving a big smile uJ-*u"iog, ,näeti*** caw belis' at the"end of which the eatire group rings cmployee starts a ;;i;g-;;'tnusic, working and o-te wrrereirtuf**, doing whar they are doing,
clearly, thes* people";äd; with their colleagues.
Likemanysiart-upcompanies,ZapRgseultureandvaiuesbegantodevelopatlhecompany's involved rvith few employces_,. and many of them wcre fcrmaLive .t"g*. Thui;-l*r* ,lr"**ly losing the fonnal' more the *.rfr** g""*taity *votuei to be each new hire. As companies grow, where Exehange' Link at this n.i*tt äa Lio-n*a seen highly coltaborative,"i;äü;fi*pü.* to ernployees placc for fun a be a Änanciai *u.***r,-bJ had ceased to the compa*y had been work and sPend their time'
just as important to Hsieh and Lin believcd that it was Following the Link Exchange experience, metries' In 2004' it.r*u, * g'ä* t*"*"ues-and other business to yr:u?" The $ow the culture ***ry y*J au rnean cultrre the does *lfing';Vmat Hsieh sent an e-*,ail-tö all employeel t**f**"t were then distilled down to l0 values:
1. DeliverWOW
?. 3.
Through Service
Embrace and Drive Change Crcate Fun and a Little Weirdness -Io
a
see ttrern, For information. contact [email protected]. provides torrrs t0 anyone who reql,ests segmelrt availäble at Nightline ABC an sec Hsieh' Tony inre'ul"*s *i*' video of the Zuppo, *uuiloment, ;nctuding 24' ?008)' Uomepage {Novemb* Z"ppos'"om ofth* bottom the
,, zuppo,
t'rug \uu
trlladelse' gen mäde. uden udgiverens forudgäende vil blive overtraedelse' sädan en tbretager peßon€r' der servicevilkärene,-tii"t"l"at' ot gleich' ganz den' wer übefiragen kopiert vorherige zustimmung des Verlags
anvenälse), som er ulovlig eller?"aäd.. rver kvarificerer og rimerig die orr irruo"r'ao.raein Teil eines etsforfulgt, i det omfang rov.n ooer in gesetztictr geschieht. Eine andere Verwero*'
B,,*
ilelchen
Mitteln.ies
Schritte eingeleitet iu*ioertturratut g werden gerichtliche
"*"
är
0." s.*i..n.oin"g'ngen
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Iapp+s'com: Developing
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4. Be Adventuou$, Creative' and Open Minded 5. Pursue Crowth and Learning with Communicatisn 6. Build Üpen and ;;;-JilüionshipsSpirit
i. L
euiH
a Fositive Team and Famiiy
Do More with l-ess 9. Be Passionate and Determmeo 10" Be blumble
ThesevaluesplayedanimporrantraleinnlyemploVelhiriledecisions'intraining'andwere process' pottßlial the oä*it.t*o- li.the recruiting ti"".ghout ;;,il;; everyoay ny reinforced ts do the work' The ä.*äionuf f*Jiäregaraine their abiliw employees were intcwiä-ä'i" that thcy were intunri"i"yä;il;d-fu* lo *ot**Humble'" when hurnan resources *-p;;;ri'Ä* lulu**. rar*.' roi i*tul::, tl" value "Be that compatible rvith the;öä aIrogance' if the recruit exhibited excessive ego or take to inreiliewing experts t;;ä# po*ition*, employees ti. .-äp""v prefered to train person would not b,e rrir*6. ro, this reascn, to bring in experienced sutsiders' [ish*r-f*u*f positions 'h*n might be asked to a Little Weirdness'" Potential employees Another value w*s "Cteate Fun and we won't hite 'one" saY "'1f thev scale of t-10' fftiäoU*t*ed' rate horv "weird" tn"V *ao *o a One example 8s"''* or probably *".p-;;iliiiot 3*' .W" likeis week to rhem.... If they,re a 10, rhey,re from (varying ..fun and a littlc **Ldn***" was thc-*-.ki;;;ttite of a deparunent of the office' parading througb week) dressing in costumes and as follows: Hsieh desctibed the Zappos culture
Tome,theZapposcultureembadiesmanydiffcrentelements'lt'saboutaiways we cüme in eontact with' lt's about looking for ne\# wäys to WOW *u*Vooi ;;;other like family. lt's about tearnwork building relarionships where.we treat *u seriously. it's about growth, both and having r* un,T ou, taking ouncr"Ä peoplc' achieving the impossible with fewer pcrsonal *O proi**ionai. tt'Jabout most But mistakes. ris5s, 11d not beinf afraid t9 *+* lt,s about we run long üe in if we da the-right thing. then of alt, ir-s "p-*ä*. "tiig "b;;;hav;;iä*,itut anA üuitdlomething grcat'le will succeed onemightexpectthattheexuberanceoftheworkfarce,andthestrong,cohesive,t-un-loving further' ou*.-rtt*-*p, leader. Nothing could be quiet' culhxe ernanated ro* u rowdy, boistero,,s,was Hsieh leader*hip' trtä uitrt* other senior o, H*i*ii*;-;;";i*ryl*, rro* however, Tt ä;; **niot leaders wets nutufe' calm' and humblc" and exffeme$ soft sp*ken. professional.Thespecific-cu}tw;**u1*dicrated&gmthetop.butrathergrewfrornthe ensure that those **-to *-"ftiuate it- reinforce it' and employees. T-he roie of the leader* not casualties of the and jgy ;-G the employees were attributes that fostered passion growth' coilpany's succtlss and continued
1s
tn
Helen Cosrer,
Z*ppor.**
"A
mit
verboten Bei festgelegte verwendung ist
2008' pp' ü0' Step Ähead"'For$es' June 12'
2Q0S Culture
Book' p' l?'
forudgäende tllta( ogen mäde'uden udgiverens overtredelse' vil blive sädan en foretaler der o' pltton"t' gleich' mit servicevilkär"n", overuäder el1er übertragen werden' ganz som er ulovlig "'io'-ouo'' oäs v{aes :r kvalificeret og rimetig anvendelse), die vorherige Bei !o11rt verboten' eines ist Teil festgeiegte Verwendung ;fortulgt, i det omfang love" rrii*r'ä-r.^"in oo", i'o"n s"-i"ru"cnlungen Eine andere Verw.naung urräi. rchen Mitteln dies geschieht. Schritte einee
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Case Studies in
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initial training: told new employees dunng their Lin described whal the sxecutivss 'This cannot be just me' or'Tony tUsieh]t-'o1^[el
We tell ali the employees' flMosslerl,orStevü1üiU1'oranybodyelse-who'sonthe'illanagementtesm's culture.It'severybady,sculturengre.andil'simportantthatyoulive,breath, ask Atl this is uier generated' we don't inspire ttre curtuä, *na uulq lqon it. about passionate you're d".;;'f ;; rrrrrr, i*'iuu*tuilds upon itsclf" If peoplc,. -it, uPon Plcase build
it''
culture fastered excellence: Mossler observed that ths Zappos very bcst at whatever particular department Everyonc's focused on just !-1"+ t* companv' a thread that runs throughout the they are i, I,;;;;JJ,- J-r1ri"rv
lt,salifestyle''..They,reaiwaystioiog,brearhing'andthinkingaboutthe iofretatro"r what happened at
Aft;;;"tk,;*ptt a*'t;;ff;-;"J they have fun' they bond l'*y!o n* *iti' o*rt*t zuppL öioy*o''id *b"::^f:* caü we move the
companv. Zappos'
and build
*t"ää;ilff;;;äi4*!ni"s
innovate? Hcw can we make it better?' business forward? How can we
Everynewemployee,whethersntrylevelorseniormänsgel?wextthroughtheseffi*four.rveeh hires a bonus' plus pay trt* o"inioe, Hsieh oifeted thc ncw Mld]u;';ffigf program. over rraining quir. ttt* size of the bonus had increased ä the with been have rhey tirne the staved for new ernplovee who ou:*.tiJr;;;**e that anv rrr* "o*p*r, rime, and in 2008, *-*ii,öoti. who wefe nÜt a$ $oon 6s those identify to an*lts uulu*r, and was passionate *b*.i;;;;;;anf *j- for thesc bonuses was just ?-3 possiblc. Thrcughoutä"-*oäpuoy,* hirt"ty,;;;;fu* percent, Hsieh commented that'
;;; Gt;; fty ?:3. percent. since rhc call cenrer io*ou., *t" ftitiog process was not matching {he ;,To ,,r*, it says ,t ur rn* oii*i i* nor high *"rgä.;-;;iG them. on an do a good enou*h job of training, orl,W* diän't-o, their lives üsmpany unO *mpt"yä* Ur"n*tr, in happens ,ori*tirn*s *thcr stuff ***üJ basis after ,ir" r,ii iä"-ö* or ongoing
thatmakestr,*r*,u.ro*u*ednnwork.,'e*pr"y.*-whostaycdmcrethang0days,howcver, generally stayed for the long tenn"
job they were hired far' new hires' regardless of the A1 the end af the training, all Lss,vegas At some poinl customers' as cati cenrer qp-;;-ö.l4;::i,:*..:ttn *ä"f, r*" teasr ar for worked
intheirfirstyear,theywouldalsospendatleastaweekworkingattheshepherdsville believed iiwas important that all iuppot trinn*a. *r.e orders how 'tut*r leaming warehouse_ hired at shepherdsville' emplt:vees üffi;-ä;äios. grrh;b";i;J participate in the new hire vegasio tn t-as r-"Jt' **nt particularly rnn** -räli-ä-ö 3t n-iert-t ä;i;c. if pcssibte during their frrst year with the comp*nv' employecs have a
Eachyear,Hsiehsentane+nailaskingeachemployee,-asrvellasthecompany'saffiiiatesand *üat the Zappos culture meant to them' They
,o'ilr* "i** linesäescriblng irrhey nor to discusJ*i, *irh their coileag*-.
business partner$,
were
rhey wcre nat to These were put
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Philip Dackweiler . lngen del afnogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtraeder servicevilkärene, er forbudt. De personer, der foretager en sädan overtradelse, vil blive retsforfUlgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder üb€rtragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
Zappos.eom: Oeveloping a 5upply Chain to Oeliver WOwl
Zappos,com: D*eloplng a Supply Chain to Delitter
lfOW!:
GS-65
o. 23
arnong them as contributors told stories of the inrportance of Zäppo$ in their iives, and what the eümpany culturs m€ant to them. The following commeüt by one smplüyee is representative of the sentiment sxpressed by many:
I
am truly grat€fuI eash day I walk through the doors that I can be challenged, encouragcd Bnd grow; 1 san ls,rgh and play. I am abie to spend my d*ys in an environment tbat operates with aud suppoJts thc same beliefs I hold close to my heart. There is really no place likc zome.'" Company partners were also asked to eontribute. One commented on the relationship betwesn üulturB aäd company success:
From the momert that I first reseänched Zappos I knew there was something sp€cial happening within the company. I waated to know how a ccmpany eould successfully grow as quickly as Zappos. I found *re answer to my question as süon a$ I walked in rhe door of the Zappcs carnpns. I felt welcomed and the campus was buzing with ftiendly people. As I taured the campus, *lmost everyone intoduced tLemselves by name and gave me a brief description of their
job. I eould tell
everyone was proud of theü careers and enjoyed being part of the believe that the positiveenergy that's being unleashed by thc Zappos team is thc key to Zappos' susee$$."
Zappos team.
1l
"'
q"**
I
in'?008 Culture Book - äqppos.coar, p. 2? l. fleur't, in "?0ü* Culnrrc Bock " fuppos.com, p.45V,
fi'om Kelly D., Merc.handising Deparuneat,
Quore frotn Lesli* W,- ofZapp*s.com parm*r
Philip Dackweiler . Ingen del af nogen bog mä reproduceres elier gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrreder servicevilkärene, er forbudt. De personer, der foretager en sädan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
W
Care Studie$ in ln1€rnational Märketing Möriagcment
Zappat mlla: Develapiag c,txpp& Chaia ta Deftv*
WAIf!:
p,21
GS-65
Exhibit
I
Zappor Gross Revenu€ Growth
1200 1000 800
600
40s 20s 0
$Millhn
2000
?00r
2002
2003
2004
2üü5
?006
2007
?0ü8 (est)
1_6
8.6
3?
70
t84
31ü
597
840
t0üs
Zappos gtowth in gross revenues, 2000-?008. Retunu typically ran in the r*age CIf 35-3? percent of grüss reve[ues.
Saurce: "2008
fulture Book," Zqpar.eoar,p.9.
Philip Dackweiler . Ingen del afnogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtr€der servicevilkärene, er forbudt. De personer, der foretager en sädan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
Sappos.com: Oevelqping a Supply Chsin to DefiverWOW!
Zagas.com: Exelaplng
a
S*pply Chain to Deliver IFOIF!: GS-65
p' 23
Exhibit 2 Z*ppor Distribution Center, Shepherdsville, Kentucky
Shepherdsville Distribution Center
Static Sh€lving
Carousel
Robots (and operator)
with shelves st work station.
Robotic inventory area"
Source: Zappcs.com {with pnnissioü)"
Philip Dackweiler . Ingen dei af nogen bog mä reproduceres e1ler gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrader servicevilkärene, er forbudt. De personer, der foretager en sädan overtredelse, vil biive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.
Zappcs,com: Beveloping a Supply Chain to Eeliver WQW!
llappa*.wm: D*elaphg a Sqply Chtin to Dallvrr
lfOl{!:
GS-ül
D'
Erhibit 4 Top Internet Retail Businesres in X007
The top tfir Internet retäil cüupänies in ?0S7, aceording ta Internet Refaifer, were:
Philip Dacloreiler . Ingen del af nogen bog mä reproduceres eller gengives pä nogen mäde uden udgiverens forudgäende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtraeder servicevilkärene, er forbudt. De personer, der foretager en sädan over6adelse, vil blive retsforfillgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder übertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Sewicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlwrg werden gerichtliche Schritte eingeleitet.
Case $tudies in
lnternätionai Marketing Mänägement
Zapa*cam: Eel.etoplng a Suqpb Chainta üaliv* l,lüIt{.. SS-dJ
Exhlbit 3 Zappos Supply rffeb
Fulfillment C€nter
SupplierA.com, etc. are "Powsted by Zappos" sites.
