Philip Dackweiler <p.dackweiler@gm.x.de>.

Ingen de1 af nogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkrene, er forbudt. De personer, der foretager en sdan overtrredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

Zappos.com: Dqveloping a Supply Chain to Deliver WOW!

STANFORD
GRADUATE SCHOOL OF BUSINESS

Zeppos.coM: DevnloprNc

"^'*:bff:,3; A SuFpLy CHArN To DELTvER

wow!
Our rleckion r**s a/r+'erys to focur on ser"r,ir:s bet*tuse we gal instunl feet{be& whenever we delivery. Customers were wawed by the experienrc, and rhxn they told a banch of peaple. nd u'ord of mouth *'arh.s u lat faster on the Internel than it dots persfln'to-pr:rscn because you cn jus! e-ft?i{ out a bunclr af your friends and say, 'hey I just hatl lhis ilmzing
expericnte.' That wan ene ofthe re^qons that we wanted ta fteep upgrading shipping. Lin. Chairman. CO. and CFO of Zaonas'

-Alted

In late 2008, iess than

tr0 years

after its founding, Zappas anticipated reashing annual gross sles

of Sl billion, When its founder first proposed the idea of selling shoes online, the cocept was greetcd with intense skcpticism. Despite the chailengos, the c$mpany had achieved dramatie success. It was the world's largest online retailer of shoes, was profitable, growing rapidly, and
had an outstanding reputation for customer service. Its employees were passioately. engged in their work. While shoes still provided the vast ajriry of reyenues, Zappos had expanded its product offerings based on feedback &om custcmers and the enthusiasm of employees. There was still a huge untappd sustomer base*cnly 3 percent sf the U.$, population were Zappos customers-suggesting that the cornpany was not close to saturtirg its lpportunitics in the u.S., lel alone other international regions.

However, the c*llapse of the financial markets, and the prospet of a prolonged re*ession. created new chaileng*s. Zappos had never been lavishly funded-it had always been intcnscly conscious of cash. Unlike most relailers, il was continuing to grow, but early signs were that the rate sf grCIwth was slowing. As rhe eompany's leadership looked forward, it considered ways that Zappos could sustain the high quality expcrience that it was known for-to deiiver "w-ow" ro its customers. supplitrs, and othqr affrliates. The cornpany's supply chain management hd cvolved as Zappos had grown, and was one of its sources of excellsnce. Yet, perhaps therc were opporhrnities fur continued irnprovement. ' Qrotations are from interviews with the auihor. unless orherwise specified. David Hoyt prepared this case uader the suprrvision sf Michael Marks, Lecnrrer in Operarions, Information, and Technology, and Professor Hau Lee as the basis fsr class discussion rathcr than to iilEtxare eithrr effective or ineffective handling of an administrative *ituation.
Copyright Q 2A9 by the Eoard olTruslees of the Letand Stan{ord Juniar Unive.rsig,. All rights resen'ed. To order copies or requesl Feftnission ta repraduce nurt$rils, e-mail the Cue Writing A"ffiee at: r*.o@gs.slanlord.etfu ar write: Case Wriling Affirc, Stttford Grduttle Sthoal af Business, 5I8 Memorial lllay, Stanlard University, Stnford, CA 9#A5-SAI5. Na part of this publieatian may be repraduced, stored in d rrtrievl system, used in a sprudslseet, ar transmilted in any form ar by any means alecffanic, meehanical, pfuttotopying recording, or olherwise wirhaut the permission af ths Strlford Gruduate Schaal af Business.

Philip Dackweiler <p.dackweiler@gmx.de>. Ingen del af nogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkrene, er forbudt. De personer, der foretager en sdan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gleich, mit
welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

Case Studies in lnternatisnal Marketiog Management

Zappos,caa: Developing a SapplS Chain ta eliver

lf0l$!:

6,3-65

p.2

Zarpos.con In 1999, Nick Swinmurn was frusffated in linding the right size, color, and style of shae. After trying several stores, he felt there must be a better way. Stores carried e relativeiy smail selection of styles. and usually did nol have a full compiemsnt of colors and sizes eveil fi:r the styles they did stock. This was not surprisig considering the physical constraints of shae storesr the lirnited number of shoes that an ayerage store could stock, nd the small lac*l population
sened by individual storcs. But this was 1999, and the Intemet bosm was in full swing. lf Swinmura, who was an ordinary $hoe customer (not a shoe fanatic), was frustrateq it seemed likcly that many others rnust be feeling the same way. What consumcrs nseded was a way to access a huge selection of stylcs, clors, and sizes. Since nsne existed, Swinmurn decided t create one, using the Internct to addrsss the selection problems faeed by traditional shoe retailers--despite having no experience in retail, let alone the shoe industry. Raising Capital Swinmum raised 5150.000 frorn family and friends and recruited Fred Mossler, a senior shoc buyer at Nordstrom, to join him. Swinmun tried to raise venture capital, but had difficuity finding investors willing to put in large arnounts of money. Onc of the venturc firms that he approached was Venture Frogs, foundcd by Tony F{sieh and Alfred Lin. Hsieh was a young Harvard graduate, rvho had cofounded an laternet advertising firrn ealied Link Exchange with Sanjay Madan, a college roornmat. They sold the company to Microsofl for $?65 million in 1998, when Hsieh was 24. Lin hadbeen a friend f Hsieh's at Harvard {and a custmer of Hsieh and Madan's college pizza-making business}, who left a PhD program at Stanford University to join Hsieh at l-ink Exchange. Hsieh nd Lin then founded
Venture Frogs, which funded Internet siart-ups, including companies sueh as AskJeeves. Tellne Networks, and Zappos.

ln 1999, at the height of the Intcrnet bcor'.1 Swinmum leli a voicemail with Venturc F?ogs, explaining *rat he had started a cmpany to sell shoes on the lntemet. As Hsieh and Lia were about to hit the delete button, thinking that this "sounded like the posrer chiid for bad lntemct business ideas,"' Swinmum said that the shoe market in the United States was S40 billion, and that 5 percant of this business was being done by mail order. Hsieh and Lin realized th-at if people bought $2 billion of shoes from catalags, tbe lnternet-with its capacity to rcach large sections of th population and to provide detailed information vastly better than a catalog could-was going to be a substantially larger market. They decided to invest, putting about $2 miliion into the cmpany over the next fcw years. Hsieh also invested pcrsonally in Zappos {whose nme was an adaptation of thc Spanish word for shces, "zapatos"}. Latcr, Sequoia Capital, a premier Silicon Valley vsnture firm, also invested in the company.
While Hsieh, Venture Frogs. and Sequoia put money into the company, Zappos was never funded on the lavish scale of lnternet start-ups such as WebVan*the total investment in the

'

Hsich quoted in Duff McDonald, "Sole Purposc," CIO /nsr'g1, November ?006, p. 45

Philip Dackweiler <p.dackweiler@gmx.de>. Ingen del afnogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvaliltceret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkrene, er forbudt. De personer, der foretager en sdan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder berragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen lestgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schitte eingeleitet.

Zappos,cor*: Developing a 9uppiy Chain t treliver WOW!

Zappos"ro*: D*eloping a Sappty Chain to Daliver

lf0l*!:

GS-65

p. -l

c$mpany was less than Sl0 million for the first five years of the company's existence. Sequoia Capitai would later lead an investrnent round r:f $54 million, ssme of whirh was used to buy out early inve$tors. In tire long run, the lack of sub$tsntial funding was a benefit-Zappos was forced t focus on those factars which were essential to success, operate effrcienfiy, and avoid crating I sucffssful online shoe retailer, which inhibited access to large-scale investment, had another advantage-lack tf competition. As Lin said, "It was act$lly tsmpting to invcst in a company where everyone thought this couldn't be done, bccause you knew that in the early stages, ycu were no1 going to have a lot of competition."

the excesses that led to {bilure for many other Internet srart-ups, The difcult challenge

of

However, in the shsrt run the relalively low funding raised by the company was painful-the were times when employees worked for months without paychecks in ordcr to help thc company
survive.

Financisl Success

Aftcr investing, I{sieh began to work closely with Swinmum, and in ?00 they became

co=

CEOs. Lin joined as CFO in 2005, later adding the roles of COO and chairman. Swinmurn left Zappos in 206, and Hsieh became the sole CE. Zappos had strcng growth from its first sales througb 2008, when it expected grcss merchandise saies of S I billion {Exhibil l). This strong growth was largely depcndent an a happy, loyal custorncr base. As thc compauy developed, the percentage of repeat customers grew-from 40 percenl in 20043 to 75 percent in 2008." Hsieh viewed this as essential for sustained sucess, saying, o'Yu can get arryon to buy ftom you once.... The hard part is getting people to buy from you again and again."'
Zappos became profitable in 2006. but did not have an objective af maximizing profit, preferring

to invest in grcwing the cornpany. That year, Zappcs wss able to achieve gross margins of 31 percsnt, even after shipping and returns (with more than one in four orders returned).b Shipplng, both sutbomd a*d for return$, was a substantiai part of the company's cost sBucture, at abut S100 rnillisn.? or almost 17 pcrcent of the company's gross sales of i:g: *iltioo in 2006. This percentage had remained relatively constant over time, despite increasing return ievsis and deueasing delivery times.

In latc 2008, Zappos had about 9 million eustomsrs*_a iarge aumber, but just 3 percent of the U.S. population, leaving plenty of roorn lbr continued growth. It had about 1,5 employees, half in its Nevada headquarters and call certer, and half in its Kenrucky fulfillment cntr. The colnpany was still private, with no immediate plans for an IPO.

' Richard Waters, "Trial and Enor Shows the Fath to Success," The Financial ?'imes, March 9, 2005, p. delined repeat custmers Es eny cuslomer that had prcviously purchascd from tbe cmpary. * Jeff Morris, "service a 'Shoe-In' for Zappos.com," Maltichannel Merchant. April 2008, p. 7.
5

9.

Zappos

Anhur Zaczkiewicz, "Zappos Sells Service," Itomen's lfr.ar Oaily, November

Watsrs, loc. cit. Sidru

trS,

2{S6. p. 24.

Pu.rt

"Shoe In,'" Blsin*"r,r 2., Decenber ?06, p. 54.

Philip Dackweiler <p.dackweiler@grnx.de>. Ingen del afnogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrpder servicevilkrene, er forbudt. De personer, der foretager en sdan overtradelse, vil blive retsforfulgt, i det omfang ioven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopie* oder bertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Scfuitte eingeleitet.

Eoppos,tam: D*elaping a S*ppty Chein ta Dcli*er

WtlW!: GS-f

p.4

Ccrporate Culture and VflIues

Zappos had a strong company eulturo, which was dcveloped and nuitured by managemant. This cultsre, together with company vales, was a srong influencc on all aspccts of the business, including the supply chain. Hsieh and Lin recalled that the srong cuitwe rhat existed in the early days of their firsr start-up, Link Exehange, had disappeared as rhe colnpany grcw. As Lin explaicd, "At the end of the day, one af the reasons we sold the company was because it was no longer a fun place to work." They were determined that this would not happen at Zappos.

As a result, when Zappos leadership considcred what it needed in order to meet the next year's business objectives, the queslion "How are we gCIing to grow the culture',)" was as important as issues such as "How many people do we need to hire, how many more servers, or how much ore office space do we need?"
Hsieh described \Mhat the culture rxeant to him in 208:

To mc, the Zappos culture embodies many diffcrent elements, It's about atrways looking for nerv ways to WOW everyone we come in contact with. It's abcut
building relationships where we trsat each other like family. It's about teamwork and having fun and not taking ourseives toa seriously. It's about gpowth, borh personal and professional. It's about achieving the impossible with fswer peoplc. It's about opeflness! uking risks, and not being afraid to make mistakes. But most of all, it's about having faith that if we do the right thing, then in rhe long nrn we will succeed and build something great.o

Hiring and training werc particularly important in maintaining and gowing the culture and the company's values. Hsieh said, "We want people who are p,assionate about what Zappos is about--*ervice" I don't care ifthey're passionatc about shoes."o (Zappos' cultrire and values are
discussed in

dekil in the Appendix.)

Tns Zlrpos SHopprxc Exprnmxcn From the beginning, Zappos set out to provide an exceptional shapping experience for its customers. It wanted customsrs! after any interaction with the cr)mpany, to say "'Wow!" To illustrate the priority placed on serving its customers, Hsieh reftrred to Zappos as " service company that sells shses," which he later amended to inelndc the wide range of other products sold by the company. Hsieh elabcrated on the impartance of customer service: "It's no1 rcally a
seffet., .. Peopie have known. _for a long time that companies that provide good service do realiy well. Yet no one does it."10 Hsieh saw customr service as an investment rather than an
expsnse.

-'20S8 ulture Back," Zappos.com, p.

12.

'

Christopher Gergen and Gregg Vanourek, "Zappos Culture Sows Spirit,'" I&e Wrchingtan limes, July 16, 20Sf,, p.

2.
1o

waters. loc. cit.

philip Dackweiler <p.dackweiler@gmx.de>. Ingen del af nogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrader servicevilkrene, er forbudt. De personer, der foretager en sdan overFedelse' vil blive gleich, mit retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopien oder bertragen werden, ganz
Bei welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen t-estgelegte Verwendung ist verboten. Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

'Zappos.com: Developing a Supply Chain to Eellver

WOW!

, : .... ' d*' ''

,-

I
1

Zaryos.eam;

*slapinr a Sappb Chain to Delimr WAW!: GS'65

p'

The drive to provide a "wow xperienc" infsrmed every aspect of the company. The Zappos website loaded faster than any other retaii website. While most orders were made online, telephone support was essential for maximieing the custromcr experience. Unlike other popular retil sites, he company's tcll-free phone number was prominently displayed on all its web pages, the average phone call was answered in less than 20 seconds, and call center operators had the authority to resolve virtually any issue'
Zappos knew that its primary competition in the shas business was brick-and-rnortar slores, and that in order to be successful" customers needed to bE comfortable buying shoes snline. The company addressed this challenge in number of rvays, including ftee returnsn providing extensive online product information. maintaining a tall eenter, and free overnight shipping.

Fit" and the Return Policy

A key aspect of making customers willing to buy shoes anlhe ws dealing with the issue of fiteustomers needed to feel comfrtable that they would receive products that fit, and that they rould rerurn thsse that did nst. Zappcs quickly realized that this culd bc best addresscd by providing frce retums, initially for 6 days, latsr extended to 365 days {although most returns came back within 60 days). Customers could thus pr.uchase several pain of shoes, of different styles and fits, keeping those they wanted while retuming thse that did not fit.
Zappos closely monitored cu$tomcr behavior. It found that the rnost profitable customcrs were not those that returned the fewest products. Customers who rnade use of the free return policy rended to experiment with different brands and styles-while they had a higher rehtm rate, they also made more net purchases" Overall, retns were about 35 percent af gross sales.

Online Product lnformetisn

It was also essential to provide as much information as possible to customers as they made their purchasing decisions, This was done in several ways. Retail websites t)?iclly had small photographs of produets, with swatches of the available colors. The pictures were generally from only a few angles, and often did not show importnt detsils. Zappos provided substantially better insormation to customers. When new models (or models with new colors) arrived at the
Zappos warehouser a photography team took pictures from several angles {by 2008, eight photos were taken of eaeh style and color)" Cuslomers interested in a particular item eouid easily see
large picturesn in the desired color,

fto multiple

perspeetives'

The site also included detaiied descriptians of the shoes, as well as information that would
ordinarily be provided by experts at a brick-and-mortar shoe company. For instance, a person's gait (the way that they ran or walked) was important in Iinding the proper running shoe. The lappos site had a detailed discussicn of gait. and how ctrstomers could detcrminc which rype of shoe was approprite for ihem. The site also provided customer feedbaek. Customers could write commnts on the shcles they purchased, which Zappos did nst edit (except to remove profanity). The rnost rscent customsr comments were displayed for each type of shoe.

genbogmreproduceresellergengivespnogenmdeudenudgiverenSforudgendeti1iadelse.Brug(ud
servicevilkrene, er forbudt De personer' over kvalificeret og rimelig anvendelse), som er ulovlig elleiovertraeder mit oder bertrasen werden' ganz gleich' ** darr ohne die vorherige zustimmuns des verlags kopiert .?*, verwendung ist verboten' Bei festgelegte "u.n, als die geseulich oder in den servicebedingungen welchen Mitteln dies geschieht. Eine andere verwendung eingeleitet' Zuwiderhandlung werden gerichtliche Schritte

*t::i:t1-,::::,:i*":"*t":St";"t"lt"Ttli.

:.ffiT::l:ilffi',:;ffi;

Cse Studie5 in

lflternational Marketing Management

ChaintoDr,liver IFOW!:

The Zappos Call Center (*Customer Loyalty") which handled about 95 percent of c,rders' Mosl customer interactins were through the website, borrt ptoducts, rettrns, or other issues, were handled by The rest of the orders, piu, qrr**tions *u, staffed 241? by about 40 people il the Las vegas

rhe call center.

headquarters.

tn zbgg, ihi,

all Las Vcgas cmployecs went As described in the Appendix on company culture and vaiues, the end of ths cour$e' regardless of the through the same C-*"*t new-hire training sourse. At with spent t least two week* in the call center working :"U T* lhry **r* frireJ ior, they
custoers.

including the call center {or Zappos rneasred mosl evcry aspcct of its business. time a cuslomer ealled to the n9m loyalty', in Zappos ,*ttori. ti*t**A how long it took !h1 2008 this number was astonishingly ti,ne the call was answeied by a call center op;rator-in measure call center low, consistently averaging less than 20 seccnds' lt did nat' however, nulny calls they took' Thc objective was to as.how

"cuslomer

;t;;";;-or, **ti*, or""ffi*i*"y,

meant having an extensive provide the customer with the best possible experience' If that interest in running, the call cefter operatsr was tonuersation with a custoiler about his was looking for a specific shoe that was enctuaged to have the conversation. If tbe customer to look on at least thrce othcr not available at Zappos, the call center psratsr \tras trained then talk the customer througlr finding lntemet websites ta find what the customer wanted, and websita .{*ppos would lose that ordr, but the custorner would the product on the "o*p.-tGfutur*. Hsieh iommented, "We scorc lll center operators] based likely retum to Zappos in the We don't cars if +*y,.ltud* j on whether or not they **ot uUout and beyond for the custmer' " " .cfficient' they were.... ro, us, *rery interaction is a branding oppor-tunity'"l the sale cr how

such

and beyond tustomel one widely cited example of a call center operatol gCIirg bove was following uF on shoes that expectations took place in "tuty zoo;. A eall center opffator

The custsrncr replied ftat she :v.as vcry ehould have been returned, an c-mailed the custorner' mother, who had since passed away' and had not ,**__rO. had boughrthe shoes for her sick for UFS to go to the gotten arorllld to retuming the shoes. The call center opeRtor an'anged arrangemnt and condolence card to custoffier's hcuse to pickip the shoes, then sent a {lower 6y this concern on the part of a the customsr. Needless to sayr the customer $'as overwhelmed a biog, wiich were widely cireulated'l? cmpany! *nd postcd *o**"nt, about her **p*d*t"" on

by themselves' They were given Call center operators were trained to handle mort any situation to escalete the matter to a the authority to do so using their best judgment without nesding purposes' calls were monitored by Zappos supcrvisor or manager. For quality,

"onttot to ensure that the operator had exceeded ernployees, not by an"outside ug*"V. i4onitor* listened ,o*to*., expectatioils, and thaithe custofier's experience had been exeeilent'

;'-*ffi:Zappos.eomBelievesHappierStaffersLeadtoHaFpycu5,tonfs,,'rrecr.
October 20?, P. 35. itnJ.n Uoitt*v, "Th*se Brands Build Community"'ldoee'carn' May

l?' 2008'

philip Dackweiler <p.dachveiler@gmx.de>. Ingen del af nogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over loralificeret og rimelig anvendelse), som er ulovlig eiler overtrreder servicevilkarene, er forbudt. De personer, der foretager en sdan overtedelse, vil blive gleich, mit retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz
Bei welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

?appos.com: Developing a Supply Chain t Deliver wOW.

Zsppos.ram:

$*elnping a Sd+pt!

Cheia to

Deliftr WOW!: GS'65

ln late 2008, the eall center received about 5,000 calls daily. Zappos viewed each ofthese as a rhancs to "wow" a customr in a personal way" As Hsieh said, "At that poinl you have the full attention of thc customsr..." That's the timc *her* you havc a huge apprrrurity .". t Ehine."l3 A customer that had irn exceptional cxperience was likely to tell friends about it. With the ease of e-mail communieation, positive or negative tustmr experiences could be rapidly spread to large number$ of peple. Zappos wanted to ensure that its word-otmouth testimonials were
ovenvheimingly positive.
Free, Rapid Delivery

The hnal asF*cr of providing exceptional service was rapid delivery at rrs additiryl :harge. Zappos alweys fied to beat customrr expcttions, under-promising and over-delivering. Utrtimately, this meant opemting the rvarehou$e around the clock, cvery day, with deliveries rnadc ovemighr by UPS. An order reccived in the evening would usualiy be delivered the nexl day, even though the standard delivery terms were for UPS round, which had a 4-5 day
delivery xpctatio. Lin elaborated:

in thc early days we didn't really have a choice; we couidn't afford anything else except ground shipping. Then we started understanding tht whatever morrey we had left over we wanted t rcinyest in the growth of the rompany. We can either spend it on marketing, rying to gt ncw csstotrnets' or
gucss we cn spend it on our existing customcrs and lct them drive lhe word of moulh" *come back." You know these customers are gr:ing to buy and let them drive the shoes at a later date, sc our decision was always to focus on service because we got instart feedback whenever we upgraded somesne. They were wa'wtd by the sxpsrisnce, and thcn they told a bunch of people. And word of mcuth works a lot faster oa the lntsrnet than it does person-to-person because you caR just e-mail out a bunch of your friends and say. 'trey I just got this amazing experience.' S0 that was on of the reasns that we wanted t$ keep upgrading shipping. The other rsasn is that we've ahvays thought about our real ccmpetitian as the instant gptification you can get waiking i:rto a brick-and-mortar store, trying on some stuff, and walking out with the sruff you like. Our idea was that over time. \Me wer going to get as elose ts that as po$sible, and that would really bring the
$tofq to your homc.

During tbe 2006 holiday season, Zappos guaranteed aext*day delivery for all orders, and continued the policy tlgough 20?. Howeyer, sinc.e customers expected exl-day delivery, "they were no longr as wowsd as before, when it was a 'surprise' upgrade," according to l-in' Furthermore, guarantecing next-day delivery set cuslomers up for disappointment on thosc rare occasions when the delivery was late due to unavoidable problems such as weather impacting
plane schedules, or if cornmunisations lines were down and Zappos was unable to comnunieate orders to the warehouse. Overll customer satisfaction decreased very slightly in 2007, and the company dccided to uo longer adveise overnight delivery. It provided the same level of r.r"ic*, but nly guaranteed 5-day ground shipping. Zappos fomd that when customers no

Ii Mi.hu"l Bush,,,Cusromcr

Servicc a Brarding Oppomlniiy," Tirq Busin*s, May l?,2008, p. 35

philip Dackweiler <p.dackweiler@gmx.de>. Ingen del afnogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtreder servicevilkrene, er forbudt. De personer, der foretager en sdan overtrcdeise, vi1 trlive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gleich, mit
welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schdtte eingeleitet

,'t "" ' T'ft

Case Studies in

lnterilalional Marketing Managment

Zappos.eom:

fr*eloping a Sxpply thein to Delivet I$OW!: GS'65

p.8

longer expected nxt-day delivery, they were again $urprised when packages arrived lhe next day, especially when they had placed their orders late at night. s Zappos continued to increase delivery speed, shipping cost as a percentage ofnet sales (ailer returns) remaind constatt, even though ths percentage of returnri increased. By 2008, Zappos w*s on of the tp three UPS oyemight shipptrs, and worked closely with UPS to increase efliciency and drivc down shipping csts. If Zappcs decided to back off from its desirc to ship all orders for ovemight delivery, for instance, using ground delivcry for all customers that were within a two-day deiivery &om its warehouss, it estimated that savings could be signiftcant. UPS estimatd UPS Ground coul*l reach l l percent of Zappos customtrs within one day, 49 prrcent within two days, l8 percent within three days, ?l percent within fow days, and the remaining I pcrccnt would taks five days.

Tnr DrvnxrPMEl\Ti\D Evolunoti oF ZAPPoS' Opsnnrto*..s

Zappos began

in San Franeisco, in the second floor of a Victorian house, with the founder of Craig's List living downstairs" By 2004, the eompany needed to expand, with particular emphasis on its call centcr. Hsieh and the senior managmcnt believed tha: it was important to have the call centr as part of carporate headquarten, rather than outsource sr remotely lccate this function-a{ter all, the eompany's primary focus was orr providing the very best custorner experience, and rhe call center was central to achieving this objective" The Bay Area was cxpensivc, but it alss did not have c right environmnt, nor access to suitablc employees to stsffthe type of call center that they believed was essential to the company's success.
They decided to move Zappos to Henderson, Nevadq n the out$kifrs of Las Vegas. Las Vegas u,as a service-oriented city that operated on a 24*7 schedule, was already home to many call centers, and had exbemeiy good Internet connectivity. Of thc 90 employees in San Francisco, 70
moved to Las Vegas.

Attracting Brands
In the early years of the company. it was difficult to get brands to sign up tbr cnline distriburion. Shoc companies had made huge investments in their brand cquiry. In 1999, Zappos wss an unknown start-up, and established rctailers viewed the Intemet as, in Mossler's wordso "kind of a {iea marker.... They saw the lnternet as a place where everghing would be discounte4 and their brand would be ruined." In addition, the existing retailers prcssured the brands to rssist oniine
sales, as they did not welcome the new cornpetition.

An additional complication was that brands were more successful when grouped-athtretic shoe brands" for instanee, fared better when grr:uped with other athletic shoes. If a retailer offered only one athletie shoc brand, there would not bc enough selection to attract customr$. Thus, it was difficuit to collvince companies to be the first brand of a category to be carried by Zappcs. Once the first brand signed oR, however, subsequent brands were easier ta ttract. ln its first
year ofoperarion, the eompany signed up 60 to 7 brands. Zappos focused its attention on signing brands that customers searched fior or asked for when taiking to call center operators. The cornpany reviewed logs of customer searches fur brands that

Philip Dackweiler <p.dackweiler@gmx.de>. Ingen del af nogen bog m reproduceres eller gengir,'es p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrader servicevilkrene, er forbudt. De personer, der forerager en sdan overtredelse, vi1 blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gieich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

Zappos.(om: neveloping a Supply Chain to Beliver WOW!

Zappos,com: O*elepinp a Supply Chain to DeliveT

\I'OW!:

GS-65

p.9

wre nt on its site, and its buyers investigated those brands and evaluated whether they would be valuable additions to the Zappos offering. As the company grrw and became well knwn within the industry, brands bcgan to contact Zappos about being $old tksugh the sitc. As Steve Hill, the company's vice president of merchandising in 2008, said, "flThe buyerl will get in touch with the brand, talk to them, trd look at the product. if there's a compelling reason ro have the product, then we'li go ahead and open the brand. ln a lot of cases. it would be duplication of sornethig we already have, so we may not go dswn that road."

High-end brands, initilly rluctan1 to parfner with online rclaiiers such as Zappos, eventually cam on board for several reasrlns. First, as con$umrs became comfortable buying oline, this became an importnt disribution channel. Second, they began to realie that if customers could not purchasc authentic high-end brands, it made it casier for counterfeiters--customers searching for their brands on the Internet would end up on sites that sold fakes.

A third incentive for high-end brands

arose when Zappos began creating '"vertical" sites within Zappos.com. Thc hrst such site, "Couture," was crsated in 2003, and fearured high-end fashion products {initially shoes, later expanding to clothing and accessories). By 2008, Zappos had dded verticals for running, outdoor activities {such as hiking), and a "RideShop" featuring products for skiing, skanboarding, surfiRg, and off-road bicyciing. Brands were eager to paftiipate in vertical sites, since thsse visiting the sites rvould be passionate consumsrs-the types of cuslorners that wanted high-cnd brands, and that those brands wantcd most to a,ract.

As cuslomers wers wou/ed by the compaily's high level of service, they bcgan asking Zappos to carry products beyond *hoes. Zappos added additional products based on the passion displayed
by cusfomers ar emplcyecs. Lin explained:

A iot of companics

looh at lproductJ categories from a market point of view, and chase after big markets-they think f, market is strategic and want to go into that

market. We have tcnded to lssk at thing* as: 'if we want to get into this product category, do we have passionatc people, whether it's a customer, or an cmployce, or s prmer, that would love for us to be in that product category?' lt's actually worked out yery well in those situations. So, if customers want us to get into
h*ndbags r ac.cessories because we sell shoes, we go into that eategory.

Zappcs began selling electronic entertainment producti begause some of its emplayees were passionate gamerst and wanted to sell gaming equipment. Lin observed, "We found that people whs are passionate about a product ctegory tend to run it much better and much more efficiently than pcople who just think, 'this is a big markeq I want to get into thar business."'

By late 2008, some of'the non*shoe products that Zappos soid included: handbags,

luggage,

clothing, eyewear, clectronics (eameras, csmputers, video games, phones, and CPS devices), watchcs, houseware, and jervelry. Its ouldoor verti*al site also included items such as tent$, stoves, water {iltcrs, lanterns, and other items important for outdgor eilhusiasts*these customers were not just interested in hiking boots, they were passionate about the outdoors, and wanted to be able to get a wide range of products. Other vertical sites included a range af irerns important to customers interested in those sites areas of foeus.

;;;il -t" e*i'sd' s'11' 1"e919

,tl,t-. . - y* ..,t ,. ,- t
Mtsnagement in Intetntional Marketing

Case Studier

Evolution of the Operational

. ,. - .^*#' ffi? ji:|,jiJiff xTH#ll::$lJ'l-*....*'-:1ff shoe companles' :H"#H::ff :ll.::lT[T'-T:}.1"ili be forwarded to the
shoes ftom

Mode

tle zappos'*i*irr*o g- "i-"uld incur.inventory or tulfillment costs' :t*s,.zappo's -"fJ""t pricc' over ttme' which would fulfill the ;;;.' ,u**o*i*iir* reuil pnce. ,"o;-i;;;;4"1f-tH"llholesalc invenmry' This own its Zappos charsed all z"ppir'rrrip*en$ were notn changed, *iii uv 2001,
this msdsl
foeus on customer satisfaction' driven by ttt" evolution was primarily "ompuoys

{ff 3fJ'JfjfJ-X;ip"'approach liil::.y';llTi#l; ilTJ;,llJ1l'lii:si,Tfg" websitewasonlyaboutg5perccnt.accuratc..rr,*.ompanyrcceivcdthisinformationfromtts vendorsinrnany*";,:*,*'":r*::;lil-l1i;i**ffig:f"5;1.?'i#:-i''", prace ror custom;;' since thev courd l*iXi;f:r:S"X*:t:&""*'1"?*J;;a;.ation or long delivery ttmes' stock, leading ls cancellation
orders for products

*'

,fr-i*J-iin

when a customer was that Zappos did not know the drop-ship approach withir: a ferv davs' but if it The seccnd problem with orCer *ftip be order had been shipp"fi-l*ia-, zuppoi cu$tomer's order might n problcm until reeeived a targe *oJi'fro* *ouf not know that there was a * delayed. The custo*r order' called to inquire about the

qt6t;;* *.:* *-p-n,,; Zffi ;"h;y,

,-i*l*i***

o ase ri*gin6 I nv entarY I n'H

one began to stock its own inventory' in November ?000 Zappos would store before thev ln response to tirese ;u' , o*ndo.tliu*irt*Ja physical the requiremenrs -J;;;ii retailing' and manufacturers of or *u* in'nJi*it

+-t: lntTer tbis requiremenq zappos sign up to be oniineltpp*"i'li* the \r.re unsure uuo*r going out cf busirress but c*nied "f witto**, carifornia irat *as had purchasea u *rro*lin aPProPriate brands'

rti."5*;

-*tr-igl''rt1tg-t: **t

oneoftheaftractionsofWillowswlt}atitwasmuchlersexpensivethantheSanFranctsco inveamf it purchased an abandoned *#.-."*p-"V dec;ded i" .-rw it- own ano-tr''rnea ii into a wareho"se ad Bay Area, *o *ii**, fro* *'lr'*-i'L**' deparunent *or* ur-rfr of Sacrarnento' was not idealiy ii-t o*ever, Wiltowr, a;;t*l ""nft u?fft nearby, and shipments distribution rnajor center. There was
"*rrr*r, 1o distribution located to be an lntemet ra* *ar*nouse was a manual operation' were made

l, upiL

Whilebringingsl.lleinventoryin-house,Zapposeontinuedtousct]redrop.shipapproachwith
manY

cf its vendon'
had oniv 30,000 $quare

center, which fffifi"Jfffi #*rtr1fffr"fffitfifto *J'fotf'tmtnt' Under this program' Zappos re manage i - i;;;;,Y

reet' ups

approaclred rfr"
,u

*op*y

to Zappos'combut this was latcr changed rvebsitc was shsesile'com' Th* **puny,s original

servicevilkrene, .i rot"tua'' som er ulovlig eller?"*d", verlags ver lsralificeret og rimetig anveiolrse), die vorherige- zustimmung des n,i.t . ou.r ist verboten' Bei iiiiJo'"r.ra"in "ir,., * g"r.oran oder in den s"ruicereorngungen festgelegte Verwendung eforfulgt, i det omfang rov.n andere verwno"r, Eine "i, velchen Mittein dies geschieht. Schritte eingeleitet' ,"*tlon*Otung werden gerichtliche

ot

" personer'

*t'1ri:n

r.'

o*.

forudgende tilladelse t:rus \uu "Ogiverens en sdan overtredelse' vi1 blive der foretager ganz gleich' mit kopi'ert Jer bertragen werden'

Choin to eliver

lfOW!:

wouldcontinuet0o\#ntheinventory,butitwouidbestoredinaUFsfacilitynearitshubin uv a thirf parw' The proposal offered Kenrucky. o;;firffint *ouoLiur-a t"vs-thirds"of customers could reccivc Louisvine. U**g ;;;ui willows' several advantages, the mogt 'iqilt-ry u 1o**' *o*t than shipping from using ups crouncjula u:t would be more deliveries within two days which be manaBed *ing *'gl"utef tolls' lnventory and fulflllment woutd withaut zappos having ra make a major

u** u, riii"** * efficient than the *r";;;;ih$moved its inventory to pcrtbrming - au"ii*O analysis' Zappos capital investment. t" i, "n* the UPS facilitY. wIk. The Zappos clsar that this approach would nt within 6 to 8 weeks, however, it was could handle' since each r iilrgrl-lra1*e :v*l:T business invoived *";;;;-lieepine style of shoe could *u* * *"p** sgu' thur. an individual stylcisizc/color combination shoe to 80'00 SKUs'

*l

require many SKUs'

Center in Kent*clE freueloping the Zeppos Distrtbufion it would need to provide *-r.pionur sJruicc to--its-customcrs' Zappos decided tt at ln n J., *o necds of its business' Thev c*rieo-d;; irre irieh-sfu 3 minutes frcm the l-iPs devciop its own o,rrniuii"rnti shepherds"ur",""i*r.v' less than as found an irexpensive building in coqpaly needed to build i warehouse Louisville. Due r a lack or. "apltai,-i* stati; in;entsry shelving and hand-held bar hub in r*rult, tit-V^"i-a inexpensively u, po*riilt*.- *-u man, gemeilt that was later uplsaded ta the inventory code scanners, *fri.h'r]d infannation beyond the between scanners and servers was servers-the cost of ;;;i;, communication
comPanY' s budget constraints'

"i't "*-'

Zappos had about ?0'00

TheZapposteamdidnothavepreviouscxperienceindevelopingcomplcxinvsntory that had addressed tir*y Iia-oot find othcr compniJs managemenr *yr,**J^*rorthermore, a resultu the company in-house' As

systems prcblems similar ,o ir.-*;" they develop*J-trr"it business that procedures"f;;* on a highly SKU-intensive developed irs own systems and new warehsuse' Hsieh io-help^bring up the required virtually perfect inventory "."*u.y, muc, of tire *ft**" eoding himsclf' t fr"- *"rtrt*l ao;og

rnoved

Kentuchy

place Fromthecompany,searliestdays,{appo.shaddevelopeditsownsoftware,opdrnizedtomeetitsin *ioi-*ite tosts'. This practice wa$ still in using open source qrgerams. in ouO*''in scftware
needs,

2008. The company's rapid growth experience' At volume and to dEliver a supcrior custornsr the ordel ro keep up *irrr * Jscalating in the lr group {always smatl, ccnsidering end of each year,s holiday settingseson, provide double the *louigo*;d;itiq1;;'1 make plans to seasan' They company revenue. ;;ig ***o io' the foilowing vear's holiday

,*q,,o.i"*nntinuJ upgrading oficth

h*d*I^:.Tl

holiduy the rhe capacity of the just-finished could e thoroughly testcd beforc plans by mid-year, -*;;;;i;ysterns implemented rhese new caPacitY \ryas requred' stock bin might hold up were randomly assigned. A siven In its new warehouse, stock locations same brand' The random not be'the sam sryfe, o' *u*'ith* to l0 pairs oi rt u**,iut;*,**;,"-ld ali shoes &om a given brand stoekins approach shipping' and "r "0".e-r:*hii-,*-:nlig, r*"t*d prcbl-eps when they started $gether sounded ril.- g*a organrzation,-it when a shipmurt arrived' it was U'iogluo6o* *toeking' crearing missing bins' The stock worker were pled in the nearcst available inra pairs oi uho**, which separated

ir';".;;;", -;;;;ilh-

tiliadelse' Brug (ud overtredelse' vi1 blive nt pt"ottt'' der foretager en sdan sewicevilkreng mit som er ulovlig "?iro'' bertragen werden' ganz gleich' over kvalificeret og rimerig anvendelse), "tter-o,r"rtoe, zustimmung des Verlags kopiert oier eines Buchs darf ohne die vorherige Bei det.Kein Teil festgelegte verwendung ist verboten' retsforfulgt, i det omfang toven tillader gesetzlich oder in den servicebedingungen andere verw".rorng a. ai" welchen Mitteln dies geschieht. Eine Schritte eingeleitet Zuwiderhandlung werden gerichtliche
forudgende es p nogen mde_ uden udgiverens

Marketing Management Case 5tudier in lnlernational

p.li
p}acing the box into 1bin, telling the system had been ordered' it ficier went to get a box that different stylcs of located with i;;"1d;the

when -wlr*n scnnsd the shoe box and location a stocrt lacation of that purt *orJJi, bax in rh. was esy to find rhs appropriarc

the size iC not need to distinguish berrveen shoes frcm different gH shoes of the same odei sitting next to itshoes stocked next to the Size

***iu"r**rs-.-the *otm

bT:;;;

Asitsbueines*grelJf'Zappouincrea*editswarehcusingcapacity.Thcinidal265'0squarefoot ;";p1?v opened a new 832'00 square foot facility was frlied ," ;il;;F6Ftth" gror*'th-'Wirehouse operations also became more facility, of which ha1; ws ,rtio*O for fulure The new static shelving and simple co$Yeyors' sophisticated. The initiaiwarehouse consisted;f eutomated car*usels uutoi*O *on'*uyo'i' It also had facility had some static sieiuing, but with uscd in dry needed iioo,, *u*tt liie syrtems commonly rhar spun unril they;;;"i1" contained 32 units per ioops in_place by.2008 cleaners--except tht each of the 13t carousel automatiorl to its stories high. In zobt, zppos icaea mte floor and were stackfi-iou, totott picked up shelves that tutti*t' warehouse operations by installing a robotic rystem'in and brought the to bs picked (or cmpty plac*s fsr irems to be stocked)' contained rhe items effrciency-in the f'st year it was msre rvorker shelves 1o the workers. This $eatly increase it was also more scaiable' since efhcient as ei*r me ltatic o, ca'o''s*i methods' than twice as 2 for photographs of easily added when needed. (see Erhibit
new shelves anc rouots courJ u. thc ZaPPos distribution centcr')

irs vendors for drop-shippins, ilHf;f-'{"#f*r-"-ti,t sending orders to inventory increased s it grew' The source of own
percentge of snpme.ots from the

arthough the

"o*!uny'* or drop-shipp"d ry9.m $e v;nd31 was rhe delivery, rvhether frorn the Zappos warehouse that cvaluation of customcr satisl'actron showcd transprcnt ta the ustomef. However,
customersservedbytheZapposwarehousewerehappierthanthosewhoseordcrsweredrop.
shipped'

The were bcing shipped from e zappos warehouse' By March2003, about ?5 pcrcenr of orders to its own standards by not prcvide *utto**t *ii* that lived up company decided tt *iii "rrC leadership evaluated the situation' and decided cantinuing the drop-ship business- ffr" .o*!*y J'seruice comRanl.t.hat happ^ens,tn sell but as a that it shCIuld tlefine itself not as a shoe *o*p*y' to stand for somcthing more than just shoes.,' Hsieh explained,"We decided ttui*i'*unted the other results t that time were not what Hsieh and rnaking money sellrg shces." Thc,service atlention on what the focus helped cncentte leaders wanted thern to be, but thc revised in order to be recognized for superior service' needed to do ompany

Zapposimrnediate}ystoFpcd-$ingdrop.shipments,cuttinglf?5po"*nt0fitsbusincssinthe its inventory to include those itEms short tcrm. Zappos Uoiit'i.i* busiss U-*fr".liirr*r.urid
that had previously bcen drop-shipped'

Thc dccision to bring all inventory in-house When inventory accufircy to nearly 100 percent' procedures i*prou.*?ts icquirea to incres$e on the website' appeared

allowed Zappos

to tahe those systems and

was sold, thai item no iooget the last item of a particular style/color/si1* when onu* *as i" stock-the only exception beirg Thus, any it*m tf*at"a cu*toer selecte4 their shopping ca$s at lhe wo *urio*em had that item in there was just on* t*n lo inventary, una

emfortulgt, i det omfang

velchen Mitteln dies

oie.rorte.ig" lov.ririlo.r'*'o"i. r"' "in., e,;.rr-;lu,i.tr," oo", ,r o.r ,.*."o"oin*gtn irr. lo.ou.n geschieht. Eine andere verw..o"",

i***e

o'*' :ffi::l"n"' #::'Jl3ll"ol'iq "ugleich' mit werden'-ganz be(ragen

a"' v*t"gt
ist verboten' Bei festgelegte Verwendung

k";;;;;;er

Supply Chain to Zappcs'eom: Developing a

DetiverWOW!

7V

Chainn Ael/l'.er WOWI:

this casc' the sametime.The|rf$tnetocheckoutwouldreceivethitm.AswithallZapposactlvltle$' ;-rvice dro*re ,h* *o*p*y's operations-inaccuracy. l0 pcrc$nt oroviding o$randing ;;-;;;; accracy, with an objective of
iequircment for cxcepuonal inventory 208' for instance' the its home paFe'--9-T::**T125' showed inventy sutisties on Zapus -,vr--,'t;,i,z'lz uPCs, and 2'851'610 tstal products had l,4t? warehouse 15

i*oj;;].oii

uruur* for shiPment'

SurrlY Cgatni AtL'ulAE]IElir

Buying
that manufactursrs wa$ to develop,l-* :1::,1Y1es The *aditionat practice followed by shoe selling ph"" orders for the upcoming

R-b;;;-;;da w*u1d be introduced ; ;;1" sho. built to these orders' with a deiivery throughout the season' 11." *u"ui'*turers poaular't* lf a retailer ordered season for ttre st'tes becllrre -hielr.ly relatively smali surptus uoifuUf* in case generally by selling at inventCIry that had to b* ditpos*d si to many unitt, it *oold hurr* excess hit, ths manufaclurcr would not bc able to stsep discoirnr. However, if a style U**u*J*-ftug* lose potential sales' rcstafi prcduetiori, and the retailer would
increase deliveries, as it could not

for specific schedule' and retailer$ would place orders Eaeh brand had a monthly *vailability "*on'tt Frutdng optimal purchasing decisions ,nas based u- .iit.t*J *urt numbers of unirs trt" iu"i5*i of uoits and delivery tirning' These on sening the right dciivery scheduls*-botit the m"arker' This pun nf tn* buyers, and a gcod sense ol -i*ritue decisisns required erperience on the the shoes over the lnternet was $Ew' and was parricururrr was oio*t sales. Mossler's experience in the indu*try thc most relevant model *uluiug *uil your feel' You g*t a scnsc for this tiric' U* **pluin*4, "It's about particularly critical how rhev were.doing. You had a sense for brands that werc have"" You just made your bets"' how big potentiel a new"brand uld

r**Ti'p;'fi"td;;g ,*t:;l;;ilili.,

*i

By200E,themgrchandisingdepartmenthadaboutl00empioyees,abouthalfofwhomwcre Zappos had *.r* ,h" pF"ty points of c.ontact for vsndofs' buyers saw' buyers and assistanr;;: fiir* thar the Zappos ta see'the .* urot*ution an Extranet. which vendors culd use to benefit from pricing, uJ *".dn*. This _enabled zappos such as on-hand inventory, sales, the inventory' lf a ;t;"d;t personncl) *valuating having rlousands of buyers (both Zappo* cail t" u"nOot trad dditlonal stsch s'tre might vcndor saw that pr""i,i;;;d'**ff-C inventory. on the ather hand' if an " suggest rhur zuppo* putg** more rhe appropriat* uoy*, "o at zappos' but the tendor needed more produc't for other distribution item was selling slowly
channels,s,{remight$uggestthatZapposreducefuturescheduleddeliveries.

;ffi;,ll'iryw.arippr.qa-*
16

s'lovember 25' 2008)'

An

Crocs

the manufacturer of plasric shoes ad.sandsls' exccpticn to tiris practi'"c *u, Cro"r, Supply Chain Msdcl for case' "Ct*;;'R-;;l"tionizing an lndustry's supply chain, see rrt"'ir*r*aGSB a'ovantage"' GSB No' GS-57'

For a du:scription of the

L*p"rltit"'

engiveSpnogenmdeudenudgiverenSforudgendeti1ladeise'Brug(ud
er urovrig over kvarincerer og rimelig anvenderse), som

::'r#$;:::::1""t

mtt ganz gleich' ,"t, verlags kopiert oder bertragen werden' darr ohne die vorherige Zusrimmung des verboten' Bei festgelegte verwendung is1 ",.n, verwendung als die gesetzlich oder in den servicebedingungen welchen Mitteln dies geschieht. Eine andere eingeleitet Zuwiderhandlung werden gerichtiiche Schdtte

ett"r-o*rtoer

servicevilkrens;i:i::::i:::;T::::.tilJf:?:l1iliH":fi:S]:";JLi:i,

*?ru!|ffi:::ffiH1tr".'i

i*

Case 5tudies in

lnlernatinal Marketing Management

e'!a

*Powered by Z*pposo: Operating a Supply \#eb

its as the linear pfocess of placing orders with The Zappos supply chain was nt a$ simple For instance' in 200?' Zappos to customers' suppliers, stocking roo*i'y, u"d shippingorders below)' When 6pm was onfine shoe i*tuit"t {described in rnore detail purchased 6pnr, a ai*.ount producl that- was in the Shepherdsville sold integrated inm zappos,--G 6p*.*o* ye$itl in t}"'t*** *ay as the zuppot.*om-website-lhe ptdufts were handledbin warehouse, exactly * wcbsite mightbe sitting in an inventory on tt *.Opcom exactly the sarne *uy,

rexr ro a product
products.

"r

":116ffinn"i " Zffir."o* website, even thaugh each website displayed different

ThecapabilitythatZappcscreatedlosellonlinetoindividuaicustomerswasalrovaluabletoirs of retail prcducts had distribution systems l,endorsu direct sales lnitiatives. Most rnanufacturers large numbers of goods to retail stores' or tc tht were built aroun'tp*""rt of relatively For instance' a manufacturer selling $hoes to distribution centers operated by large ,tot .,*Jiou'
Nordstrom,xoulddeliverlargebulkorderstoaNrdstromdistributioncenter'Nordstromwould of ftu* tftit distributian center' The transfer then supply a relatively smill numbe, of.rr ocur at the Nordstrom retail storeindividual pairs of sho to custcmers would

As the Internet

developed

manufacturers wantcd n"iwolk to deliver products directly to customers-in websites to sell producls, and a distribution For companies that had previously sent large srnall shipment$ to large uumbers of.destinations' tlis was a difficult chailenge-tr: say nothing of the shipmenrs to relativeii-f** J"stloa6ons., products' handle billing to

public' some as a credible, pcpular, '*'ay :f selling to the To do this' they needed to develop to te able to scll dirccily to *usto**n'

new requirem*n, ,o

individual ronsuners" and deal with individual to desigrr ald.run a retail website' a call center t0 severai areas of **i*o.*, the technology to and a disribution system optimized for delivery deal with cu'torner questions and problems, retail cust0me$. ln order to help manufasturers sell directly to These were all areas in which Zappos excciled. called "Powered by zappos''" under th.is,plotrutl]' consumerst Zappos developed a progrn ttese-compa*ies, n *t* call center' and distributed
Zappos developed uoJ

single ir**ss lots .o,f gt{."t*. for retuins'units of the Thc companics wouid have lo develop

r-ifr* **U*li* fcr i;;;;- ;h; ;""uf****, was the hvpothetical "Smilh Shoe Companv'"' directly to custcrners] smithshoe'com' which would display all the Custcmers would go ;1il company website, by zappos" logo- The

included a prorninent "Powered availablc shoes. rrre s*itb srru* weuiite it was sent to tit* Zappos disu'ibution center' where customer orderEd a shoe, and the orde.uas nunber that hsd a qlestion or problem called the handled jusr like any other order. customers by an operatoT at thc Zppos eall center' Smith on ths Sith Shoe website, which was snswered at the call centcr' and run the.website,'end to handle its customers Shoe paid Zappos for ilerns sold on tn"r was sold on *re bmitl Shoe'i/ebsite' as it did Zappas purchased

h;;;1;p i-t".y

theZapposwebsite-infact,t}reinventgr-Ywa$thesame'evgnthoughitwasoffered0ntw a customer ussd to place an ordcr' Zappos wcbsires. In all eases,;;;lli--; of whic website at retail prices'
bought producrs

e";;pplier

at whslesalc prices, and sold to the customer

riiipDackweiler.pcu"r*",,J6frll"lie":.:l_":,?:-mm.ff:"?Tll'i'Jl"*::lH:';"'':'ffi;;'viiblivegleich' mit oo'*ut"n werden' sanz un,",'oilse), som er ulovt'?

:l':H;:ffi". il$o"o"' ti":"llmffim:"ffi J?ilff'$ffi ::::#ffi :'nT'ff *i*;*':Jf l**'trffi stu'

zer

kvalincerer

og,i-,rie

"t":,::'ff$'jffXi:Ili#";

ffi

'

;;;;ilt

*'i:n

e"'i'hditu

"i

WOWI a 5upply Chain to Detiver Zai:por'com: Developing

{:hain

to [lclivlr WOW!:

Linobservedoneoftlrebenefitsofhavingasingieinventoryservingmultipler:nlinestores:

oneintcrcstingaspsttofolrbusincssfromasupplychainperspectiveis.thatin *:*t ::** to have lts own world, *u*ry u*, yoo op*n
rhe brick-and-morrar
opened up these
same disptayrpu.*,i'*ownshelfspace'andiisowninventoryspace'Thewaywe've iir*t*ot windows t0 access the stores online, vou *rt*u*

inventsry;youcanjustcreate"n"l*tt''urmainsiteh*sacccsstothesaine running' for ,*r*"iio ;f *t verticals related to inventory, ., *;i,;;li*a oI Powered by Zappos * up""in"t Utuod Yo:Uh example. Or, I can show ycu or on the people sell ; p*d*:lt:,T-t OYerstock site, or through letting other time it will be much' much ss-vet 6pm site. It's accessing Fq 1u*t,lnventory' world'
rnore effreignr tt'an in thle brict-and-mortar through the sarne inventory could be accessed Thus, Zappos created a supply Y11'-i" i.lich the Pawered bv through 2008, ,*uu;;;;;i-t sold shies many websit*s qg*t iuitli' in
ZapPos Program'

Scheduling Praduct DeliverY

suppliers t the was scheduling deliveries from its one of the challenges facing Zappos piu*.J orderJwith more than 1'4s0 different brands' company to distribution ffinter. In 200g, the gvc suppliers dclivcry windows' i"t'nio"-itiplc dciivea' dates' Zappos and to try to smooth the recetvtng orders typically

at 15" Olst'iluticn center' help schedule when pr-t- arriuea *gerc 1u*o thougtr the warehouse, op:rated fir. schedule. Zappos received products eompany's pnmary I *r. folshrpping products-to customers*thea customer ordcr' the clock, around of * t***. tto i tlps *itttin four haurs objective was getringl;;;;*o o"

;;;-;

**

The large nurnber of shipmenrs

frornja vendors led ro tralTic management visibility into the *u* that it had ji*lt*C wxehouse. one of the challengr* Z*ppu*"fJd-gree ofuncerrainty as to the actsal day that

diffrcultiEs for the

therp manufachrrers' supply chains, and might state availability on u, rhe warehour*-*fi" a*manufactursr a shipmenr wsuld uo* availability' in practice' * q,runtlty ,o-LtLtiu*oa from thaf Ausust l, and Z*ppos mighr speci$ in which traffrc at the e'ugtt*t'' As a result' there were days rtre*shipment might *y!i**-io which relatively few to ue untcu*ec, and other days in warehouse was backed up waiting shiPmcnts arrived' the warehcuse operation'.but 'n This created ineffrciencies within -"iwe our ernployees' **rl ,o wo* not;ust our custoflers andchange that' and ot.***a: Zappos to address. ask thern ta them a p*'tJ *r- *in*, ano't but also our pa$ners. we give "t;irt"lO tirem lro specihc rcquiremcntsl'-"

*t;;i;

for was n issue that was difficult

tlealing witb Exctss InventorY

products that clear space to prepere ml th: new Brick-and-mortaf stores had to used for sandals by August store **"rA rtt"Ji" clear sheif.space and selling seassn. which would sell during the fall make *p*". uuu:il;;i" io, iloo*, or Septcmber, in order to arrived each

F";;;;;;

rerrdei.e;, som er )ver kvalificeret og rimelig an

ri ruat' uiovlig ett"iorr.rt 0.. servicevilkreng

tiliader det.Kein Te' rctsforfurgt, i det omfang roven Eine andere verw..ro*g werchen Mitrc1n dies geschieht. geri:hlliche lchlitte eringeleitel Zuwiderhandlug werden

der foremger en sdan overtradelse' ganz gleich' mtt kopiert oder bettragen werden' vortrerige zustimmung des Verlags eines Buchs darf ohne oie verboten' Bei festgelegte verwendung ist ur;or" gesetzlich oder in den s"-i."u"oi.,gu"gen

ot p""on"''

vil blive

S , t.

Case Studies in

lnierntional Marketing Managernent

in July until the end-ofwould hve t0 drop prices starting winter season. To do that, the store
$eason inventory was dePleted'

redsced ZapposwasllOtconsrainedbytheneedtoelearspacetomakeloolforeachseson'sincoming t*eio r.yrog io g.1 rid ol stock until custmers when new i.nventory. lt d;;i neee to the fall' .*,u*i* io"*grt, sandals well into were based demand" For instance, it found ,t

", prices*but thc reductions custornefs slowsd rheir pr,rrchaser, Zappos Coaversely' rosm for the next sesson's products' th- o**a make on customer teha.rrior, *-ff before the end-of-season-agai4 the* if a model sold slowly, the price could be A* ffiff explained' "]Yhen we make a decision to demand' decisions were based'oo interested in are *ffini us thal they're no longer something down, it's beeause customers mark rhey say, 'Hey' now I'm rcady **ln**'" rhe price - p"i"i"i*ftich this product at tfrar prile, to buy it again'"' werc ruade priee in order to clea' slow-moving stock In Zappos, early days, decisions tg reduce would r,"rt r.i oo Juyt, and no sales had been nade' they sellmanuaily. lf a shoe assigned was automated. The orupany lower the price. As the company grew,-this. to sell-thraugh instance, ir might expect a given style -iri. rhrough percentages . wauid maintain the days' it an initial p*tinO. *o*ft as tie nrst 60 at 25 percent p*, *on*. tltc did not,achieve its target sell-through' price regardless of ,ri**. ano that, if plan' If salcs *,if lt aehieved-thc sell-through O";^*.tfy sysrem would aurom",f'*t up' rte ptan, the price might be adjusted back t;ey exceeded picked up ro rhe

;;i; ;u*

n;;

loi*J

.*io*..

;d;;;1"

; ;;;id;.t

o;;r;

f*

p"*;;

the;;-* fi"-

Zapposdidngtwantitssucce$stab*basedondiscountiRg'howYer,Thebasicoperating of to dispasing tn* Urrt sirvi.cl.1T*' with respccl principlc of *r* cs*pun; *** ," J*fir* Zaopos wanted to have the right wes oo tl'* u'ittg decjsion' --ro excess inventory, the primary bcus the extent"tlat it made rhese decisions at the right ti#. produt', in the righi q,ranriti*r, deal with' [-*-rfv. it would have less slow*moving inventory to the cmpany adoptcd a there be some excess inventory' and
However,

it

was inevitabie that

numberofapp,ou*hestoaddresstheissue,ltwouldonlydiscounttoalimiteddegreeonthe was not enou*l .ite,'noitt''A tftippi"g nd retums' there Zappos.com *ensite]-as a iull-seruie* would dilute the -rotdeep'discounts on the site margin to $uppon deep diseounts. Furthermore. and initun"e, ifa runner needed new shoes' *oorr*. Zappos brand and inhi;ir salcs ofnew difficult to se'l the tew model' it would be uoa d;-;;"
rhe site had both mr:dei if the old one was heavily discounted'

thit';;;;*i

Tosupplem*nttheautomateddiscountingpfogralnforsellingexccssinventory,Zapposopened in 20t)4' t" *?o*p*y's Keituckv warehouse, opened several outlet storss. The first, adjacent stor in four other loeations' ln r:pened stand-alne-otttlet Beginning in 2006, t;-*i that sold surplus or end-ofoniine ,t o*. rumlun, op*, a discorinter 200?, Zappos bought the viewed service as very cuitomer base"' Zappos custm$rs typically
sea$on shoes to

important.
rended

outlgt for siow-moving inventory-it couldbediscountedasmuchasnecessarywithoutdamagingtheZapposbrand.6pffcustomers

wcre toking *d *;;;;;;;rv lovur'.*r'lt" "toiiPt",T,-'..spurchase, zappos now had an onlhe tu" 6pm to shop *"*-ioi iir* best deals. wirt ttto* products to the 6pm site' where they could

* ilff*r*n,

for the bcst price' thus

*u*

: :

':

:::-f 'l ;: r.'

r"rio"tr.y, som er ulovlig e'"r?"noo rver kvalirrceret og rimerig un gr;cr,; o*r "in", J.'J," gesetzlich oder in oen ser.riceueor'g*g.n :eforfulgt, i det omfang iov* iittua..'a.t.t<"h Eine andere verw.,]a:ig welchen Mitteln dies geschiehr. gerichtliche Schritte eingeleitet Zuwiderhandlung werden

forudgende tr p nogen mde uden udgiverens vi1 blive foretager en sdan overtraedelse' o" p""on"" der servicevilkrene' rilot-orot' werden', ganz gleich' Vertags kopiert oer bertra'en ou," die vortrerige zustimmung des Bei festgelejte verwendung isr verboten'

mit

aisopaidforshipping{bothfordelivcryandreturns).Thus,Zappos.cauldbepreservedasafull. to be discounted as requircd while prices ; il;';6 ;i* *oofA service, fult-margin
move inventotY'

"p;;;;

were handled After6pmwasintegratedinrotheZapposoperation,alltheinventorywasbeldatdreZappos or**o n.* ,i- pil;..; and.6p'cr:m sites boxes' and warehouse in shepireriiir*. Zappos-branded trtat zappsslrltt *rtipp** in idenrically at thc warcilur*, ****p,

;;#-

wcre shipped in ordinary brown comrgatedboxcs'

ln200s,Zapposalsoinitiatedarelationshipwithoverstock,anonlinediscguntretailer,asaway shepherdsville ur*rrg*;:o*, zuppo* drop-shipped from its to liquidete exer$ invsnrory. ln this
disnibution
crlft

tor t'o Overstock' s c u$tomers'

Opportunities for ImProvemet

earlier' was contained inefciencies' one' as discussed Hsieh realized that the suppiy ehain still *as difficult to coordinate and resulted in uneven the problem *r mn*uo-*& which. ttr" o"*r" supply chain reaching o-"-:::3*,.tno" deliveries. rn"r* *ul'Jro iri*ia"i*o"y in in china, then sent to the shoe companies in the production. t"tor, *nu"r- *rr* **o*ractured sorne then sent t0 zappos in Kentucky' shipping u.s., where they were stored. The shoes were Kentucky distribution eenter m* iuppu* dittv to rhe z*ppos or all of those shoes chain effrciency' woutrd increasc overIl supply

;t.-d

("less than truckload" were-mds with partial.trucklcads Many of the deliveries t0 zappos also of individual suppliers' resulting in a trt" *t*rt*.-es or LTL). These LTL shipments-ca*: froT center (*eating trafc of tnrcks *ti"G ;t4 Zapposdistrib'rrtion larger-than*necessary nu*b*, some

problems). as weli u*"tfl*"**on.*ic inefficieric{ "f could make pickups Zappos to huu* its own fuck fleet that volume, it might ns moie efficient for *up".ity.. There was a high concentration of from supplier *arcr,o,,ses and optimize "u,gu in the areas around Ontario and Long supplier *rr*t ou*** in-*.'JuttreL baiiro6".'in*tl*.1ariy g*u"h, as well as in a few lacations on the East Coast'

ty:p*ttltl,lartiatiV

t'ull tn:cks' At

the efficiency of outbound freight' even if the There were also passibilities for inereasing cne day' r,aunf.u*tn**", *ouid receive shipments within overnight objective was still retained' by lcss expcnsive Eu"n *oro rrr tu* .ounry couid be served ovemight
using
ground shipment ovcr weekends, where

ups round.

"ou*idftf

day' was considered to be the next business

THE QuEsrIoN oF IrirERriTIoliAL ExPANsroN

a freight in canada. Initially the company shipped to zappos had a passionate customer base Zappos set up a Canadian shrp1oE1ry-'. 1;111*11V, forwarder in rhe U.S., who would then for cuslomers' adian- ord'*o and sinrplified the customs issues could not seli websire. *hirtr irani to other parhlers' so Zappos rights Many brand* rr"a uiJi*iaian cist iaurion was pcssible for the iit*' With an existing customer base' it to achieve substantial these brands un itrl'C*nuJi* center and disiribrrtio* center' but eornpany to establish a-Cana*iun call distribution sgree',ents with m*ny brands' voturne would r*qrri.*;wG canadian

rti*ru"g a"r vrrlags kopiert Jer tbertlsen 1e^r-11' Bei ,::T'#f, :f :;,;n',ffi ',,":3.ffi uort verboten' Teil eines Bu.r.r, a*r om" oi" ".ig" iruao'ao.raein festgelegte verwendung ist
retsforfurgt, i det omfang lov* Eine andere Verwenorru welchen Mifiein dies geschieht. Zuwiderhandlung werden

ganz gleich' mtt

J, r" geseztictr ooer

g"titrysddftt gngtlttg

"

o* t.*..*oirr!*g""

gi,

t'

CaseStudiesinlnterilationalMn*etingManagement

Chain ta Deliver WOW*

Thecompanyperiodicaliyconsidered|urtherinternationalexpansion,buttheopporilrnitiesinthe .";;;;;h;J nevr favored expansion outside North u.s.. and rhe cosrs of moving into other Amcrica. Lin cxPlained: Thedebatehasalwaysbeen,oeanwebesonsiste[t10urbrand,providinggreat rtringl al*tribution center or call center?' serviee in tire other cormtry without g*ing;n ;; to anothct countrv and estabiish la The ansv,'er i$, 'No'' If you're noio?iy do- you havc to- put in .- !y:1,11 distriburion cenrcr and call ccntcrl, th culture there. [An equivaienl stze money, u,rt you ur*o-h*u, to undrstand different of gurope. Europe is aagmented with rnarket to the u.s.] is to serve a[ of understanding of i*r** urra different eultural i**"**, *"0 aiffer*nt levels
layout
thc dcsire for scrvice'

in with substantial opportu$ities stitl ta be tapped major *.r""*rJ io-r**igt markets, zappos had rejected required to replicatelt* ***puoy'u company did sell footwcar and csnridered. The intcrnational **p*ri* *u"t, rime-it had been and retums, and required that for uut bags to intemational--.**to**r*, ^shipping customers outside the U'S' and "irutg"J fm themilfver Ordrs customers take care of taxes and duties
the
on the Zappos'com website' Canada were accepted oniy by phone' not

u's" and significant

chailenges and costs

THn Ecqwolflc CHALLEncss on ?008

seen a major imp'ael T: fu frnalllt-3artet As of November 2008' Zappos had noi yet lncleases compny had recorded sigirificant rsvsnue coliapse and economic'sto*or"r,. The il-i rtieh-e"d brick-and-moflt r'tailers reported y.*ff. rhrough the first three quarten of the at a Octsber, Zappos eontinued to grow' albeit sales Oecrses in September and double-digit somewhat slower rate'

into addition to the inrmediate impct' this brought Margins were decreasing, htwever. ".1n good sconomic tim*sbe considered even in quesrion an issue *rai*"ro eventually company resulted "*-io factoi important to thc eustomefs and to the scatrability. So** oi tlr"--'wow" unwieldy ar unaffcrdable as the eventuaily becoms &om iabor-intensive *riul,l** which mighl company grew. wcutg zappos
successfully groo ten Internet rctailers.)

,ri"iuiiffi

or $?0

to oll- l"..rJu pio.* and organizational changes inofordertop the uiltion in'sales? (see Exhibit 4 for 200? sales

|o the to be changing' Tradirionally' customers- came noticed Ho*Ju.i as the ecsRomy sh'uggled, Zapp.gs plaeing zappos.com site and purchased direetly, rime; tl"Jgh muitiple ehannels, before fin*lly rhat customers came to the sire many r"q* iht*]rgh affrliate sitts, through comparison orders. tirey might ;;,h" site directty,'
customer behavior also seerned

rtr"ppitg.ogio"r,iu*ugh
diflicult

a Google ad' and then finaily buy'

to prepare for on utlly fronts" In-loolring at how best The changing economy posed challenges for irnprovements and u'p**t* of its busines*
efficiencies, including its supply chain'

economic;it5il;;;;"1"";-t

philip Dackweiler <p.dackweiler@gmx.de>.

Ingen de1

urnol*G

tilladelse' Brug (ud p nogen mde.uden udgiverens forudgende rna reproduceres etter gengives

som er ulovlig eiler-overtder over kvaliriceret og rimerig anvendetse), andere verwend'ng welchen Mitteln dies geschieht. Eine gerichtliche Schritte eingeleitet' Zuwiderhandlung werden

se*i"e"i1k'e";;-;;*::::i:::.tiiin::i#JJffiff:"#lgiffi, In. ganzgleich' mit

Bei

:J,:"tri,","""';*?l:''lnffi::xilJ;$il:',#;#;TtrI#;:il'J^"immungdesVerlagskopiertoerberfasenwerden' festgeiegte verwendung ist verboten' als die gesetzlich oder in den servicebedingungen

to Deliver WQW Zappos.csrn; Developing a Supply Chain

ZaPposeal,r:Dnelopin|

S':PFi! Chdln

b nelb* t4OW!: S'45

P' 19

Srunv Quusrull$s

l'WhatareZappos'eofeGomptsncieandSgurce$ofcompetitiveadvantage?How corporate cuiture play in these questions? sustaineble ** *yi urout roi" does

2.
3.

io the $$!Ifler experience? ls it wortb the ccst? How tnprtent is next day ailshipment environment ftcing the cornpany in late How miglrt you change it in the cost-conscious

?008?

more pmfitabl-, ;;;;iy "o.t* 4.Howwouldyoue}rpgcttheenvironncntofamsrecost-consciotrscoilsrrfteltoaffeet in such *n envirorun$t to maintain sales zappos, uusinessi what can zappos do $CIwth?

you add more products' more geo6raphie*' How would you expaud the business? $fould G business,-how can re company become or by selling pnuate labels? As you elFand associated with the focus on service? i"1iitt urlt*
_

,_-

r_._a-

*^ra rm'*nl

'

forudgende ttt nogen mde'uden udgiverens vil blive der foretager en sdan overtr-delse' ioil'a'' n" pt"ontt' eti"r-ou..ta". rervicevilkrene, "i werden' ganz gleich' mit tofit't oer ber*agen an rerr-dllre;, som er ulovlig rver livalificeret og rimelig gu.h; ou.r on r" aie vortrerige zustimmung des v"rtug' verboten' Bei r.it festgelegte Verwendung ist i det omfang ioven tillader-det.Kei' "in", '" **tzlich oder in o* etsforfulgt, Eine andere Verwtno*' '"*lt"t"otn!*g"n Mitteln dies geschieht'

it

ri/elchen

i"*io.tn*ot*g

werden gttitryhtht' Stin'tt"

tlg"lttttt

'tntt'

Case Studies

in lnternational Markeling Maflgement

Chain rc Oeliver

lY0fi'!:

APPendix
ZaPPos Culture and Values

StepintothelobbyofZappos,headquartersolrtsideLasVegas,andyouknowyouarevisitinga lik- t wl used [but well cared for) *ollege -f*dt *p"oy with a *iq:* .utt**. The room tfre-aro oipop*o* wafu from a ppper sitting on ana

dorm activiry room. I ne liglrts are-low Dance Revolution"'awaiting large *d-""d;;;;;;'iD*** the reception;*t,* a*rt. * is a sofa. The:e are bcokshelves filled with you wait on.a bath visitors and ernployees. "oio*[r* The rules for this library are simple: ,rra *ori""i"i"i*ts. rnany copies urpoporuJiir.**

voucantakeaybookyouwat,youdr>notneedtoreh.lfnit,butyoumustreadit'

Thcuniquenanueofthecompanyculturedossnotendatthelobby.Eachworkareainthe walls' buildingishighlydecorated..Employees.*".ti'anopenofftceenvaonmenlbutnotn ui*fts ate A*not'd by iow (four foot) rnodular conventional, discreteuioi**. roJt.*6, wall between is no dividing

*nrr.*purer {erecompany's senior cxecltivcs' Divisions berween The ,i- uitrr. lisie and thaJ" on the othgr, on one"a:**pro-v** workspaces Hili, are locatsd in the rniddle of such an aisle' inciuding Hsieh, Li;, M;;;l*. and. short, the working environrnent reinforces a indistinguishabte tcrn ;y ;th-; empl.oy.ge, a*d teams ar part o'f a op**t* ** ioiita*ft, U"t * part of a tiam' beiief that employees " and eveivone conlributes rslc, larger

u* to*.

"t organi"urioo*-ii.r|;;-l;;"1";O pf*vt

i*pntiunt

together.

by in each aisle give a warm welcome-sornetimes As a visitor tou.s the offiees, the employees case' one by other furms of recognition' ln one giving a big smile uJ-*u"iog, ,neti*** caw belis' at the"end of which the eatire group rings cmployee starts a ;;i;g-;;'tnusic, and working o-te wrrereirtuf**, doing whar they are doing,

clearly, thes* people";d; with their colleagues.

Likemanysiart-upcompanies,ZapRgseultureandvaiuesbegantodevelopatlhecompany's rvith involved few employces_,. and many of them wcre fcrmaLive .t"g*. Thui;-l*r* ,lr"**ly more fonnal' losing the the *.rfr** g""*taity *votuei to be each new hire. As companies grow, where n.i*tt a Lio-n*a seen this at Link Exehange' highly coltaborative,"i;;fi*p.* a fun placc for ernployees to be a nanciai *u.***r,-bJ had ceased to
the compa*y had been work and sPend their time' just as important to Hsieh and Lin believcd that it was Following the Link Exchange experience, metries' In 2004' it.r*u, * g'* t*"*"ues-and other business The $ow the culture ***ry y*J au does the cultrre rnean to yr:u?" *lfing';Vmat Hsieh sent an e-*,ail-t all employeel t**f**"t were then distilled down to l0 values:

?. 3.

1. DeliverWOW

Through Service

Embrace and Drive Change Crcate Fun and a Little Weirdness

-Io
a

see ttrern, For information. contact tours@zapPos.cam. provides torrrs t0 anyone who reql,ests availble at Tony Hsieh' sec an ABC Nightline segmelrt inre'ul"*s *i*' video of the Zuppo, *uuiloment, ;nctuding 24' ?008)' bottom ofth* Z"ppos'"om Uomepage {Novemb* the

,, zuppo,

anvenlse), som er ulovlig eller?"ad.. rver kvarificerer og rimerig die orr irruo"r'ao.raein Teil eines etsforfulgt, i det omfang rov.n gesetztictr ooer in geschieht. Eine andere Verwero*'

B,,*

"*"

trlladelse' gen mde. uden udgiverens forudgende vil blive tbretager en sdan overtraedelse' peonr' der servicevilkrene,-tii"t"l"at' ot wer den' ganz gleich' befiragen kopiert vorherige zustimmung des Verlags

t'rug \uu mit

0." s.*i..n.oin"g'ngen

verboten Bei festgelegte verwendung ist

ilelchen

Schritte eingeleitet iu*ioertturratut g werden gerichtliche

Mitteln.ies

".*

Iapp+s'com: Developing

a Suppiy Chain

to Deliver WOW!

ffi

4. Be Adventuou$, Creative' and Open Minded 5. Pursue Crowth and Learning Communicatisn 6. Build pen and ;;;-Jilionships- with Spirit

i. L

euiH

a Fositive Team and Famiiy

Do More with l-ess 9. Be Passionate and Determmeo 10" Be blumble

ThesevaluesplayedanimporrantraleinnlyemploVelhiriledecisions'intraining'andwere o*it.t*o- li.the recruiting process' pottlial ny everyoay ;;,il;; ti"".ghout the reinforced the work' The .*ionuf f*Jiregaraine their abiliw ts do that thcy were employees were intcwi-'i" intunri"i"y;il;d-fu* lo *ot** when hurnan resources *-p;;;ri'* lulu**. rar*.' roi i*tul::, tl" value "Be Humble'" that compatible rvith the; aIrogance' if the recruit exhibited excessive ego or inreiliewing experts t;;# po*ition*, ti. .-p""v prefered to train employees to take person would not b,e rrir*6. ro, this reascn, to bring in experienced sutsiders' [ish*r-f*u*f positions 'h*n might be asked to a Little Weirdness'" Potential employees Another value w*s "Cteate Fun and "'1f thev saY 'one" we won't hite scale of t-10' fftioU*t*ed' rate horv "weird" tn"V *ao *o a or 8s"''* One example probably *".p-;;iliiiot 3*' .W" likeis rhem.... If they,re a 10, rhey,re (varying from week to ..fun and a littlc **Ldn***" was thc-*-.ki;;;ttite of a deparunent of the office'
parading througb week) dressing in costumes and
as follows: Hsieh desctibed the Zappos culture

Tome,theZapposcultureembadiesmanydiffcrentelements'lt'saboutaiways we cme in eontact with' lt's about looking for ne\# wys to WOW *u*Vooi ;;;other like family. lt's about tearnwork building relarionships where.we treat *u seriously. it's about growth, both and having r* un,T ou, taking ouncr" peoplc' achieving the impossible with fewer pcrsonal *O proi**ionai. tt'Jabout But most mistakes. ris5s, 11d not beinf afraid t9 *+* lt,s about we if we da the-right thing. then in e long run "p-**. "tiig of alt, ir-s "b;;;hav;;i*,itut will succeed anA uitdlomething grcat'le onemightexpectthattheexuberanceoftheworkfarce,andthestrong,cohesive,t-un-loving further' ou*.-rtt*-*p, leader. Nothing could be culhxe ernanated ro* u rowdy, boistero,,s,leader*hip' Hsieh was quiet' o, trt uitrt* other senior however, rro* H*i*ii*;-;;";i*ryl*, wets nutufe' calm' and soft sp*ken. Tt ;; **niot leaders humblc" and exffeme$ those professional.Thespecific-cu}tw;**u1*dicrated&gmthetop.butrathergrewfrornthe **-to *-"ftiuate it- reinforce it' and ensure thatof the employees. T-he roie of the leader* not casualties and jgy ;-G the employees were attributes that fostered passion growth' coilpany's succtlss and continued

1s

Helen Cosrer,

"A

2008' pp' 0' Step head"'For$es' June 12'

tn

Z*ppor.**

2Q0S Culture

Book' p' l?'

forudgende tllta( ogen mde'uden udgiverens vil blive der foretaler en sdan overtredelse' o' pltton"t' el1er overuder servicevilkr"n", "'io'-ouo'' werden' ganz gleich' mit bertragen som er ulovlig os v{aes :r kvalificeret og rimetig anvendelse), die vorherige !o11rt verboten' Bei Teil eines festgeiegte Verwendung ist i det omfang love" rrii*r'-r.^"in ;fortulgt, oo", i'o"n s"-i"ru"cnlungen Eine andere Verw.naung urri. rchen Mitteln dies geschieht. Schritte einee

trri*.*,

ier

"r*i*i"*" g.J,.n

;;;;;;*t

*.rden eerichtliche

Case Studies in

lnternational Marketing Managemsnt

thain to Dclivu

lfl{!:

initial training: told new employees dunng their Lin described whal the sxecutivss 'This cannot be just me' or'Tony tUsieh]t-'o1^[el

We tell ali the employees' flMosslerl,orStev1iU1'oranybodyelse-who'sonthe'illanagementtesm's culture.It'severybady,sculturengre.andil'simportantthatyoulive,breath, ask Atl this is uier generated' we don't inspire ttre curtu, *na uulq lqon it. you're passionate about upon itsclf" If peoplc,. d".;;'f ;; rrrrrr, i*'iuu*tuilds -it,
uPon Plcase build

it''

culture fastered excellence: Mossler observed that ths Zappos very bcst at whatever particular department Everyonc's focused on just !-1"+ t* companv' a thread that runs throughout the they are i, I,;;;;JJ,- J-r1ri"rv

lt,salifestyle''..They,reaiwaystioiog,brearhing'andthinkingaboutthe at iofretatro"r what happened

companv.
Zappos'
and build

Aft;;;"tk,;*ptt a*'t;;ff;-;"J fun' they bond l'*y!o n* *iti' o*rt*t zuppL ioy*o''id they have we move the ca *b"::^f:*

innovate? Hcw can we make it better?' business forward? How can we

*t";ilff;;;i4*!ni"s

Everynewemployee,whethersntrylevelorseniormnsgel?wextthroughtheseffi*four.rveehpay hires a bonus' plus trt* o"inioe, Hsieh oifeted thc ncw over rraining program. Mld]u;';ffigf size of the bonus had increased quir. ttt* the tirne rhey have been with the "o*p*r, staved for that anv new ernplovee who rrr* ou:*.tiJr;;;**e 6s rime, and in 2008, *-*ii,oti. to identify those who wefe nt a$ $oon an*lts uulu*r, and was passionate *b*.i;;;;;;anf was just ?-3 *j- for thesc bonuses possiblc. Thrcughout"-*opuoy,* hirt"ty,;;;;fu* percent, Hsieh commented that'

;;; Gt;; fty ?:3. percent. since rhc call cenrer io*ou., *t" ftitiog process was not matching {he ;,To ,,r*, it says ,t ur rn* oii*i i* nor high *"rg.;-;;iG job of training, them. on an -o, orl,W* din't do a good enou*h smpany unO *mpt"y* Ur"n*tr, ,ori*tirn*s *thcr stuff happens in their lives ***J basis after ,ir" r,ii i"-* or
ongoing

thatmakestr,*r*,u.ro*u*ednnwork.,'e*pr"y.*-whostaycdmcrethang0days,howcver,
generally stayed for the long tenn"

job they were hired far' new hires' regardless of the A1 the end af the training, all Lss,vegas customers' At some poinl cenrer qp-;;-.l4;::i,:*..:ttn worked for ar teasr r*" *"f, as cati
employecs have a

that intheirfirstyear,theywouldalsospendatleastaweekworkingattheshepherdsville all *r.e trinn*a. iuppot believed iiwas important 'tut*r leaming how orders warehouse_ hired at shepherdsville'
emplt:vees ffi;-;ios. grrh;b";i;J tn t-as vegasio participate in the new hire r-"Jt' **nt particularly rnn** -rli-- 3t n-iert-t their frrst year with the comp*nv' ;i;c. if pcssibte during

business partner$,

Eachyear,Hsiehsentane+nailaskingeachemployee,-asrvellasthecompany'saffiiiatesand *at the Zappos culture meant to them' They

were

,o'ilr* "i** linesescriblng irrhey nor to discusJ*i, *irh their coileag*-. *n., in; ; book, which *", piJi*JJ"o'JJu--*t

rhey wcre nat to These were put

no;;l;;g31 tr"g*t{*n
**.r*fu*a

Whiie na

comrnon feeling u*-:;typical'"' there was definitely a

employecs the previous year' subrftssron' before until they had made their new was about 4?5 pages long' irt* zaog tioo

!{-bce.n

Philip Dackweiler <p.dackweiler@gmx.de>. lngen del afnogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtraeder servicevilkrene, er forbudt. De personer, der foretager en sdan overtradelse, vil blive retsforfUlgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder brtragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

Zappos.eom: Oeveloping a 5upply Chain to Oeliver WOwl

Zappos,com: D*eloplng a Supply Chain to Delitter

lfOW!:

GS-65

o. 23

arnong them as contributors told stories of the inrportance of Zppo$ in their iives, and what the empany culturs mant to them. The following commet by one smplyee is representative of the sentiment sxpressed by many:

am truly gratfuI eash day I walk through the doors that I can be challenged, encouragcd Bnd grow; 1 san ls,rgh and play. I am abie to spend my d*ys in an environment tbat operates with aud suppoJts thc same beliefs I hold close to my heart. There is really no place likc zome.'"
Company partners were also asked to eontribute. One commented on the relationship betwesn ulturB ad company success:

job. I eould tell

Zappos team.

From the momert that I first resenched Zappos I knew there was something spcial happening within the company. I waated to know how a ccmpany eould successfully grow as quickly as Zappos. I found *re answer to my question as son a$ I walked in rhe door of the Zappcs carnpns. I felt welcomed and the campus was buzing with ftiendly people. As I taured the campus, *lmost everyone intoduced tLemselves by name and gave me a brief description of their

everyone was proud of the careers and enjoyed being part of the believe that the positiveenergy that's being unleashed by thc Zappos team is thc key to Zappos' susee$$."

1l

q"**

fi'om Kelly D., Merc.handising Deparuneat,

"'

Quore frotn Lesli* W,- ofZapp*s.com parm*r

in'?008 Culture Book - qppos.coar, p. 2? l. fleur't, in "?0* Culnrrc Bock " fuppos.com, p.45V,

Philip Dackweiler <p.dackweiler@gmx.de>. Ingen del af nogen bog m reproduceres elier gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrreder servicevilkrene, er forbudt. De personer, der foretager en sdan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gleich, mit
welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

Care Studie$ in ln1rnational Mrketing Mriagcment

Zappat mlla: Develapiag c,txpp& Chaia ta Deftv*

WAIf!:

GS-65

p,21

Exhibit

Zappor Gross Revenu Growth

1200 1000 800

600

40s 20s
0 2000

?00r
8.6

2002
3?

2003

2004

25

?006
597

2007 840

?08 (est)

$Millhn

1_6

70

t84

31

t0s

Zappos gtowth in gross revenues, 2000-?008. Retunu typically ran in the r*age CIf 35-3? percent of grss reve[ues.

Saurce: "2008

fulture Book," Zqpar.eoar,p.9.

Philip Dackweiler <p.daclnveiler@gmx.de>. Ingen del afnogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrder servicevilkrene, er forbudt. De personer, der foretager en sdan overtredelse, vil blive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gleich, mit
welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

Sappos.com: Oevelqping a Supply Chsin to DefiverWOW!

Zagas.com: Exelaplng

S*pply Chain to Deliver IFOIF!: GS-65

p' 23

Exhibit 2 Z*ppor Distribution Center, Shepherdsville, Kentucky

Shepherdsville Distribution Center

Static Shlving

Carousel

Robots (and operator)

with shelves st work station.

Robotic inventory area"

Source: Zappcs.com {with pnnissio)"

Philip Dackweiler <p.dackweiler@gmx.de>. Ingen dei af nogen bog m reproduceres e1ler gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtrader servicevilkrene, er forbudt. De personer, der foretager en sdan overtredelse, vil biive retsforfulgt, i det omfang loven tillader det.Kein Teil eines Buchs darfohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Servicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlung werden gerichtliche Schritte eingeleitet.

Zappcs,com: Beveloping a Supply Chain to Eeliver WQW!

llappa*.wm: D*elaphg a Sqply Chtin to Dallvrr

lfOl{!:

GS-l

D'

lr

Erhibit 4
Top Internet Retail Businesres in X007

The top tfir Internet retil cupnies in ?0S7, aceording ta Internet Refaifer, were:

0ffrce Desct lnc.

Dell

Inc.

i i i

4.2

Inc.
i
Sears Holding

Corp.

2""1

7.6

Source: "rnerica's Top Tea Retail Businesses," /rteret Retailer lop 5d0 Gaidt, 2008 Edirian online sumrnary tLtlSJi]{lgltjftlq'seEelsjsr.cs_rd:ep5_0.91-l-i-sia$, acce$sed Jauusry 23, ?00*)"

Philip Dacloreiler <p.dackweiler@gnx.de>. Ingen del af nogen bog m reproduceres eller gengives p nogen mde uden udgiverens forudgende tilladelse. Brug (ud over kvalificeret og rimelig anvendelse), som er ulovlig eller overtraeder servicevilkrene, er forbudt. De personer, der foretager en sdan over6adelse, vil blive retsforfillgt, i det omfang loven tillader det.Kein Teil eines Buchs darf ohne die vorherige Zustimmung des Verlags kopiert oder bertragen werden, ganz gleich, mit welchen Mitteln dies geschieht. Eine andere Verwendung als die gesetzlich oder in den Sewicebedingungen festgelegte Verwendung ist verboten. Bei Zuwiderhandlwrg werden gerichtliche Schritte eingeleitet.

Case $tudies in

lnterntionai Marketing Mngement

Zapa*cam: Eel.etoplng a Suqpb Chainta aliv* l,lIt{.. SS-dJ

Exhlbit 3
Zappos Supply rffeb

Fulfillment
Cnter

llustrxn*r

SupplierA.com, etc. are "Powsted by Zappos" sites.