SERVICE MARKETING WAC:

ZAPPOS.COM

Team Members : Anmol Sharma

(19021141021)

Tanvi Jain

(19021141125)

Harsh Agarwal

(19021141045)

Abhijeet Khushwah

(19021141001)
How Zappos Started
In1998, Zappos.com founder Nick Swinmurn was searching for a certain pair of shoes in San
Francisco mall.
He found difficulty in finding the right style, right colour, and right size shoe. Nick spent a
couple of hour in the mall, walking from store to store, finally going home frustrated and
infuriated.
Nick found there were no major online stores that focused on shoes. He quit his job and
started an online portal, Shoesite.com. He changed its name to “Zappos”, i.e. derived from
Zapatos; a Spanish word for “Shoe”. In 1999, Zappos was born.

About Zappos.com

Zappos is one of the largest online retailer of shoes, clothing, handbags and accessories that
provides high quality and excellent services to the customers. In addition to this, the company
has always focused on providing outstanding and superior customer services in order to make
them feel online shopping experience as close as possible to visit a retail store.

The company offered a wide range of larger footwear selection as compared to any other
online or offline shoe store that enhanced the sales and growth of the company. Zappos has
developed a customer focused business where employees of the company are encouraged to
make decisions that will positively impact the customer satisfaction. The company
continuously focuses on delivering superior customer services as major growth of the brand
offering comes from the customer loyalty.

Timeline:

Year Milestones

1999 Found by Nick Swinmurn

2000 Zappos records $1.6 million in gross sales

Zappos had 150 brands and 400,000 pairs of shoes

2001 Nick Swinmurn and Tony Hsieh as Co-Ceo of Zappos

2002 The brand elevate gross sales to $32 million

2003 Gross sales of Zappos rise to $70 million

2004 Gross sales of Zappos more than double to$184 million

2005 Sequoia increases its investment in Zappos to a total of $35 million

 Alfred Lin, cofounder of venture frogs, join Zappos as CFO

Gross Zappos sales increase to $370 million

Zappos moved its headquarters to Las Vegas

2006 Nick Swinmurn leaves Zappos

Gross sales climb to $597 million

2007 New competition came

2008 Gross sales at Zappos hit $1 billion

Net revenue of $635 million and net income of $10.8 million

Zappos culture

Zappos is a unique concept, model online business, and a gratification point built from scratch. An
online business that prime focused on customers, giving them quality, choice, free shipping and easy
returns.

Zappos is known for its zany corporate culture. Zappos’ conventional organizational structure is being
replaced with “Holacracy”, a radical “self-governing” operating system where there are no job titles
and no managers.

Zappos, which has 1,500 employees, will be the largest company to date to implement Holacracy.

The company has apparently distinct the causal link between a happy workforce and an equally
balanced “purpose with profit” bottom line.

A “bureaucracy buster”, this new policy energies fresh ideas by removing roadblocks and inspires
modernization to come from anywhere within the company.

The company’s tagline and principal philosophy is to “Deliver Wow” and since 1999; it has done so in
scoops, serving millions of customers across the globe.

Zappos customer service

Telephone to telephone, terminal to terminal, or even asymmetrically, like when the wildly engaging
employees at Zappos create their signature video demos for any and all products they have for sale
on their site. So, if telephone inquiries ever drop off from Zappos customers–which seems likely as
customer support trends continue to move toward messaging, chat, and social media–I expect Zappos
will find ways to have engaging conversations on those channels as well.
Either way, Zappos is depending on customer service as marketing, trusting that the intimate
engagements they’re having are enough to cement the loyalty of the customers on those calls and
ensure that word of the Zappos brand will spread

Fulfillment Operations

Fulfillment center was located outside Louisville, Kentucky. There were two warehouses totalling to a
size of 1 million square feet.

 Receiving-
1. There was a direct shipping from the vendors bypassing the customs as the facility
was in foreign trade zone.
2. Conveyor belts were used for the workers convenience.
3. Incoming merchandise was processed within 24 hours of arrival.
4. UPC of each product was linked with a license plate number (LPN) which carried all
the details of the products such as type size, color, history etc.

 Put Away Areas-static Racks-

1. Shelving units divided into four sections and floors with a capacity of 2.6
million items.
2. Location stickers for easy identification of the location of the boxes.
3. Waves display one item till it is marked as picked by an employee.

 Carousels-Automated carousels 30 on each floor with 200 bays each. Each bay contains 15
boxes. There was a lack of efficiency as the utilization rate was 70% as compared to the static
carousels with 100% utilization rate. A better option was to use a combination of both.

 Pack/Ship- Two packaging lines one for single line items and another for multiple line items.
Packaging slips with ba\arcodes containing the LPN details were attached to the parcels.

 Kiva- Kiva was an automated storage and retrieval system which was bought to handle the
exceeded capacity out of the existing systems. The system could simultaneously pack orders
and replenish inventories. Also it has twice the efficiency of the existing systems. Zappos could
easily scale up this system by adding more pods and robots to the system. It was cheaper and
more efficient.

Working at the Warehouse

 500 to 600 workers.
 Average pay of 8.25 dollars.
 Benefits such as free lunch and free vending machines also they catered the employees two
days a week. These offerings added a lot of value to the jobs for the workers and made it
special for them.
  JQRs which certified being qualified and trained for performing a particular job were awarded
to workers.
 Pay for performance systems for rewarding the efficiency of the workers. This motivated them
to perform even better.
 Chillers were installed for cooler temperatures for workers comfort.

Clothing
Clothing was a bigger industry than shoes and thus looked attractive to Zappos to enter into.Zappos
wanted to expand it’s line of offerings. Clothing was a better engine for expansion and growth. Zappos
offered athletic wear initially with athletic shoes (eg, Running apparel with running shoes) started with
small offerings it was soon 5% if the revenues. Zappos adjusted warehouse operations to enable it to
process clothing.
The company wanted to be more than just a shoe company or even an apparel company
, it wanted to be known for it’s service.

Beyond 2009: Continuing to grow Zappos

The company was affected by the 2008-09 economic crisis. It laid off around 8% of the employees.
Financial implications showed a need of improved cashflows. It seemed it would have to drop the plan
of upscaling Kiva MFS. Hsieh and Lin were considering the amazon offer citing to the needs and
opportunities of the Zappos. Amazon had better resources, technologies and also had a much larger
number of clicks on its website. Zappos needed funds to carry inventories in the new lines and
businesses. Accepting the amazon offer might be useful in achieving these objectives.
Answer To the Questions:

Question 1. What makes Zappo’s customer service so special?

1. Zappos’s customers are loyal, 75% of Zappos’s purchases come from old customers on
account of upgrading as many orders to rushed shipping because they believe every
customer is a valued one.

2. Call/contact center representatives (CLT) handled an average of 5,100 calls per 24-hour
day. The CLT members were problem solvers since they could solve questions from
customers who could not answer for themselves using Zappo’s website.CLT members help
customers find shoe brands Zappos didn’t carry, they were instructed to use the internet
to search for the shoes at multiple competitor’s website.
3. Their call center employees weren’t rushed to end calls and can stay on the line until the
customer's conflict is resolved. They were authorized to take as much time as necessary
to assist customers with their orders, answer their questions and troubleshoot their
problems.
4. Zappos CLT members were responsible for “wowing” customers with their outstanding
service. They are also supposed to establish a personal emotional connection (PEC) with
customers.
5. Going out of the way for exceptional service. Handwritten thank-you notes to customers
and bouquets of flowers or boxes of candy in sympathy or celebration.

Question 2. What organizational choices help Zappos deliver superior service?

1. Getting $1.1 million in venture capital funding from Venture frogs who specialised in
early stage internet, e-commerce, and information and telecommunications
technology companies.
2. Adopting the 10 core values and promoting company culture.
3. Hiring people who passed both the traditional skill-based interview and the culture
interview only and whose thinking aligned with the core values of the business.
4. Giving 4 weeks of paid training and requiring all the employees to follow the pipeline
so they were ready to provide excellent customer service.This made the employees
cross-trained by developing training programs.
5. Operational activities were streamlines by
a. having separate warehouses for receiving and returning goods
b. making their fulfilment centres as foreign trade zones
c. Using foot pedals to move boxes
d. processing incoming merchandise within 24 hours’ time it comes off the truck
 e. assigning a license plate number to each product
f. use of static racks, carousels

6. Purchasing the Kiva robot system to automate the storage and retrieval system.

Question 3. What is the role of culture at Zappos?

Culture plays an integral role at Zappos and therefore is a part of their 3C strategy. Mr. Lin
believes that every employee should be fit for the culture. The company has taken feedback
from all the employees in a 1 year period and made 10 core values which everyone at Zappos
should adhere to.

1. Deliver WOW through service

2. Embrace and drive change
3. Create fun and a little weirdness
4. Be adventurous, creative, and open-minded.
5. Pursue growth and learning
6. Build open and honest relationships with communication
7. Build a positive team and family spirit
8. Do more with less
9. Be passionate and determined
10. Be humble

Zappos believed people should be friends at and outside of workplace and wanted people to
not separate their work life and their personal life. They believed Zappos is a lifestyle.

Unique points of Zappos culture:

1. Three-ring circus ambience, costumed skeletons, shoeshine stand in the lobby,

popcorn machine, arcade game.
2. Monkey Row under dense plastic vines, greetings by workers and parades.
3. Taking constant feedback by asking them to describe their culture.
4. Confession bell by Dr. David Vic.
Hiring
1. Initial application – crossword puzzle and offbeat questions, personal theme song,
weirdness scale.
2. 2 stage interview – skill based interview and cultural interview ( only employing happy
people)
3. Behavioural questions to check if the applicant opposes any core value
4. 2000$ to quit job in first week.
5. Developing positive feelings by giving courses and meaning that anyone can become
a manager. ( Pipeline)
6. 225 hours of core level training.

Question 4 How did Zappos reconstruct the online shoe retailing?

Before the entry of Zappos (before 1991), shoe retailing was majorly offline and even the
online platforms were unorganized and did not have all the varieties, shoe sizes etc. One
of the major problems faced by the online shoe retailers was that people mostly used
their platform to search online and then go ahead and buy in the brick and mortar stores.

Zappos revolutionized the online footwear retail market by:

1. Being the largest shoe store having more than 1,200 brands and 2.9 million pairs in
stock.
2. Providing the best customer service amongst the competitors –
a. Free shipping
b. Shopping experience close to the real offline store experience,
c. Detailed product descriptions
d. shoe size templates
e. live chats with customer support
f. 24 hour call center.
3. Carrying no inventory when the organization wasn’t powerful enough to minimize
risks.
4. Motivating and training their employees to give superior customer service. This was
done by creating an excellent work culture that other companies tried to incorporate.
5. They achieved operational efficiency through a lot of data collection to ensure no
failures and taking correct decisions according to the current needs.

Question 5. How does Zappos make money?

1. Sale of
a) Majorly through sale of Footwear
b) Some part is through clothing (5 % of sales)
c) handbags
d) accessories
e) sunglasses
f) athletic wear
2. Maintaining excellent customer relations- repeat customers account for 75% of
the sales.
3. Expanding from just a shoe store to other categories enabled them to expand their
customer base therefore making more streams of money.