Zappos

A. The main facts about the activities of the company.

 In 1999 Nick Swinmurn launched ShoeSite.com; an idea prompted after a failed attempt of trying to buy a pair of shoes in San Francisco. The company started as a shoe distributor and acted as the intermediary, transferring merchandise from the supplier to the customer. A year later, at the age of 26, Tony Hsieh became the CEO. After having sold LinkExchange to Microsoft for $265 million in 1999, his innovative and entrepreneurial spirit impelled him to invest $500,000 into the new venture lauched by Swinmurn. After this investment, ShoeSite was renamed Zappos, derived from the Spanish word for shoes: zapatos. However, Zappos has not limited itself to just selling shoes. It is now an online store generating $1 billion per year in the retailing of shoes, clothing, handbags, at-home products, beauty products, and accessories for women, men, and kids.

Core Values

• Zappos distinctive features and organization lies in their devotion to employees and customers. The company has developed the following framework for the company’s culture and business strategies.

1. Deliver a WOW factor through service
2. Embrace and drive change
3. Create fun and a little weirdness
4. Be adventurous, creative, and open minded
5. Pursue growth and learning
6. Build open and honest relationships through communication
7. Build a positive team and family spirit
8. Do more with less
9. Be passionate and determined
10. Be humble

Customer-Focused Business Model

• Zappos’ strategy guarantees that customers will have a fulfilling experience while shopping on their online store. The company offers free shipping, a 365-day return policy and 24/7 over the phone assistance.
• Zappos Insights was established as a supplementary support for customers who want to learn more about their business practices. This further enriches the 6th core value, open and honest communication.

Corporate Culture

• As CEO, Tony Hsieh’s has given priority to encouraging a strong corporate culture. Zappos HQ, in Las Vegas, produces an environment where employees work hard while still having fun.
• Zappos specifically aims at having a little “weirdness” in order to promote employee involvement and engagement, allowing the company as a whole to grow as innovators.
• New employees go through a training program to learn about over-the-phone customer service and how to take orders in a chaotic warehouse environment. If the trainee does not want to join the company after this process, Zappos offers them $2,000 compensation.
• One of the main perks of working for Zappos are the vast and numerous benefits. Employees receive full medical cover, life insurance, an on-site fitness center, a 40% employee discount, paid volunteer time off, monthly team outings, car pool program and a lot more! This proves the companies dedication not only to the employees work life, but to their personal well-being.

Community Involvement

• Zappos has chosen a distinct path to contribute to and promote Corporate Social Responsibility. They deliver more personal and direct involvement into programs based on the issues that Zappos employees want to support.
• Zappos L.E.A.F (Leading Environmental Awareness for the Future) is a grassroots program initiated by employees, which strives to transform Zappos into a greener company. The program promotes environmental awareness through outlets including cleaner water, recycling, reusable packaging, air quality, and energy conservation.
• Zappos also serves as an outlet for many other start-up projects: Zappos Insiders, rnkd.com, fandeavor.com, yesterbox.com, and pinpointing.app.zappos.com serving as a source for socially responsible spin-off projects.

B. The Ethical challenges this company is addressing.

 Every company, responsible or not, faces ethical challenges. Zappos has addressed some critical challenges, handling them with agility, strength, and precision. The first was the 2008 Layoff. Due to the economic times, Zappos had to layoff 8% of their highly-valued employees. This was a hard decision as the company cherished every employee. They were completely honest and open about the financial situation they were in and the employees understood what and why they needed to take these actions. In the end, all the employees that were laid off received an amazing six months of COBRA health insurance coverage, paid for by the company.

 The second ethical challenge was the merger with Amazon in 2009. Customers were confused on why Zappos had decided to unite with Amazon, and instead of leeaving their loyal consumers wondering, they publicly expressed the situation. Tony Hsieh shared the reasons on why Zappos made this decision, assuring that is was for the benefit of the customers. The current board of directors did not want the company to focus on their clients but to shift focus exclusively to product sales. Hsieh did not approve of abandoning the customer-centric model that Zappos was founded upon, and decided he must take action. In order to buy out the board, Zappos needed to unite with Amazon, a company that not only accepted but promoted their value to customers. In the end, both Zappos and its customers benefitted from the merger.

 Soon after, the company faced some of its biggest challenges involving technical difficulties and the theft of customer information. In October of 2011, one of the processing systems encountered complications and problems quickly escalated. Orders were deleted or delayed, delivered to the wrong locations, and a glitch on a website listed a set price for every item resulting in a $1.6 million loss for the company. Despite knowing that they would encounter a huge loss, they gracefully accepted their mistake and abided by the false price on the website. In January of 2012, Zappos database was hacked and millions of customer’s personal information was taken. Although the data of credit card numbers were not stolen, information regarding full names, addresses, phone numbers, and the last 4 digits of credit cards were compromised. In response to these situations Zappos contacted each customer informing them of the predicament they were in. Despite the fact that these actions are not easy to address and could be extremely costly, Zappos accepted the blame and guaranteed that their customer’s personal credit card numbers were safe.

 To this day, Zappos is still trying to recover from these ethical challenges. However, by prioritizing customer trust and satisfaction, they are rapidly recovering. Zappos’ customers admire the service they receive and appreciate that the company is quick to respond when they are at fault. It exemplifies the honest and ethical values the company has built.

C. What makes you believe this company is really ethical and why you trust it?

 Upon hearing the name Zappos, selling shoes and other retail goods should not immediately come to mind. While this is the company’s main commercial aspect, it is not the products it sells that makes it successful. It is how it sells these products and what it does for its employees and customers that makes Zappos what it is today.

 Zappos does an incredible job at contacting customers in a timely manner, especially when there are situations that go wrong. The fact that this company is honest about these dilemmas proves that they do not want the customer to be misinformed and do not want any information to be hidden from their clients. Instead, they want an open and honest relationship. By this, the customers feel valued and a part of the Zappos family.

In the words of the CEO:
“At Zappos.com, we decided a long time ago that we didn’t want our brand to be just about shoes, or clothing, or even online retailing. We decided that we wanted to build our brand to be about the very best customer service and the very best customer experience. We believe that customer service shouldn’t be just a department, it should be the entire company.”

 There are many stories regarding the remarkable things that Zappos employees have done for their customers. These stories range from a six-hour phone conversation with a customer having trouble with their transaction, informing customers of where the best pizza parlor is in their location, to just being a friend to talk to. Zappos employees are given few boundaries for working with clients and are expected to be completely helpful and comfortable to help with any customer need.

 A story that changed our perspective of Zappos is about a customer who returned her husband’s shoes after he passed away. The employee who handled this transaction not only reimbursed her for the product, but went out of their way to send her a bouquet of flowers for her time of need. We had never heard of employees going out of their way to do perform sincere and heartfelt actions that show the customer how much they mean to the company. This touched our hearts, and truly helped us to see how caring Zappos is and how dedicated they are to abide by their core values.

D.The possible challenges facing the company in the future and how you think this company may improve.

 In an attempt to boost transparency and reorganize operations Zappos has decided to switch over to a super-flat structure known as ‘Holacracy’. They will replace the top-down predict-and-control paradigm with a new way of achieving control through distributing power. This way the company can work around what needs to be done instead of around the people who do it. As a result, employees and managers will not have official job titles. However, Zappos will keep some hierarchy and keep the “Big Bosses” who set the pay structure.

 Zappos attempts are carried out with good intentions, but implementing this system on 1,500 employees will not be easy and may have some consequences. Employees and managers on the same level playing field can constrain friendly-competition that motivates employees to keep progressing.

 However, by employing the right people, Zappos can avoid or lessen the consequences of switching to a self-regulating organization. Designing a different application process, to exclude candidates who are not compatible with the Holarctic system, would be the ideal procedure.

 Another challenge that Zappos faces in upcoming years is the threat of globalization and core sustainability. This threat raises two key questions. First, how can Zappos continue to use competitive pricing in international markets that may have similar products with cheaper price tags? Second, if the company begins to ship products abroad, will they have to abandon their policy of free shipping? We may not be able to answer these questions with certainty, but we do know that human resource practices will be crucial in meeting these challenges. Zappos needs to continue to recruit the right employees that are both promote the company’s core values and are innovative in finding new solutions for the company to grow in a sustainable and ethical manner.