CASELET

ZAPPOS – FACING COMPETITIVE

CHALLENGES

BY
T.Charles
1) Challenges faced by Zappos

Some of the challenges that Zappos is facing that may derail its attempt to be the best
online retailer are:

 Product diversification i.e. to offer different varieties of products other than the ones
originally offered

 Adoption of Holocracy, a management philosophy

 The threat of Globalization and Sustainability

 Extra shipping cost because of the free return policy

 Competition from the other leaders of the industry

 Work from home (Quarantine)

Product Diversification

Zappos initially started out selling various variety of footwear. Over the years, it has
evolved its product selection to include clothing, handbags, and accessories. The main
challenge has been to convert regular shoppers of footwear into loyal customers for their
other products also. For a company to be known mainly as one of the topmost footwear
sellers, it is quite a challenge to make customers believe in their other products as well.

Adoption of Holocracy

In an attempt to boost transparency and reorganize operations, Zappos has decided to

switchover to a super-flat structure known as ‘Holacracy’, which eliminates managers and
gives employees the freedom and responsibility to decide hoxagement jobs. Approximately
210 employees found the new philosophy so dissatisfying that they took three months of
severance pay and left the company.

Globalization and Sustainability

Globalizaiton and Sustainability goes hand in hand because they would have to be able to
adapt to the change when entering into these markets. The economy is changing everyday
throughout the United States and internationally with how businesses run. With the
pricing in these markets going international is going to also affect how their business will
successfully run. The problem Zappos will face will be in continuing to use
competitive pricing in international markets that may have similar products with cheaper
price tags. Secondly, if the company begins to ship products abroad, will they have to
abandon their policy of free shipping.
Extra shipping cost because of the free return policy

Another major challenge is to manage the extra shipping cost if the customer returns
the product if it is not upto the mark. This can incur heavy shipping costs in these tough
financial constraints throughout USA. This will further increase if the company begins to
ship products abroad.

Competition from the other leaders of the industry

There are already several competitors in the market who also have a reputation in the
market. Zappos does not only have to compete with them but also ensure that their pricing
is better than them while not compromising on their quality. Work from Home Zappos
recently launched “Customer Services for Anything” during the Quarantine period for their
customers. Reorganizing themselves to work from home while launching
Customer Services for Anything has been a very big challenge as they have to attend to
numerous calls overnight while adapting to working from home.

Training and Development can help Zappos overcome these challenges

Training and development can help Zappos to meet these challenges. A proper training
and development program will enhance the skills and capabilities of its employees to
differentiate themselves from the other players of the industry and gain competitive
advantage. It will help the employees to understand their customer's perception along with
their tastes and preferences in order to provide a customer oriented service to enhance
customer satisfaction. Employees will have the correct and full information about their
product as well as their customers which ensures a smooth flow of goods throughout the
process of delivery. The focus should be on specific training and development activities
that will help employees embrace Zappos’ ten core values. Employees should be trained on
how to “deliver WOW through service”, while providing opportunities for growth and
learning through training and development programs. Design team building workshop to
promote team building a well as train employees in “lean” quality techniques so they can
“do more with less”. Socialize new employees to Zappos culture. Help employees
understand career paths at Zappos and meet development needs so they can move along
their career path. They should also encourage employees to frequently use “Zappos
Insight” which is a department within. Zappos created to share the Zappos culture with
other companies. Zappos Insights provides programs about building a culture (3Day
Culture Camp), its WOW service philosophy (School of WOW), the power of a coaching
based culture (Coaching Event), how the human resources function protects the culture and
how its programs support it (People Academy), and custom programs. Zappos Insights
allows the company training function to become a profit center through marketing and
selling its programs to other companies.
2) High Levels of Employee Engagement In my view, employee at Zappos have high levels
of engagement given the cultural values (e.g.,fun, growth and learning, positive team spirit)
free food, buyout of employees who are not happy working at the company, and use of
monthly engagement surveys which provide results that are acted on. They are highly
motivated and involved in the company’s activities which has enhanced their contribution
towards high performance that has led to the organization winning various awards. Zappos
insists upon its employees to regularly fill up the status reports on various things such as
how much time they spend on the phone with customers. Managers later evaluate the
reports in order to identify the existing gaps and training needs assessments. Zappos also
believes in helping the employees understand what inspired the company culture and helps
them in putting into practice the cultural values and needs. The company created
theZappos.com library, which provides a collection of books about creating a passion for
customer service, products, and local communities. These books can be found in the
front lobby of Zappos office and are widely read and discussed by company employees.
This establishes high levels of employee engagement in the daily activities of the company.

Values that Training and Development can most influence Zappos places great emphasis on
its 10 core values which they believe are a way of life. Their operations are guided by the
following core values:

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

Out of these, the core values which Training and Development can most influence are:

Deliver Wow Through Service

Zappos emphasizes that anything worth doing is doing WOW. It is such a short,
simpleword, but it really encompasses a lot of things. To WOW, you must differentiate
yourself,which means do something a little unconventional and innovative. Therefore it is
veryimportant to have training sessions to inscribe the 1st core value in its employees.
Pursue Growth and Learning

Winning organizations are those that encourage the continuous learning process
ofemployees by providing training in relevant areas that are in line with the
marketdemands. HR managers thus have roles to identify the gaps and training needs
toincrease employee efficiency and encourage a learning culture.

Build Open and Honest Relationships with Communications

Communication is a vital component of successful organizations. Free and open

communication among employees and managers or leaders promotes transparency
andknowledge sharing. It is also a source of encouragement for the people.

Build a Positive Team and Family Spirit

Productivity in companies is more likely to be achieved through teamwork rather

thanindividual performance. Through team building workshops, Zappos can create
positiveteam spirit ensuring teams are effective to increase their outputs.

Embrace and Drive Change

Change in the labor market is one of the challenges HR managers are struggling to face.
The development of new technologies has forced companies to adjust and adopt new
systems that will enhance their customer service operations. Zappos must have training
sessions to keep its employees abreast with the latest development in order to keep up pace
with the market.

Do More With Less Team building workshops can be designed to train employees in “lean”
quality techniques so they can “do more with less”

Values that Training and Development can least influence

The values that are least influenced by Training and development are:

1. Create fun and a Little Weirdness

2. Be Adventurous, Creative and Open-minded

3. Be Passionate And Determined

4. Be Humble .

These values are more related to employees’ personality which are least influenced by
training and difficult to train. These values are more focused on in selecting new
employees. Interview questions are based on finding employees who are creative and have
strong individuality.