Zappos Company in the Footwear Market

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Table of Contents

The investors’ concerns for their decision not to invest in Shoesite.com in 1999
Strategic analysis and value chain of Zappos
Works Cited

The investors’ concerns for their decision not to invest in Shoesite.com in 1999

The aspect of the market

The footwear market in 1999 was believed to be a purely brick-and-mortar business. Many investors had no desire to consider the opportunity of providing funds for an online shoe store even though products offered in the classic shops failed to meet the needs of the targeted market due to the limited options available. According to Koo, “online shoe retailing accounted for only US$37 million of the entire footwear market, worth US$40 billion in 1999” (Zappos.com (A) 1). Thus, it can be claimed that this sphere was not well-developed and popular among customers. Sales figures turned out to be even more critical, as more than 95% of shoes were sold in ordinary shops while only 1% was sold online. Realizing this dramatic reality, the majority of organizations that operated in the footwear market were unwilling to start working online. Nevertheless, about 1,500 small online retailers had occurred by 1999. Unfortunately, they faced difficulties with the involvement of manufacturers and had to spend “US$82 to acquire a new customer, as opposed to US$12 spent by brick-and-mortar retailers” (Koo, Zappos.com (A) 3). Competitive advantage strategies were costly and poorly developed. They were often associated with the traditional retailing models that were not effective for e-commerce.

The aspect of the consumers

The majority of the customers of the footwear market believed that it was better to look for products in brick-and-mortar shops, such as outlets, “department stores, discount stores, supermarkets and… local retailers” (Koo, Zappos.com (A) 1). Consumers usually were price-conscious and tried to find those products that met their needs considering the quality of a product, its diversity, and the lowest possible price. One-time purchases were conducted as a rule, which presupposes that clients were not loyal to a particular brand. The possibility to buy shoes online might have attracted the representatives of the general public due to the provided opportunity to obtain products at a lower price. In addition to that, purchases were shipped to clients directly, and refund was guaranteed in some cases. Nevertheless, the focus on the traditional business and an opportunity to try on selected shoes could discourage people to make online purchases.

Strategic analysis and value chain of Zappos

Strategic analysis of Zappos (Laudon and Traver 572):

Barriers to entry: no difficulties; possible sales taxes.
Power of suppliers: different suppliers exist, and they have the power to alter prices of their products. Zappos reveals sales information to engage suppliers.
Power of customers: customers have many options and are not very loyal to one brand so they can affect pricing.
Existence of substitute products: Footwear cannot be substituted by alternatives.
Industry value chain: The chain of production and distribution alters in a positive way, as opportunities to streamline both production and distribution occur.
Nature of intra-industry competition: competition is based on differentiated products and services. Price is often associated with brand and quality.
Core competencies: “a diverse shoe selection and excellent customer service” (Koo, Zappos.com (A) 1).
Synergies: Zappos’ partners are its vendors.
Technology: different technologies are used to develop products, improve relations with clients and employees, control inventory and sales, etc. (Koo, Zappos.com (B) 1-4).
Social and legal challenges: return policies; customer attraction and loyalty establishment.
Firm value chain: The company’s business processes allow it to develop the most efficient operations and to become the leader in the industry. It encourages employees to participate in the decision-making process and provides them with numerous benefits that enhance their loyalty. Organizational culture is based on the values developed by the staff, so they feel highly valued. Workers also develop emotional connections with clients, which enhances customer satisfaction and makes them return. Thus, provided services are exceptional, as they are based on clients’ needs and demands. Zappos gives vendors their sales data and inventory to enhance their relations, allowing them to use the Extranet. They are used as merchandisers who are highly appreciated, which requires no additional spending and makes them assist Zappos and provide it with unique items that help the company to remain competitive and attract clients.

Works Cited

Koo, Oh Young. Zappos.com (A): Bring the Shoe Store to Your Home. INSEAD, 2013.

—. Zappos.com (B): Strategy Powered by Culture and People. INSEAD, 2013.

Laudon, Kenneth, and Carol Traver. E-Commerce 2: Business. Technology. Society. Pearson, 2014.

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Zappos Company in the Footwear Market

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