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Analysis of Zappos.com Supply Chain

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1 ? Executive Summary 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. 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. ...read more.


The usage of these systems may lead to the gathering of all data regarding percentages of return of customers, fidelity, shopping habits, and also preferred products, categories or styles. The aggregation of all this data would provide the company with a personal file for every returning customer (75% according to text), making possible to personalize the offer and ?own? the customer. Together with the Customer Service module, Sales and Marketing would be involved in this restructuring process. Sales module would provide detailed information on clients? profitability, impact on revenues and return rate. This information can be used to provide ad hoc offerings, discounts and recommendations. Also these data can be used to answer customer specific inquiries, recording and storing past issues in order to provide an up-to-date, focused response to new issues that may arise. Zappos can also use marketing module to boost the parallel offerings; as mentioned before, the company enlarged its offer by selling a series of articles, from luggage to sportswear, related to shoe business. Marketing module can trace and analyze spending habits and provide a detailed and customized offer for every returning customer. 4. B) Creation of SOPs in response to call center reported issues. Due to the extensive support provided by the customer center, Zappos.com has to manage almost singularly every issue that may arise from the phone call of any customer around the US. This may be reflected in a very broad range of topic or problems. Nevertheless, another important source of expenditure is the time that call centers employees use to solve the issue of the customer. Zappos commitment is to use all the time needed to solve the problem, assuring an outstanding experience and making the buyer feel special. This may be reflected in an increased expenditure for the company. A possible strategy that the company may put in place to lower down the costs of answering long calls and issue personally all problems without giving up the quality of the customer service may be an indexing of the exceptions. ...read more.


In the e-commerce business buyers have a very high level of bargaining power, due to the possibility to compare the prices of the same article they are interested and switch at no cost between alternatives. Even in this case, Zappos can count on many techniques perfected during company life in order to maintain a solid customer base and keeping high the level of loyalty. The company has a loyalty program for customers and offers many policies regarding returns and refunds in order to keep the customer satisfied. Nevertheless, Zappos is able to maintain prices low in order to stimulate the comeback from past customers and compete with the threat search engines represent. In the case, returning customers make 75% of the selling. b.4 Bargaining Power of Suppliers Suppliers can exercise much pressure on companies, especially if their number is limited and the product the supply is hardly replicable, vital or possible to find elsewhere. These factors are not influenced by a company strategy and are preexisting in the industry structure. In the online business industry, bargaining power of suppliers is low. Zappos has many alternative suppliers so can exercise its power and obtain convenient conditions for the supply of products. Dealing with Zappos is an important asset for suppliers too, as the large customer base, the visibility of the company and the inventory management. On the other hand, a controversial situation may be the relationship between UPS and Zappos, which although the retailer company had the ability to manage, could represent a concrete problem in case the shipping company may refuse its services. b.5 Threat of Substitute Products or Services A substitute product is a product that can accomplish the same purpose as the product that the industry is producing. It will restrict the profitability inside the industry. There are no substitute products for footwear and most of major manufacturers are looped in by the company. ...read more.

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