HRM 511 Organizational Behavior

Zappos.com 2009; Clothing, Company,Culture & Customer Service

SUBMITTED BY Haresh Gurnasinghani P301312CMG529 On 5th July 2013

SUBMITTED TO Prof. Tarun Chaturvedi

IN PARTIAL FULLFILLMENT OF THE DEGREEE OF Masters of Business Administration (MBA)

Information about the company

In June 1999, Nick Swinmurn, a 26 year old marketing manager founded an online footwear retail site shoesite.com, and then renamed the same to Zappos.com,Zappos.com has quickly become a leader in online apparel and footwear sales by striving to provide shoppers with the best possible service and selection. In 2008, the companys gross merchandise sales exceeded $1 billion. Zappos.com currently stocks millions of products from over 1000 clothing and shoe brands. Zappos.com was recognized in 2009 by FORTUNE MAGAZINE as one of the 100 BEST COMPANIES TO WORK FOR, debuting as the highest-ranking newcomer to FORTUNEs 2009 list. On July 2009, Zappos.com came to know that Amazon.com which is a billionaire online retailer got the approval from their board of directors to propose the merging of two companies. The merging of Zappos with Amazon will help Amazon to increase its customer base and strengthen its market share in the retail categories online. But Zappos senior executives felt that it was not the right time and made an intermission for the decision. But Amazon.com has been pushing this issue on Zappos.com by offering $807 million of Amazon shares, $40 million in cash and promised that Zappos can work as an autonomous subsidiary of Amazon. But the financial adviser of Zappos.com, Morgan Stanley estimated that the future value of stock of Zappos.com would be up to $650 -$900 million. Hsieh and Lin, Zappos CEO and COO, respectively, knew that many of Zappos growth, and therefore its value, had been due to strong company culture and obsessive focus on customer service. In 2009, they were focusing on three Cs-clothing, customer service, and company culture the key to the continued growth of the company. Hsieh and Lin had only a few days to consider whether to recommend the merger to the board Zappos for their 21 July meeting.

The Key factors for success.

Zappos.com became the worlds largest shoe store with a50 brands and 400000 pairs of shoes in stock, how did this happen zappos.com a small online store launched just a year back becomes worlds largest shoe store and Amazon.com looks forward to acquire, that too allowing it to be the independent subsidiary of it.This case study further evolves about the organization culture Zappos have set, and the 3Cs that changed zappos.com to worlds largest shoe store in less span of time.

The Strategy
By October 1999, the company created its direct relationships with the show shoe manufacturers and by the end of 2000, Zappos.com offered a huge variety of brands and the manufacturer ships the orders directly to the customers which results in reducing the carrying inventory cost to the manufacturers. By the end of 2009, Zappos.com were able to manage a sales growth of 1187 million dollars, and so they got venture capital from venture frogs an investment and incubation firm that Hsieh and Lin formed in 1998. Hsieh joined Zappos as co-CEO (with Swinmurn) in May 2001, noting that Zappos was the most fun and the most promising of all the companies he had encountered as a venture capitalist. By the end of 2001, Zappos.com had grown to $8.6 million in gross revenue. For the next year 2002 they targeted the gross sales to grow at $1 billion. In 2003, Swinmurn became the chairman and Hiehbecame the single CEO of the company.

The contribution of 3Cs to exponential growth of Zappos.com. The company has developed the 3Cs to rate the customer service and other strategies.

Company Culture.
For Hseih newly selected CEO culture comes first to maintain execution, passion excitement and consistency. Zappos culture was shaped by 10 core values on which it hired and fired. While Zappos had a playful side, with values such as create fun and a little weirdness, it pushed performance just as hard with values such as do more with less, and deliver wow through service.

Customer Service.
Hsieh and Lin believed that a substantial portion of the companys rapid growth was due to its customers loyalty (75% of Zappos orders were from repeat customers), which they attributed to their obsessive focus on delivering superior customer service. For the 96% of sales placed via the Zappos website, customer service took the kind of fast, free shipping (in both directions); a wide selection of more than 1,200 brands (2.9 million products in inventory); the availability of special sizes; and a highly intuitive, consumer friendly interface. Customers could simultaneously search by style, size, width, color and gender and expect to get tens if not hundreds of matchescertain to be in stock (the site only displayed shoes that were in inventory.) Customer service was a core component of the culture. Its free-call number, free shipping and returns, 365-day return policy and 24/7 availability also set it apart. Zappos employees had no scripts or call-time metrics, and were empowered to take action to make customers happy. Another success factor was its relationships with vendors. Zappos has built collaborative partnerships and shared information with vendors in an open and transparent manner. They were able to see inventory levels, sales and profitability, and they helped Zappos plan its business and made sure they had the correct product at the right time.

Clothing
In 2006, Zappos began to follow up on several additional lines of business, including purchasing a discount footwear site, running e-commerce sites for other companies, providing private label products, and providing online business advice. As Zappos was not much into making premium as selling its service this C was contributing to the missing volume thatZappos needed to make its model work. They started with brands where we already had a relationship this helped to bring in customer to a well known brand and thus giving them the needed exposure. . Hsieh and Lin wanted Zappos customers to associate the Zappos name with service, not with shoesor even clothing. We are a service company that happens to sell shoes, and clothing, and handbags and accessories, and eventually anything and everything, was a popular Zappos saying.

Successful Execution.
Implementation and execution of of 3Cs in Zappos were so perfect that by 2008, the company hit its goal of $1bn in gross sales and in 2009 Fortune magazine ranked Zappos 23rd on its list of the best companies to work for. Zappos has expanded into apparel and other categories where customer service could be a differentiator. Later Zappos was sold to Amazon in late 2009 for $1.2bn. Mr Hsieh reassured employees and others that it would be business as usual. Today, Zappos still operates as an independent entity with its brand and culture intact.

Learning Objective. After reading this case study I can clearly say that 10 core values, implementation of the 3 Cs Stand Zappos apart. The organization survives on excellent customer service which comes from its unique corporate culture and basic training of employees. Zappos recruit people who deliver customer service and also take care of them.

Total Words: 1192.