Remaining Competitive: Zappos and Its HR Practices

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Table of Contents

Executive Summary
Introduction
Strength
Weakness
Opportunities
Threats
Conclusion
Recommendation
Reference List

Executive Summary

This paper examines Zappos.com and how its HR practices impact its ability to be competitive within its current industry. The analysis done in this paper focuses on the company’s business culture and hiring practices as well as makes recommendations regarding what possible practices could be done in order to improve the company’s standing and reduce its problems.

To do this, a SWOT analysis was conducted to examine the various practices of Zappos and determine what areas need to be better and where it is most effective in.

Introduction

Zappos.com is one of the largest online shoe and clothing stores in the word with over $1 billion in annual revenue each year as of 2010. The company’s current strategy in a competitive online market place is to provide the best customer purchasing experience possible.

This was done through the use of next day delivery, a return policy that allows customers to return shoes if they do not fit as well as uses its company culture that focuses on making its employees happy to create better relationships with its clients through good customer service. All of these factors have helped the company to become better than its rivals making it one of the most recognizable online brands in the world.

Strength

Convenience of Online Sales

Through the analysis of Kuruzovich (2013), it was shown that online sales from 2001 till the present have become a $500 billion a year industry as a direct result of more people buying their needs online. With sales amounting to $1 billion per year, Zappos.com can be considered one of the largest online retailers in world since it controls 0.25 percent of the online market.

Kuruzovich (2013) explains that the “integration of warehouse and delivery centers has resulted in delivery services that can enable products to reach customers within the U.S. through next day delivery services as well as to international customers within 3 days to a week (depending on the type of shipping method utilized)”.

As such, the current state of delivery methods used has brought more consumers to online eMarkets since for them it is far simpler to find what they want to buy through the search bar of a website or the ads of online retailers (Kuruzovich, 2013). It should also be noted that Zappos has a price advantage as compared to traditional retailers since it does not require a physical floor space in order to sell its products to consumers.

Expenses related to utilities (electricity, water, etc.), the salaries of sales representatives, security staff and other supporting services are smaller because of such practice which enables the company to sell its products at a lower price as compared to traditional retail stores.

Focus on Customer Service

Another of the company’s strengths is its focus on providing good customer service. Through the use of excellent customer service where the CSRs (customer service representatives) actively attempt to develop a good relationship with the client, this results in a good purchasing experience for the client which can result in better long term customer loyalty of the products of the site.

Employee Culture

The Pierre & Tremblay (2011) study which examined employee churn rates (the number of employees that leave a company) and their impact on company performance showed that job satisfaction is an important factor in keeping employees.

The study focused on measures of “perceived stress, job satisfaction and citizenship behavior (OCB) to examine the likelihood of an employee staying or leaving”. Pierre & Tremblay (2011) explains that employees that were satisfied with their jobs were more likely to stay despite being within a stressful work environment. They point out that factors related to:

tight managerial controls (i.e. the use of metrics to measure performance)
low salaries, lack of sufficient diversity in tasks
the scheduling system (i.e. alternating night and day shifts)
a lack of appreciation for the work that they do contributed significantly to employee displeasure with their jobs and a greater likelihood of leaving (Pierre & Tremblay, 2011).

Taking this into consideration, the employee culture at Zappos which promotes employee happiness and skills development helps to ensure that employees are satisfied with their jobs which enables it to keep talented employees within the company. From a human resources perspective, this gives the company a long term competitive edge as compared to its other rivals within the same industry.

Weakness

Recruitment Practices

From a human resources perspective, the practice of the company wherein it offers employees that have undergone the 4 week orientation program $2,000 to leave (no questions asked) if they felt that they were not the “right fit” for the company is very wasteful and creates the very real possibility that the company may lose out on some very talented employees.

The practice of offering $2,000 to leave is definitely not normal and can contribute in preventing employees that do not have the necessary drive from joining the company, however, given the fact that a majority of the employees of Zappos are CSRs and that call center work is considered to be a high employee churn environment, this can create a situation where the company could be losing hundreds of thousands of dollars a year just to prevent people who they believe “would not fit in” from joining the company.

This also creates problems in terms of the company being able to fill the necessary positions of customer service representatives that leave the company. Taking these factors into consideration, while the company may focus on an internal culture of creating long lasting relationships with its customers, the fact remains that with a lack of sufficient personnel it may not be able to do this in the long term.

Opportunities

Work from home

One of the current trends in human resources that focuses on customer service relations has been to create work from home opportunities for employees. Basically, the process works by having employees use their personal home computers and headsets to do their customer service operations from home.

Such methods have been utilized by other companies such as Convergys (which is one the largest customer care companies in the world). Work from home opportunities helps the company to lower the costs with facilities maintenance and allows its employees to be even happier since it reduces costs associated with travel and having to eat out.

Threats

The primary threat that Zappos could possible encounter comes in the form of other retailers in the online shoe/apparel industry. It is likely that they could copy the same focus that Zappos has towards its employees and customers resulting in lower sales for the company due to increased online competition.

Conclusion

Based on what has been presented in this paper so far, it can be seen that the main problem with Zappos lies in its hiring practices where it creates far too much potential for the removal of good employees as well as creates the potential for other employee candidates to simply excuse themselves from the hiring practice with $2,000 in cash provided by the company.

Such actions have the very real potential to create problems for the company in filling in the necessary gaps in its employment structure as a direct result of the natural churn rates that occur within a company. Not only that, taking into consideration the high churn rates that are seen in many call centers, the company’s unusual hiring practices can definitely result in a limited pool of employee candidates for positions within the company.

Recommendation

It is the recommendation of this paper that the company improve its current hiring practices to more properly reflect the needs of its call center division. While it may be true that the company prides itself on having a business culture that makes employees happy and thus the company’s customers happy, the fact remains that it does not need to limit its hiring practices in order to achieve such goals.

This can be achieved by letting the company culture transform the employee rather than hiring specific employees which the company believes would be the best fit within the company’s business culture.

Another recommendation would be for the company to take into consideration a shift towards work from home operations which would not only enable it to save in terms of expenses but would help to make the employees happier in the long term since they can work from the comfort of their homes.

Reference List

Kuruzovich, J. (2013). Sales Technologies, Sales Force Management, and Online Infomediaries. Journal Of Personal Selling & Sales Management, 33(2), 211-224.

Pierre, X., & Tremblay, D. (2011). Levels of Involvement and Retention of Agents in Call Centres: Improving Well-Being of Employees for Better Socioeconomic Performance. Journal Of Management Policy & Practice, 12(5), 53-71.

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