We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Zappos.com owns a consistent share of shoe buyers’ market and maintain a solid and prominent position in online retailing. Although the numbers suggest that the company serves the US market like no other company, an expansion of its current share should be considered. Even thou the investments that this would require, we agree that Zappos could expand and build a stable source of competitive advantage by producing its own shoes line, followed in the future by it’s own shoe related wear line.

The main issue regarding the expansion of online market and the low barrier at the entrance that characterize the e-business is that many other shoe resellers and low cost companies accessed the market, raising the level of competition. As cited on the provided case, an increasing number of users gets to Zappos by using referral provided by Google, right after having compared the prices of the online shops for the same article.

GET EVEN A BETTER ESSAY WE WILL WRITE A CUSTOM
ESSAY SAMPLE ON
Analysis of Zappos.com Supply Chain TOPICS SPECIFICALLY FOR YOU

At the same time, Zappos has few possibilities to low down the prices over a certain point, has it has to buy from Nike, Adidas, and all branded producers that impose most of the price. In the final retail price Zappos has to include the high costs on customer service, shipping and overall experience; all these factors combine and most of the time exceed the prices offered by low cost resellers, which give up the quality of the service in order to be able to offer low prices.

Having a self made shoe line would be a solution for both of the latter problems, permitting Zappos to increase dramatically its market share and go over the difficulties provided by online search engines and low cost competition. 2 – Overview Zappos.com is the largest online shoe and apparel shop in the United States, with 1500 employees and 1 billion dollars revenues in 2009. The virtual company, since its foundation in 1999, experienced an exponential growth in the online shoe selling market, becoming in a short time the main actor on the scene. In 2009 Amazon.com has bought Zappos.com and now the company is operating as an independent entity despite the acquisition.

Shoes represent 80% of Zappos business and the company has been carrying on an aggressive strategy in order to expand their businesses, enlarging its offering with apparel products and any other shoe related product. Due to its good and stable results and the availability of funds for expansion, Zappos has been increasing its investments for its facilities, warehouses and range of products in order to compete on diversified markets. Recent expansions were made in non-related product lines, like watches, luggage, eyewear and kids’ merchandise.

Although the company registered a stable and reliable stream of revenues, Zappos is currently considering possible strategy to maintain the pace with online competitors, in a business that is naturally subject to low barriers at the entrance and an aggressive competition. The company wants not only to maintain, but also and mainly increase its market share in US market. In addition, we can assume Zappos is considering the possibility to expand internationally.

Either expanding their business locally or globally, Zappos has to consider strategies that could permit the company to maintain the level of the service offered high, above competitors. The outstanding customer service, the shipping and return policy and the reliability of the company combined to create the image of Zappos, a company that exceeds customers’ expectations and gave them the famous WOW effect. The company has to find strategies to expand its business both locally and internationally without giving up the quality of its services from one side and being able to compete on price on the other. And all this continuing to provide every day its distinctive WOW effect.

Zappos has to create partnerships with foreign shoe sellers around the world, controlling the inventory management as it always did for local implants but outsourcing the local knowledge that alone couldn’t obtain. At the same time in order to expand locally Zappos has to expand their offer with a proprietary line in order to win the low price competition of the competitors, offering the same high quality services. Nevertheless, it has to seek higher revenues by leaning internal processing and increasing their efficiency: saving costs on customer service, call centers, shipping and inventory management seems a priority for the company in order to be able to compete profitably with the aggressive competitors that populate shoes e-business.

3 – Problems and Alternatives Problem 1: The Question of Expansion Zappos has a constant expanding strategy. They invest considerable amounts of their profit on expansion. Although they have a large number of customers, which is around 9 million, it is still a small percent of the US population. Considering both the US and the world market, Zappos has a huge market to expand.

Trying to be an international company is one of the biggest steps of expanding and becoming a more popular, worldwide known brand. There are important opportunities in the world market and many companies desire to be a part of it. This issue turns into a problem when companies are not familiar with other countries cultures and business ethics. It is the same case for Zappos too, since they focus on customer satisfaction and they are only familiar with the US market. So it was always a huge question for Zappos whether to expand their business in to the international market.

Zappos first tried to expand to the Canadian market and faced some difficulties regarding distribution rights of brands, which were already sold to other companies. It was impossible to enter the market without negotiating distribution agreements, so they decided to shelve the project. Zappos needs to find an easier way to enter the market and understand the efficient ways to establish a distribution center or call center.

Alternatives to Problem 1: 1. A) Use Amazon foreign services and locations or buy local companies and acquire their local expertise Although it is not mentioned in the case, Amazon bought Zappos in the last few years. Currently Amazon has separate retail websites in United Kingdom, France, Germany, Italy, Spain, China and Japan.[1] So Amazon already has an understanding of the business and culture in these countries. This is an important advantage for Zappos. They can use Amazon’s services to start the business and try to expand if they become successful. By this way they will not need to invest considerable amounts of money and it will be safer to give a chance.

Although they may have difficulties maintaining their own culture within the new locations, with the help of Amazon’s experience on the market and culture, they have a high possibility to be successful. Customer services of Amazon can help them understand the culture and demand of local customers and shipping companies that work with Amazon will help to increase efficiency. Also it will give them an advantage to negotiate for distribution agreements. For the first couple of months they can provide free shipping only to premium customers, until they have a good understanding of local shipping and logistics.

1. B) Buy foreign companies and acquire their local expertise on shipping companies and logistic Another way to approach the problem can be buying foreign companies that are working as online retail stores and acquire their expertise in the business. By this way, there will not be any need to search for employees that are experienced in the business. The only problem would be trying to create the Zappos culture in the new firm, but this can be achieved with proper training. The existing local companies will have an understanding of logistics and the efficient ways of shipping within the area. It might also be a good way for understanding the local culture, since these companies will already have an idea about the local customer profile.

Problem 2: Virtual competitors low prices competitions in the US The contemporary downturn of world economy brought the competition to focus their competitive strategy on low prices and broad offer. In order to compete in the US and internationally, Zappos has to combine a low price product offering and maintain an outstanding customer service in order not to lose one of its most reliable sources of competitive advantage and distinctive feature.

Alternatives to Problem 2: 2. A) Producing Zappos’s own shoe-line to expand current US market share Zappos.com owns a consistent share of shoe buyers’ market and maintains a solid and prominent position in online retailing. Although the numbers suggest that the company serves the US market like no other company, an expansion of its current share should be considered. Even though the investments that this would require, we agree that Zappos could expand and build a stable source of competitive advantage by producing its own shoes line, followed in the future by its own shoe related wear line.

The main issue regarding the expansion of online market and the low barrier at the entrance that characterize the e-business is that many other shoe resellers and low cost companies accessed the market, raising the level of competition. As cited on the provided case, an increasing number of users get to Zappos by using referral provided by Google, right after having compared the prices of the online shops for the same article.

At the same time, Zappos has few possibilities to low down the prices over a certain point, has it has to buy from Nike, Adidas, and all branded producers that impose most of the price. In the final retail price Zappos has to include the high costs on customer service, shipping and overall experience; all these factors combine and most of the time exceed the prices offered by low cost resellers, which give up the quality of the service in order to be able to offer low prices.

Having a self made shoe line would be a solution for both of the latter problems, permitting Zappos to increase dramatically its market share and go over the difficulties provided by online search engines and low cost competition. 3. B) Focus on the main product and offer Zappos customer service experience as en extra Even if this strategy may collide with the idea of the customer service focused company like Zappos has operated until now, according to recent trends in e-commerce the fragmentation of the service offering may represent an alternative, still less plausible than the latter proposed one.

As showed in the airline business, pioneer of the e-commerce for seats selling, low cost companies are dominating the market offering cheap prices flight to large audience. In order to achieve such a goal, airline companies are dismantling their offering in core service and optional features. The flight remains the main offer they provide, while all extras connected to it are paid separately. In our case, Zappos could compete with US shoe resellers by offering shoes at a discounted price and having the customer service WOW experience paid.

In this way, the quality of their services would be the same and customers who don’t request the service would same money on their purchase. The only downturn would be represented by the fact that the customer wouldn’t be considered as unique anymore, having all services offered and included with the purchase. This could impact negatively on Zappos image but keep the pace with online competitors.

Share this Post!

Send a Comment

Your email address will not be published.