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University of Massachusetts Lowell
Strategy Formation and Implementation, MGMT – 6910-061
Robert J. Manning School of Business
Winter 2017
Week 4
INTERNAL ANALYSIS
ZAPPOS SHOE RETAIL COMPANY
Professor: Ashwin Mehta
Prepared by:
Convington Bien-Aimé
Submission Date: Saturday, December 03, 2016

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ZAPPOS SHOE RETAIL COMPANY – INTERNAL ANALYSIS
Summarize the article
Zappos is a retail footwear company that was created by Nick Swinmum in July 12,
1999 in United States of America. More the firm is specifically diversifying its
products not only in shoes (about fifty thousand varieties of shoes sold: soccer,
basket, high heels, dress shoes, running, ……., and sandals), but also has as
extension, accessories, clothing, handbags, and eyewear (ACHE). The company is
headquartered in Las Vegas, Nevada, U.S., and warehoused in Shepherdsville,
Kentucky, U.S. Obviously, Zappos is another way to say zapatos in Spanish, but in
English, stands for shoes. After closely reading the Zappos’s article, we found that the
idea to sell shoes online was coined after Swinmum conducted several walks
searching for a pair of airwalks in the mall of his city, but it was in vain. In its early
life, Zappos was not Zappos. The name of the company was ShoeSite, that was going
to change into Zappos. The company has been in full growth.
In 2001 Zappos’s annual sales were multiplied at least by four, which brought the
health of the company in the flourishing state, $8.6 million. Three years after, in
2004, the sales of Zappos grew up to more than 4 percent, $184 million. The
company was in a growth momentum, where its sales, for another three years (in
2007) risen steeply, $840 million. From this flourishing time, Zappos decided to
widen the scope of its activities with ACHE.
Offer your opinions and comments
I believe that Zappos’s strengths have to do with the way it is building, keeping alive,
and operational its customer base. In order to sustainably have a great wealth and
financial health via this customer base, the company has been using and putting a lot
of emphasis on the key resource base, human resource. Hence, it is within the nature
of Zappos to treat employees and customers very well. Employees feel that Zappos is
an extension of their home. That is why they are very faithful to the company, and

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they feel at their very ease to talk to other people about buying any shoes and
accessories they would like from Zappos company.
I believe that the Zappos’s skyrocketing sales do not have anything to do with
coincidence. It is about the Zappos’s way of doing, dealing, and treating its both
employees and customers/consumers. According to www.kissmetrics.com, Zappos
has revenues in excess of $1 billion annually, and in 2009 the company (Zappos) was
acquired by Amazon for $1.2 billion approximately. But this acquisition does not
influence Zappos in its retail operations. Still, Zappos continues to operate
independently from the acquirer (Amazon). Furthermore, I believe that consumers
and employees stay when they are challenged, paid well, trusted, involved, mentored,
appreciated, on a mission, promoted, empowered, and valued. From this strategic
standpoint, we notice that Zappos is “concentrating on serving a broad spectrum of
customers.” ¹
 Discuss relevance to this week’s topics
Evaluating Zappos’s Resources: Theoretically, based on what we have read, let’s
divided Zappos’s resources into two sections, tangible and intangible resources.
Tangible ones:
- Physical resources: Zappos is Headquartered from Henderson, Nevada to the old
Las Vegas City Hall. The company chose the second location because they
wanted to pair work and leisure time. It is a profitable strategic place for Zappos.
- Financial resources: About one year after its inception, Zappos sold shoes and
accessories for “$1.6 million in 2000. In 2001, $8.6 million. In gross sales, the
company realized $840 million in 2007. $1 billion in 2008 in annual sales.” ²
- Technological assets: Typically, most of Zappos’s financial transactions are done
remotely or electronically, and expected delivery three to five business day.
Zappos has 500 employees registered on Twitter. In addition to Twitter, the
company is being followed on YouTube and Facebook, and a number of

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corporate blogs, such as Your All-Access Pass To Company Culture, Charity
Events, and Lifestyle Advice & Beyond, etc.
- Organizational resources: Behave friendly to the customers. Hsieh wants to
deeply involve both employees and customers. Based on what I understood about
Hsieh, I believe employees at the lower level of the company are the closest to the
customers/consumers. From this proximity viewpoint, the upper management of
Zappos lets those people decide for the customers. There is an effective
communication relationship that exists between Zappos employees, which
positively impacts Zappos vendors and the company wholly.
Intangible ones:
- Human assets & intellectual capital: In the shoe & accessories retail industry,
Zappos is one of the best ranked that proficiently treats its customer and
personnel, and of course is one the best workplace to be in. Zappos is a champion
of customer service. Tony Hsieh, the CEO of Zappos asserts that “If Zappos does
expand into other industries, don’t expect them to be the cheapest. Expect them to
have the best customer service.” ³
- Brands, company image, and reputation assets: Hsieh says that: “We want the
person to be the same person at home or in the office because what we’ve found is
that’s when the great ideas come out, that’s when their creativity shines and
that’s when true friendships are formed – not just coworker relationships. When
people are in that environment, that’s when the passion comes out and that’s
really what’s driven a lot of our growth over the years.” In order to entrench
Zappos great sales, the company is building a long-lasting relationship with its
customers.
- Relationships: Zappos Insights, which focuses to guide and advise entrepreneurs
of all kind was launched by Zappos in 2008 in other to help them fine-tune their
company culture and customer service. To access Zappos’s video service, the
interested parties pay a $40 monthly fee to ask any related questions to Zappos
employees. In 2007, 6pm.com was purchased by Zappos. 6pm.com is a bargain

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shoes, clothing and accessories. Zappos has invested a lot in marathons. For
instance, sponsorship of Rock’n’ Roll Las Vegas.
- Company culture & incentive system: Great company culture. Hsieh’s main
priority is culture. Zappos is dedicating some great entrepreneurial adages to any
entrepreneurs who would like to sharpen their business skills. Hsieh claims: “Our
number one priority is company culture. Our whole belief is that if you get the
culture right, most of the other stuff like delivering great customer service or
building a long-term enduring brand will just happen naturally on its own.” 4
Evaluating Zappos’s Capabilities: “For a company’s resources and capabilities to
have durable value, they must be continually refined, updated, and sometimes
augmented with altogether new kinds of expertise.”5 Zappos has enlarged its
inventory and added eyewear, watches, clothing, handbags, kid’s merchandise, which
actually account for twenty percent of the annual revenues because Hsieh does not
want to rest on his laurels due to the hindrance Zappos’s competitors encounter to
outcompete the company. Thus, to increase Zappos’s awareness, Hsieh agreed with
Amazon to acquire the company in 2009. We can say that this strategic acquisition
was very profitable to Zappos because, as we already mentioned, the deal accounted
for $1.2 billion while Zappos keeps operating independently from Amazon’s
activities. It is very important to mention that according to the article, “On June 22,
2012 Zappos announced it would be shedding their Kentucky warehouse on
September 1, 2012. Hsieh had mentioned that "Even though it was hard to walk away
from sales at a time when nobody is offering you money, we couldn't distinguish
ourselves in the eyes of our customers if we weren't going to control the entire
experience. We had to give up the easy money, manage the inventory, and take the
risk." Even in spite of his commitment to controlling the customer experience by
managing inventory, this announcement meant that Amazon would now be
controlling that part of that customer experience. Over 3,000 employees in Zappos'
Kentucky warehouse will now be in the care of Amazon on September 1, 2012.”

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As a matter of fact, the organizational capability of Zappos is greatly different as
opposed to its players in the shoe’s industry. Zappos capitalizes on a special culture
that takes into great account its customers and employees. Zappos is very dedicated to
make happy ever these two sets of people. For instance, by offering $2,000 to any
new recruit to leave the company is a special way for the company to strengthen
Zappos’s culture and instill this way of doing business in the vein of everyone who
accepts to work in Zappos. It is all about Zappos’s culture for the employees and
customers’ sake.
Evaluating Company’s Competitiveness: As our objective for now is internal
analysis, let’s keep focus on Zappos’s strengths and weaknesses. “Core competencies
are competitively more important strengths than competencies because they are
central to the company’s strategy. Distinctive competencies are even more
competitively important. Because a distinctive competence is a competitively valuable
capability that is unmatched by rivals, it can propel the company to greater market
success and profitability.”6 In this sense, Zappos is using its business culture as a
strategic weapon to well play the game where the upper management views and treats
all the other employees like family and friends. I believe each person who works at
Zappos see Zappos as an extension of their home, that is why they have the obligation
to take care of this company. Let us see. The famous example appears again where
Zappos’s employees claim ownership of this strategic objective. “A woman called
Zappos to return a pair of boots for her husband because he died in a car accident.
The next day, she received a flower delivery, which the call center rep had billed to
the company without checking with her supervisor.”7 Hsieh asserts that our whole
belief is that if you get the culture right, most of the other stuff like delivering great
customer service or building a long-term enduring brand will just happen naturally on
its own.

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What about Zappos’s weaknesses? About three years after its creation, Zappos
encountered a huge problem. People illegally accessed Zappos’s online system. It was
very costly to the company. We can call this payable one carelessness. This is what
the MBA StrategyFormulation & Implementation book calls competitive deficiency or
weakness. Zappos did not have any choice than ask 24 million customers to reset their
passwords one by one because their personal information was somehow
compromised. Obviously, Zappos’s customers were unable to communicate by direct
service phone lines to the company because Zappos phone lines were shut down. Due
to all these issues and others, Zappos was sued accordingly. It is all about time
management, and when time is mismanaged, somehow, it will have bad consequences
on profitability.
Reference
www.kissmetrics.com
¹MBA StrategyFormulation & Implementation 96, McGraw-Hill Create
²www.wikizappos.com
³www.kissmetrics.com
4www.zappos.com
5MBA StrategyFormulation & Implementation 96, McGraw-Hill Create
6 MBA StrategyFormulation & Implementation 96, McGraw-Hill Create
7www.zappos.com