ARTICLE: Zappos.com: The Multiple Challenges of Growing an Unusual Company
"Imagine a retailer with service so good its customers wish it would take over the Internal Revenue Service or start up an airline. It might sound like a marketing fantasy, but this scenario is reality for Zappos.com." Headquartered in Henderson, Nevada, just a twenty-minute drive from the Las Vegas Strip, Zappos (a word play on zapatos, the Spanish word for shoes) is an "e-commerce 'service provider' of shoes, apparel, handbags, accessories and more, representing about a thousand brands." Zappos also has a distribution center in Louisville, Kentucky where it maintains an inventory of approximately 4 million items and from which it provides rapid shipment to its customers.
In 1999, Tony Hsieh (pronounced shay), the CEO of Zappos, invested $500,000 in a start-up online shoe store known as Shoesite.com that was founded in San Francisco by Nicholas Swinmurn, who was having trouble finding shoes that would fit him in his local mall. In 2000, Hsieh became co-chief executive with Swinmurn. When Swinmurn left the company in 2006, Hsieh became the sole chief executive.
Zappos wasn't Tony Hsieh's first entrepreneurial venture. Prior to Zappos, he cofounded LinkExchange, an online advertising cooperative, which Microsoft bought in 1998 for $265 million. Then he cofounded a venture capital investment firm called Venture Frogs.
In its early days, Zappos could not afford to spend money on marketing; consequently, the company's "sales strategy involved making customers so happy that they bought again or told their friends or both. The defining aspect of the Zappos customer experience free shipping and free returns was concocted out of necessity. Hsieh figured that there was no other way to get people to try the [online] site."
In 2004, Zappos, relocated from San Francisco to Las Vegas because "attracting and keeping high-quality customer service representatives was too difficult and expensive in the Bay Area." Las Vegas, with lower real estate prices and an abundant labor pool, seemed to be an ideal location.
Zappos doesn't do anything quite the way other companies do. For instance, the three company's headquarters, which is located in a nondescript office park, are quite modest on the outside. But inside is a different story! "There are the outlandish decorations adorning walls and cubicles, including jungle creepers that hang from the ceiling and a menagerie of toy monkeys and other creatures. There are the boisterous employees, some of whom rattle cowbells, shake pompoms and bellow greetings as visitors pass their desks. But this is no exercise in nostalgia. Instead, Zappos is the site of an ambitious business experiment [with] a corporate culture that allows Zappos to prosper by providing world-beating customer service, no matter what business it is involved in." Emulating Amazon.com, Zappos has expanded beyond selling shoes, venturing into clothes, bedding, toys, cookware, electronics, and more.
Zappos gets rave reviews for "its fast, free shipping 90% of orders arrive the next business day and a 365-day return policy that allows footwear fans to order a bunch of shoes, try them on and return those that don't suit or fit. Three-quarters of sales are from repeat customers." Hsieh views "customers as human beings, not just 'consumers,' and so makes customer service the defining feature of the brand."
To gain another perspective on how Zappos differs from other companies, consider the unusual experience of one shopper, a clear reflection of how Zappos employees deal with customer challenges: "A shopper visited the site to order a pair of shoes as a gift for her husband. Tragically, he was in a fatal car accident later that evening. [Subsequently,] [t]he Zappos call-center representative working on the order return was so touched by the story that she sent the customer a sympathy bouquet of flowers." Hsieh says the Zappos "philosophy is to do what's right for the customer even if it doesn't relate to a sale or if it costs a little bit more. We just want to go above and beyond for our customer."
Hsieh believes that the success of Zappos is a direct reflection of the culture he has built and nourished. "A fun-loving, change-embracing culture drives the Zappos engine. Carefully nurtured by Hsieh, it provides a new workplace template for the future." Hsieh's advice to other businesspeople: "Chase the vision. The money and profits will come."
In 2000, Zappos had sales of $1.6 million; in 2008, the company's sales surpassed $1 billion. After several years of breaking even, Zappos turned a profit in both 2007 and 2008. Tony Hsieh explains Zappos' growth this way: "We're aligned around one mission to provide the best customer service possible. Rather than focus on maximizing short-term profits, we focus on how we can maximize the service to our customers. We are a service company that happens to sell shoes." Hsieh sees the emphasis on customer service "as creating a platform for future growth."
As Advertising Age writer Natalie Zmuda observes, "It seems that Zappos is really the poster child for this new age of consumer companies that truly are customer focused. A lot of companies like to say they are, but none of them is as serious as Zappos."
This case was written by Michael K. McCuddy, The Louis S. and Mary L. Morgal Chair of Christian Business Ethics and Professor of Management, College of Business Administration, Valparaiso University.
1. What lessons about leading people and managing organizations does Zappos and its CEO, Tony Hsieh, provide? Explain your conclusions.
2. Each of the management challenges-globalization; leading a diverse workforce; and ethics, character, and personal integrity-have had an important impact on the evolution of Zappos. How has Zappos CEO Tony Hsieh addressed the management challenges of globalization; leading a diverse workforce; and ethics, character, and personal integrity? Describe the impact and give examples for each of the following challenges.
? leading a diverse workforce
? ethics, character, and personal integrity
3. Natalie Zmuda, a reporter for Advertising Age, concludes: "It seems that Zappos is really the poster child for this new age of consumer companies that truly are customer focused. A lot of companies like to say they are, but none of them is as serious as Zappos." Do you agree or disagree with Zmuda's assertion that Zappos is much different than other consumer companies? Explain the reasoning behind your answer.
4. What particular aspects of Zappos would other organizations do well to emulate? Explain your answer.
The solution contains approximately 200-215 words per question with additional information.
IT Strategic Planning
Assignment 2: Required Assignment 2—IT Strategic Planning
Using a company of your choice, determine the strategic business goals. Develop an IT strategy that aligns to the business goals. You can use the balanced scorecard approach or you can develop your own method for defining and aligning the IT strategy to the business strategy. You will need to cite at least two credible sources that will provide justification for your strategy or approach.
Finding a company: If you are employed, it is best for you to use your current place of employment so you can practically apply the concepts in this assignment. Alternatively, you can use a nonprofit organization or any other organization you may have ties or access to.
Your IT strategy should include:
Business Goals and Objectives
List at least two or three specific business goals for the next year or two with an explanation of the business' rationale for the goal.
List an objective for each business goal to explain what the company needs to do to achieve the goal.
IT Strategies aligned with business goals and objectives
List one or two IT strategies for each business goal
These should be recommended strategies that would enable the business goals and objectives to be achieved.
If your company already has IT strategies, you may provide an analysis and justification or new recommendation for each of the strategies
Describe the structure of the organization including:
Leadership factors (the types of leadership displayed within the company)
Physical layout (i.e., how many offices, virtual offices, international locations)
Describe the current IT infrastructure including:
This should be a high-level overview
Describe internal and external challenges IT faces in meeting the business needs
Include social and/or ethical considerations
Describe risks IT might face when implementing change
As you develop your strategy, you may want to consider the following:
An effective IT strategy will enable the business operations, helping business leaders achieve business goals more efficiently and effectively.
Focus on top priorities. Take the time to understand organizational issues, how they are related, and how they affect performance. Determine what will happen if nothing changes and where IT can have the greatest, positive impact.
Identify how IT supports business processes. The business is relying on their capabilities to achieve the business goals. The IT strategy should include a plan for supporting those business capabilities, creating efficiencies, and competitive advantage for the business.
Define IT priorities and governance for IT. Without priorities and a process for IT governance in place, progress will be slowed. An agreed upon plan for governing IT will enable the decision process.
Understand the challenges. Improving processes and increasing efficiencies through IT implementation also requires behavioral and sometimes organizational change. With these changes come inherent challenges. Understanding and planning for those challenges will increase the chance of success in meeting the business goals.
Write an 8-12-page paper in Word format. Apply APA standards to citation of sources.
Listed specific business goals (minimum 2-3) for the next year or two.
For each goal:
Explained the rationale of the goal.
Provided one objective.
Explained what the company needed to do to achieve that goal.
Explained how the IT strategies will provide a competitive advantage for the business.
Aligned the IT strategies with business goals and objectives and provided a justification of how those strategies support business goals.
Described the structure of the organization including:
Described the current IT infrastructure. This should include hardware, software, network, and IT resources.
Described internal and external challenges IT faces in meeting the business needs.
Described risks IT might face when implementing change, including any ethical and/or social issues brought about by the implementation of the new system.
Ensured academic writing, such as grammar, spelling, and attribution of sources, is appropriate.