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Case Analysis : Zappos Company

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Case Summary Zappos was founded in 1998 by Nick Swinmurn, who was frustrated with the selection of shoe styles, sizes and colors in stores. As the Internet usage was booming during this time, he had the idea of having a website that would sell shoes online. Swinmurn convinced Tony Hsieh and Alfred Lin to invest in this venture as he talked about the $40 billion shoe market in the U.S. alone. Throughout the years Zappos increased its customer base tremendously although it experienced some obstacles through the lack of substantial funding. As of 2008, the company expected gross sales of $1 billion as it had become the world’s largest online retailer of shoes and continues to grow. While their sales growth rate continues to increase, Zappos understood that there was still a lot potential as only 3% of the U.S. population was their customer. Thus, Zappos decided to expand their product line and offers a variety of products through its suppliers. Zappos main focus is to satisfy their customer’s needs. In 2004, their customer base increased from 40% of returning customers to 75% in 2008. By the end of 2008, the company had about 9 million customers. Nevertheless, the company was also affected by the product returns as one in four of the orders were returned. Although this costs the company about $100 million or almost 17% of their gross sales, they prefer implementing this policy as it satisfies customers and is a minimal cost compared to what they would be spending on

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