KELOMPOK 7 – MM EKSEKUTIF B 27C DIAN ATIKA – RAFIKA - RERY INDRA KUSUMA

Zappos

CASE SUMMARY

MAIN ISSUE

PROBLEM STATEMENT

ANALYSIS

RECOMMENDATION

CASE SUMMARY

YEAR Milestones

1999 - Found by Nick Swinmurn - A variation of the Spanish word Zapotas which means “shoes.”

2000 - Zappos records $1.6 million in gross sales (exhibit 6) - Zappos had 150 brands and 400.000 pairs of shoes

2001 - Nick Swinmurn and Tony Hsieh as Co-Ceo of Zappos - Sustained effort produces $8.6 million in gross sales

2002 - The brand elevate gross sales to $32 million

2003 - Gross sales Zappos rise to $70 million

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

2005 - Sequoia increases its investment in Zappos to a total of $35million - Alfred Lin, cofounder of venture frogs, join Zappos as CFO - Gross Zappos sales increase to $370 million - Zappos moved its headquarters to Las Vegas

YEAR Milestones

2006 - Nick Swinmurn leaves Zappos - Gross sales at Zappos climb to $597 million

2007 - 6pm.com is acquired by Zappos - Zappos expand its product categories to include eyewear, handbags,clothing, watches and kid’s merchandise - Gross sales at Zappos hit $840 million

2008 - Gross sales at Zappos hit $1 billion - Zappos net Revenue of $635million and net income of $10.8 million - Buy Kiva Mobile Fulfillment System (Kiva MFS)

2009 - Sold to Amazon.com for $1.2Bil

Zappos Gross Sales by Year

2000 2001 2002 2003 2004 2005 2006 2007 2008

Gross Sales 1.6 8.6 32 70 184 370 597 841 1014

$0

$200

$400

$600

$800

$1,000

Gro

ss S

ale

s $

M's

Owning the 3 C’s: Clothing, Customer Service, Culture

Customer Service

Clothing

Culture

- Differentiator that gave the company competitive advantage

- 2005 Zappos core values

- 2008 created culture book

- Started a pipeline :

- 225 hours of core training

- 160 hours initial/new hire training

- Additional courses: effective communication, coaching, overcoming conflict & managing stress

- Additonal 39 hours: Inspiring Great Teams, Leadership Zappos Style & Cultivating Culture

COMPANY CULTURE

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 Core Value

COMPANY CULTURE

Customer Service

– Believe rapid growth was due to customers loyalty

– CLT team receives an average of 5,100 call per 24 hours

– Goal is to “wow” customers & establish personal connection

– Call times is not measured

– Call center turnover in 2009 was only 7% whereas industry average was 150%

– Do not implement a pay-per-performance or reward system

– Fulfillment Center outside Louisville, kentucky, consist 3 storage area :

– Static Racks – freestanding shelving units

– Carousels – ferris wheel type shelving units

– Kiva – Automated storage & retrieval system using inventory pods

Customer Service

Customer Service What customers first see

– 24/7 customer service representative

– Free shipping

– Free return shipping

– 365-day return policy

Customer Service:

What customers experience

– Fast, accurate fulfillment

– Most customers are “surprise”-upgraded to overnight shipping

• Create WOW

– Friendly, helpful “above and beyond” customer service

– Refer customers to competitors’ web sites

Clothing

– 2006 – pursued additional lines of bussines

– U.S clothing market was four times larger than footwear market

– Within 1 year Zappos had 300 different apparel brands

– 2007 clothing reached 5% of Zappos sales

– 2008 Zappos sold $31 million in apparel

MAIN ISSUE

Main Issue

Zappos Strategic: Clothing, Customer Service, and Company Culture

Acquisition Zappos by Amazon on 2009

Continuing to Grow Zappos after 2009

PROBLEM STATEMENT

Zappos Growth

Hsieh and Lin knew that much of Zappos’ growth, and hence its value, had been due to the company’s strong culture and obsessive

emphasis on customer service.

Company Culture

• What’s the meaning with Zappos philosophy in their culture?

“you can’t have happy customers without having happy employees, and you can’t have happy employees without having a conmpany where people are inspired by the culture”

Customer Service

• How could Zappos customer become loyalty customer?

“75% of Zappos orders were from repeat customers”.

How overcome their financial management?

Zappos Financial Management

Zappos Acquisition

Why Amazon was choose to acquisition Zappos?

What are the effects of Amazon acquistion?

ANALYSIS

Real Power of Service :

2003 = 70K USD

2008 = 1000K

USD

RAPID

GROW!!

100X SALES

INCREASE

WITHIN 6

YEARS

Visionary Concept of Service

Visionary Internal Marketing Concept : Unique corporate culture

Unique requiretment method Different KPI measurement to ensure service

Holocrary

Visionary Interactive Marketing Concept excellence customer service interface of excellence order

Excellence of External Marketing Concept

book, webpage, holocracy

Service Beyond Expectation

5 hours customer service support on call

Delivery in two way

Easiness to Return the good

Acquisition by Amazon What Next??

After Acquisition The acquisition closed on November 1, at a valuation of $1.2 billion (based on Amazon's stock price on the day

of closing). Our investors at Sequoia made $248 million. Our board was replaced by a management committee that includes me, Jeff, two Amazon executives, and two Zappos executives. As CEO, I report to the committee every quarter, and Zappos is responsible for hitting revenue and profitability numbers. But

unlike our former board of directors, our new management committee seems to understand the importance of our culture -- the "social experiments" -- to

our long-term success. In fact, one Amazon distribution center recently began experimenting

with its own version of Zappos's policy of paying new employees $2,000 to quit if they're unhappy with their jobs.

Otherwise, Zappos continues to operate independently. Our relationship is governed by a

document that formally recognizes the uniqueness of Zappos's culture and Amazon's duty to protect it.

We think of Amazon as a giant consulting company that we can hire if we want -- for instance, if we need help redesigning our warehouse systems.

In the first quarter of 2010, net sales at Zappos were up almost 50 percent, and

we've added several hundred new employees. The growth has made Amazon very happy, but it's also creating new challenges. I've noticed that at company happy hours, you don't see as many employees from

different departments hanging out with one another.

Why don’t all companies

try to build strong

cultures? I believe we

accomplish more through

inspiration

Inspire employees with vision

that’s bigger than

themselves, that goes

beyond money, profits, and

the size of market share. It is

about raising the bar for

everyone

We’ve been young and

scrappy, managing

business very tighly. With

more people as well as

capital we can grow much

faster

We are not selling

shoe. We are

SERVICE Company

RECOMMENDATION