Zappos' Customer-Centric Approach: Profitability and Expansion

This report examines Zappos' customer-centric business model, focusing on how its emphasis on customer satisfaction contributes to its profitability and competitive advantage. The analysis explores the development of long-term customer relationships and the impact of these relationships on the company's success in the online retail market, particularly in the sale of shoes and other products. The report also investigates Zappos' product portfolio expansion, considering the challenges and opportunities associated with entering new markets like furniture and electronics. It provides a comprehensive overview of Zappos' marketing strategies, operational considerations, and market scenarios, offering suggestions for future growth and highlighting the importance of customer service in maintaining a competitive edge. The report concludes by emphasizing the significance of customer loyalty and the potential for Zappos to leverage its existing customer base for further expansion and increased profitability.

Zappos’ Customer Approach
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Date: 7/24/2016
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7/24/2016

Contents
ABSTRACT:...............................................................................................................................................3
Has Zappos’ emphasis on customer satisfaction contributed to its profitability? Explain...........................3
Has Zappos developed long-term customer relationships that provide a competitive advantage in the
purchase of shoes and other products? Explain...........................................................................................3
Expansion of the company’s product portfolio............................................................................................4
SUGGESTIONS:.........................................................................................................................................5
CONCLUSION:..........................................................................................................................................5
REFERENCES:...........................................................................................................................................6
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ABSTRACT:
Zappos is an online place for shoes mainly. Headquartered in Las Vegas, Nevada, it sells cloths,
bags, home products and accessories also. Zappos is known for its unique marketing strategies
and corporate structure. Marketing strategies are customer focused. Customer satisfaction is the
unique selling proposition for Zappos. Its success depends mainly on maintaining long term
relationship with customers.
Has Zappos’ emphasis on customer satisfaction contributed to its profitability? Explain
Excellent service to the customers is the forte of Zappos. Zappos has developed a reputation by
providing the best experience for their customers. Excellent customer services are the values
add-on which keep customers returning to the Zappos. It cannot be denied that customer
satisfaction is the most prominent reason for the success story of Zappos. They have many repeat
customers. Zappos goes to the extent of excellent services that it does not remain as profitable
for them as it could be. But this gives Zappos loyal customers who keep benefitting it. A happy
customer is a top most priority for Zappos. It bypasses profits also. Eventually it will have to find
a way to make profits. (Phillips, 2014)
Has Zappos developed long-term customer relationships that provide a competitive advantage in
the purchase of shoes and other products? Explain.
Zappos has developed long term relationship with customers by working hard. They make
customers feel special by going out of their way. This put them ahead of their counterparts. But
they also have to struggle sometimes. Once an ad campaign was not received properly and
smudged the brand image. Security breach in 2012 also affected its image. Customers are very
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concerned about security and it is difficult to maintain relationship after such incidences. Some
other issues are prices errors and delays in 2011.
Relaying only on customer service means if a customer has bad experience with the company it
will be very difficult to gain his confidence again. It reduces number of customers drastically.
Zappos has competitive advantage in this area but it should be very careful when promoting
customer relations. (Yeung & Ennew, 2012)
Expansion of the company’s product portfolio
Zappos has proven its capabilities in many product portfolios. It has been an investment choice
for many investors. It started from shoes and extended to beauty products and outdoor and riding
products. Moving to other services like furniture and electronics will require a lot of manual and
financial support both at front end and back end. There is growing demand of furniture and
electronics in the market. At present Amazon and IKEA are providing these products to the
customers.
Competitors’ Analysis: Both the existing players in the market has huge capabilities. They have
already tapped the market. Zappos will be new in the market. It will have to deal with the
existing standards of the industry. It can rely on the huge customer base. But, most of these
customers are loyal towards competitors for these products. By providing excellent services they
can make customers change their mind.
Operational Strategies: Both furniture and electronics come under heavy products category. They
will require more operational space and efficiency. A separate dedicated warehouse space and
transportation will be required. This may increase operating cost. Return of items will also be
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handled differently. There will be different terms for exchange or returning of products.
(SMITH, 2013)
Marketing strategies: Zappos is already famous among customers. It will not require brand
marketing but switching of customers from existing competitors to Zappos for these products
may take time. Adding new product to the list will give more options to the customers.
Market Scenario: Shoes are cash cows for the Zappos. Cloths and bags also come under this
category. Furniture and electronics have high market growth rate, but because of low market
share it will be question mark for initial year. Although it has the capability of turning into stars
for the company.
SUGGESTIONS:
Given the market scenario and the customer base of Zappos, it should go for product portfolio
expansion. There is market growth in this sector. It will also be an added advantage for the
customers to buy everything from the same place. This may enhance their experience with the
company services. Amazon and IKEA may give a strong competition in the market but Zappos
can leverage its large customer base. Excellent customer services will lure customers to buy from
Zappos. It can overcome operating cost by developing an efficient system for that. (McNally,
Durmuşoğlu, & Calantone, 2012)
CONCLUSION:
Zappos has serviced its customer very well. It is playing on volumes by serving many customers.
It goes out of its way to make customers happy. Even if it cost to company sometimes. There are
many loyal customers who are backbone of Zappos’ profits. Zappos can enhance its product mix
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by extending to furniture and electronics category. Large customer numbers will be an edge to
compete in the market.
REFERENCES:
McNally, R. C., Durmuşoğlu, S. S., & Calantone, R. J. (2012). New product portfolio
management decisions: Antecedents and consequences. Journal of Product Innovation
Management, 30(2), 245–261. doi:10.1111/j.1540-5885.2012.00997.x
Phillips, J. (2014). The key to competitive advantage is customer satisfaction. Competitive
Intelligence Review, 5(1), 64–66. doi:10.1002/cir.3880050111
SMITH, P. (2013). Portfolio management for new products by R. G. Cooper, S. J. Edgett, and E.
J. Kleinschmidt. Hamilton, Ontario: McMaster university, 1997. 131 + xi pages. $dollar;35.95
(paperback). Journal of Product Innovation Management, 14(6), 529–530. doi:10.1016/s0737-
6782(97)90046-1
Yeung, M. C. H., & Ennew, C. T. (2012). From customer satisfaction to profitability. Journal of
Strategic Marketing, 8(4), 313–326. doi:10.1080/09652540010003663
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