Zappos is Passionate for Customers Tony Hsieh\'s first entrepreneurial effort be
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Zappos is Passionate for Customers
Tony Hsieh's first entrepreneurial effort began at the age of 12 when he started his own custom button business. Realizing the importance of advertising, Hsieh began marketing his business to other kids through directories, and soon his profits soared to a few hundred dollars a month. Throughout his adolescence, Hsieh started several businesses, and by the time he was in college he was making money selling pizzas out of his Harvard dorm room. Another entrepreneurial student, Alfred Lin, bought pizzas from Hsieh and resold them by the slice, making a nice profit. Hsieh and Lin quickly became friends.
After Harvard, Hsieh founded LinkExchange in 1996, a company that helped small businesses exchange banner ads. A mere two years later, Hsieh sold LinkExchange to Microsoft for $265 million. Using the profits from the sale, Hsieh and Lin formed a venture capital company that invested in start-up businesses. One investment that caught their attention was Zappos, an online etailer of shoes. Both entrepreneurs viewed the $40 billion shoe market as an opportunity they could not miss, and in 2000 Hsieh took over as Zappos' CEO with Lin as his chief financial officer.
Today, Zappos is leading its market and offering an enormous selection of more than 90,000 styles of handbags, clothing, and accessories for more than 500 brands. One reason for Zappos' incredible success was Hsieh's decision to use the advertising and marketing budget for customer service, a tactic that would not have worked before the Internet. Zappos' passionate customer service strategy encourages customers to order as many sizes and styles of products as they want, ships them for free, and offers free return shipping. Zappos encourages customer communication, and its call center receives more than 5,000 calls a day with the longest call to date lasting more than four hours.
Zappos' extensive inventory is stored in a warehouse in Kentucky right next to a UPS shipping center. Only available stock is listed on the website, and orders as late as 11 p.m. are still guaranteed next-day delivery. To facilitate supplier and partner relationships, Zappos built an extranet that provides its vendors with all kinds of product information, such as items sold, times sold, price, customer, and so on. Armed with these kinds of details, suppliers can quickly change manufacturing schedules to meet demand.
Zappos Culture
Along with valuing its partners and suppliers, Zappos also places a great deal of value on its employee relationships. Zappos employees have fun, and walking through the offices you will see all kinds of things not normally seen in business environments—bottle-cap pyramids, cotton-candy machines, and bouncing balls. Building loyal employee relationships is a critical success factor at Zappos, and to facilitate this relationship the corporate headquarters are located in the same building as the call center (where most employees work) in Las Vegas. All employees receive 100 percent company-paid health insurance along with a daily free lunch.
Of course, the Zappos culture does not work for everyone, and the company pays to find the right employees through “The Offer,” which extends to new employees the option of quitting and receiving payment for time worked plus an additional $1,000 bonus. Why the $1,000 bonus for quitting? Zappos management believes that is a small price to pay to find those employees who do not have the sense of commitment Zappos requires. Less than 10 percent of new hires take The Offer.
Zappos' unique culture stresses the following:
Delivering WOW through service
Embracing and driving change
Creating fun and a little weirdness
Being adventurous, creative, and open-minded
Pursuing growth and learning
Building open and honest relationships with communication
Building a positive team and family spirit
Doing more with less
Being passionate and determined
Being humble
Zappos' Sale to Amazon
Amazon.com purchased Zappos for $880 million. Zappos employees shared $40 million in cash and stock, and the Zappos management team remained in place. Having access to Amazon's world-class warehouses and supply chain is sure to catapult Zappos' revenues, though many wonder whether the Zappos culture will remain. It'll be interesting to watch!
Questions
Define SCM and how it can benefit Zappos.
Explain CRM and why Zappos would benefit from the implementation of a CRM system.
Demonstrate why Zappos would need to implement SCM, CRM, and ERP for a connected corporation.
Analyze the merger between Zappos and Amazon and assess potential issues for Zappos customers.
Argue for or against the following statement: “In the electronic age, customer relationships are more important than ever, and Zappos provides the new benchmark that all corporations should follow.”
Explanation / Answer
Supply chain management is the technique of managing goods and services of a company. It comprises of the time when the raw material is acquired by the company in order to make goods. It also consists of the materials which are in the process of manufacturing. Then, it also includes the finished goods which are supplied for consumption.
Zappos has great supply chain management in existence. The company maintains an extranet that updates the suppliers about the products that are being sold, the price of the product and the demand of the product.
This helps the suppliers and the vendors to be updated about the product requirement which could help them to reschedule the manufacturing of the product accordingly.
CRM which is an acronym of customer relationship management is a very important concept in business. Zappos already has a very good customer relationship management. The company invests heavily in CRM. The company receives on an average 5,000 calls in a day.
This has made the customer to be happy and satisfied with the services of the company. Happy customers result in more buying from the customers and also help in improving the brand image of the company.
Supply chain management (SCM) helps a company in order to have availability of product supply ready. The company is able to supply the products that are requested by the customers at the earliest. This helps the company in making the customer to be satisfied.
Supply chain management also helps the company to fall back on suppliers in case of emergency. In case of any untoward incident an effective supply chain management could help the company in facing the situation.
Customer relationship management (CRM) could help the company in building its brand image and at the same time in spreading brand popularity. A company with a good image would be able to sell and promote its product in an effective manner.
Enterprise resource planning (ERP) helps the company in planning its resources in an effective manner. The company through ERP is in a better position to gauge the availability of its resources and to use the resources effectively.
The merger of Amazon and Zappos is quite an effective move as both the companies are in the domain of e-retailing and have good supply chain management. The companies also have good brand image and uses robust technology.
Amazon has grown significantly over the years and addition of Zappos would bring with it the range of various brands. This would also consolidate the position of amazon as the leader in the e-retailing business.
It does not seem like that there would be any issue for the customers of Zappos as the management of the company remains same and they would be implementing the same strategy in the company that they were implementing prior to merger.
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