VIRTUAL STORE
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CAROLINA VITERI, HEATHER DUNDEY, KYRA WEBB, MORGAN DAVIS & SARAH PARIS 1
Table of Contents
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Executive Summary Company Summary Current Ownership & Revenue Future Growth Plans SWOT Perceptual Map Current Placement Current Communication Market Overview Placement Target market Future competition porters 5 forces business issues & new initiative technology & implementation Operations creative guidelines communication & Promotion Expenses Conclusion Sources Appendix
4 6 7 8 9 11 12 13 19 21 23 24 25 27 28 29 31 32 37 40 41 45 3
We have developed a strategic intiative to further enhance Zappos’ customer’s experience with the use of Holocube technology along with Tesco’s technology idea. The Holocube’s will allow for our customers to shop in a physical retail space bringing the e-commerce company to a store setting. The technology will allow our customer to scan all our products with their smart phone to create a virtual shopping cart that will then allow them purchase and finish. Implementing this intiative will allow the customer a physical interaction with our Zappos representatives, build brand loyalty and allow interest to our company and products in a innovative way. The initiative is made up of two key components: Holocube 3-D virtual reality and a new interactive app for Zappos. We plan to integrate this initative to all our products but first will be tested at the Westfield Mall in San Francisco, California. This initiative is geared toward local and loyal customers who want more information about our products and have a shopping interaction in a shop setting. This initiative will give us the competitive advantage of introudcing a new technology for one of the top fashion retailers in the business.
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Zappos.com, was founded in 1999 by internet entrepreneur Nick Swinmurn who created an online shoe store. Swinmurn was tired of going to shoe stores that had low inventory of the styles and sizes he was looking for. This was the reason for starting Zappos which was originally called “Shoesite.com� an online destination for all your shoe needs. Swinmurn had a vision of Zappos being a megastore that stocked multiple colors, styles, and sizes while offering shipping worldwide (ReferenceForBusiness).
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Zappos.com, Inc. is publicly traded and operates as a subsidiary of Amazon since November 1, 2009. Jeff Bezos is the group president for Zappos and Amazon (Bloomberg).
Though Amazon does not separately report revenue for Zappos, Zappos’ sales exceeded 1.2 billion in 2009 ((Dupress).
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Currently Amazon is supportive in continuing to grow the vision of Zappos as an independent entity. The mission of Zappos is “to provide the best customer service possible� (Farfan, Barbara). The future of Zappos looks bright since the merger with Amazon in 2009 there was a switch that allowed Zappos more opportunity from a highly succesful business in the market place. Zappos’ goal is to move faster towards their long term goals which are to accelerate the growth of the brand and culture to more consumers, align themselves with new shareholders and partners that are thinking long term like Zappos does currently and look at what is best for the existing shareholders and investors (Hsieh, Tony). 8
Strengths *Strong company culture *Values customer relationships *Trained employees *Global brand *Well known brand image *Online retailer is more convenient for customers *Zappos carries a large inventory and ships for free *Customers compare prices online and are able to shop easily at home *Zappos can be used on multiple devices and allows customers to shop anywhere they are
Opportunities *Owned by Amazon Inc. allows for more expansion and opportunity in brick and morter *Engage in technology and incorporate into company *Expand customer following on social media platform
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Strengths *Strong culture risks being lost because of the merger with Amazon *Endless store line that is creating internal competition *Only has a online platform *Security issues with hackers (24 million Customers) had private information stolen from their accounts *Low wages for employees
Threats *Highly saturated market *Key competitors are implementing technology into their business *Other companies carry similar products *Counterfeit sales affect the sales of branded products
(See Appendix)
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High Accessibility
High Price
Low Price
Low Accessibility
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In comparing Zappos with nine other companies it was evident
that the company has low accessibility at a mid-level price point. Prices for Zappos shoes for our target price range in the San Francisco Westfield Mall intiative will vary from $30-$500 and have a wide variety of styles. Zappos falls under the category of being a company with lower accessibility due to strictly being an online e-commerce site. Competitors such as ShoeBuy.com, ASOS and ShopBop fall under the non brick and mortar category as well, having a presence strictly online. DSW offers their products online as well as in store having roughly 300 brick and mortar locations. The competitor Skechers sells in over 1,000 stores while also offering an online store making this the highest accessibility competitors for Zappos. (See Appendix for further info).
Zappos Inc. is not solely focused on what is sold, but how
it sold it. The company concentrates in wowing its customers by selling a wide variety of products and providing an excellent customer service.
Zappos is an US online retailer offering its
products through several platforms. Customers have the facility to buy from Zappos website, mobile site and iPhone app. Additionally, Zappos Blog and Pinterest redirects the customer to the website (Zappos).
Zappos has two permanent points of sale (POS) available
including its website and iPhone app.
Zappos distribution center
is located in Louisville, Kentucky, close to the UPS air cargo hub.
Zappos inventory system is related to its customer service
philosophy.
There exists around a million SKUS and 4 million
items in inventory, therefore there is no need for a deep amount of reserve products (Apparel). (SEE MORE In APPENDIX C)
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Zappos has grown from posting on social media outlets and using their blog. Most of its marketing budget is spent on customer service. Word of mouth is how its first method of marketing started. Zappos’ goal is to treat customers with the best customer service, and reward staff who value this method (LexisNexis). Moreover, Zappos tracks its call center personnel on a metric system that ranks the customers’ happiness, rather than talk time or call volume (LexisNexis). As a result, Zappos’ goal is to empower employees and create a culture that customers want to keep coming back to and because of this they have remarkable results that are recurring revenue, customer retention, and word-of-mouth engagement (Christine).
Zappos uses relationship marketing and a loyalty business model that has resulted in 75% of purchases coming from returning customers who order 2.5 times more than single costumers (Business Source Premier). (SEE MORE In APPENDIX D)
According to Hsieh, Zappos spends little on advertising. They rely mainly on customers spreading the word about the exceptional service they received (Business Source Premier). The company’s media buy in 2009 resulted in a total of $3 million. The company breaks down this sum in three sections free shipping, a generous return policy and the extra time spent with people on the phone. These three things take time and money which is consider part of the marketing effort (800 Pound Gorilla Sales). About $8 million was spent on Facebook ads since June 2010 and 99% of it has been to drive traffic to the Zappos website (Digiday). Zappos spent about $19.7 million on advertising in 2010 and $4.8 million in the first quarter of 2011 (New York Times).
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Zappos has been working on its social media platforms to increase its engagement while most of its resources and budget have gone toward driving traffic to its e-commerce site (Digiday). Zappos is always encouraging consumers to tweet, pin, and Facebook about their recent purchases. For example, Twitter is a top customer service channel, and Pinterest is to remind customers that Zappos has a large product assorment of clothes and accessories as well as shoes. The company acknowledges that they need to improve, especially reaching users on their mobile devices (Business Insider). Zappos’ main goal with its digital marketing strategy is to carry the Zappos philosophy of building personal emotional connections with all customers (Digiday). Currently they are posting on Facebook, Twitter, YouTube, Pinterest, Instagram and Google Plus. In breaking them down it shows the types of posts they are putting out and how often they post to show that they value these social media platforms and see the importance of incorporating them into their marketing strategy. 14
YouTube The most recent post was three weeks ago. Prior they posted 4 times a month.Video views vary between 50 and 1500 views. Posts are about company news, insights, events and products.
Twitter Posts are between 2-6 times a day. Posts are of funny photos and quotes, products and company news.
Instagram Posting 1-2 times a day. Likes between 150 and 650. Photosfeaturing buyers, stylists and bloggers using Zappos products, product ads, new coming to Zappos and are inspirational quotes.
Facebook: Posts twice a day between 6am and 3pm. They are about company insights, new products, trending styles and quotes.
Pinterest: Currently they have 28 boards and posts are about products, what is trending, inspirational quotes and lifestyle.
Google +: Before March 31st they posted one-two times daily. Posts consisted of new products, styling, fun videos and company insights. Presently, March 31st was the last day that anything was posted on the site.
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Fast, Free Shipping and Free Returns Zappos offers fast free shipping and returns. Zappos delivers products as quick as possible, normally a next-day delivery guarantee up until 4pm Eastern time, a promise few online retailers can make. The title is placed as the first title in the website. The company provides the service on all domestic orders, anytime. Additionally, Zappos has a 365-day return policy (Zappos). Zappos 24/7 Customer Service and Live Help Zappos provides a customer service number and Live Help is placed as the second top header the customer will see on the website. The call center employees are referred to as The Customer Loyalty Team purposely designed to emphasize to employees that their priority is to keep the customers happy. Zappos encourages the percentage of time an agent spends interacting with customers as a positive, unlike many call centers that have the goal of reducing average call time per agent (Christine). Customers Testimonials At Zappos, compliments as well as complaints are considered treasures in order to get improve. The company is always listening with open and attentive ears to all comments. When analyzing the customer comments, more than 90% of them were positive compliments about the company (Zappos).
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Zappos Blog Zappos’ Blog works as a guide for the customer to learn about new products. Zappos provides information about products as well as lifestyle comments to show how to use the products practically (Zappos). The Blog has pictures that redirects the customer to the main site or to their Pinterest page. Sustainable Design Sustainability is also a top priority for Zappos’ business model. The downtown Las Vegas headquarters was built to create a unique company culture, while also considering the environmental impact of their presence in the southwest (Zappos). Zappos’ sustainability efforts are evident in the achievement of LEED-Gold certification for the new Zappos headquarters in Las Vegas. Renovations were done according to the Green Building Standards of the United States Green Building Council (USGBC). Zappos Rewards Visa With Zappos Rewards Visa the customer can earn rewards while pampering themselves with bags, shoes, clothing among other products. The program gives the customer three points for every dollar spent at Zappos.com. In addition, one point for every dollar spent on purchases elsewhere as well as a $25 Zappos Gift certificate for every 2,500 points spent (Zappos).
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Zappos Insights Zappos Insights is a department within the Zappos Family created to help share the company’s culture with the world. They offer tours of the Zappos headquarters, Q&A sessions with Zappos leaders, a Zappos Insights content membership, and a full Zappos dive into the company culture. Zappos Insights has their own Facebook, Twitter and Pinterest.
Zappos Labs Zappos Labs are always exploring the future of the company. It is one of the global hubs of digital technology and innovation. The team is constantly experimenting with new ways to shop, connect online, and engage with customers. Succesful projects include: Ask Zappos, Glance by Zappos, Top Pins and PinPointing. (See Appendix D).
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According to ComScore, in the second quarter of 2013 the apparel and accessories was among the top categories for e-commerce sales. In addition, it was the category with the highest-grossing mobile sales with more than 700 million in sales between April and the end of June 2013 (CNET). Zappos has an opportunity to grow and lead in the online shopping market by implementing new technology and new ways of providing customer experience in a virtual space. The online retail business in 2013 was about $200 billion-plus, according to ComScore. Mobile shopping dollars are up 24% from 2012, and desktop spending is up 16% (CNET). According to the research firm IbisWorld, online shoe sales in the U.S. reached about 10 billion in 2014. Zappos constitute around 30% of the market on online footwear sales, meaning that they have the opportunity to experiment and open to the market a lot more (Bloomberg). 19
San Francisco is the closest major city to the hightech world of Silicon Valley, with one of the most engaging retail markets, whether domestic or international (Jones Lang La Salle). The Westfield San Francisco Centre, an enclosed vertical mall, is located between world-renowned Union Square and the South of the Market entertainment district. Westfield San Francisco is ranked the second best premier shopping center destination in the entire Bay Area and is easily accessible of public transportation. San Francisco Centre will be the best fit for Zappos because flagship Westfield Malls have higher retail sales in fashion and they are expanding even more in California with four future project malls in different cities (Westfield Corporation). In 2014, approximately 435 million customers visited Westfield Corporation shopping centers generating $17 billion in retail sales (Westfield Corporation). On average, shoppers visit the Westfield San Francisco Centre 2.1 times per month and spend about 2 hours and 29 minutes at the center per visit. Shoppers also spend on average $126.24 per shopping trip (JC Decaux).
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For the the virtual space and Holocube intiative we are going to start in the Westfield Mall in San Francisco, California. This high traffic mall gets over 2 million visitors per year. Westfield works with the top retailers and luxury brands that incorporates technology into the shopping experience. They also work with retailers on design, construction and development as well as leasing, management and marketing (Westfield). Zappos feels confident that we are aligning with the right partner in this intiative to attract our target customer and test the market. We are placing ourselves on the third floor next to our competition such as Nine West, Steve Madden and Foot Locker. We feel that the same customers going into our competition will be interested in the new virtual space since they will be shopping in the same area. We will be placed in between the two escalators so that customers will be able to see us from the upper level as well as when they are going up and down to attract more interest. We will be renting the area that was originally meant to be a seating area and feel that a wide open feel will allow the customer to see the Holocube from different angles while walking by. There will be seating and four Holocubes set up with four screens in total. We are excited about how customers respond and our sales associate team will be monitoring the customer experience. 21
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Today tech-savvy consumers have high expectations about companies when it comes to implementing technology serving as a way of customize and personalize experiences while doing a shopping decision. Today great customer service is the best way to ensure brand loyalty and future growth (Support).
Demographic
Zappos will be targeting millennials from 25 to 35 living in San Francisco, California. According to the Boston Consulting Group, millennials in the US perform about $1.3 trillion in annual buying power, and have a median income of $33,883 annually. One-third of millennials between the ages of 26 and 33 have earned at least a four-year college degree, making the best-educated group of young adults in the US (LeadsCon). Zappos will take this as an opportunity to expand the brand into this young adult market, which has been proving it is a market worth spending in.
Psychographic
According to Nielsen, 85% of millennials own a smartphone and touch them 45 times a day. This data is relevant to us since we are implementing new technology into a virtual space, where consumers will interact with TV screens and mobile phones. Millennials are known as “social shoppers”, 95% of millennials in the US rely on friends as the most credible source of product information. The word of mouth is the most powerful communication tool for Zappos, which can be even stronger if potential customers, recommends or tells their in-store experience (LeadsCon).
Behavioral
In-store, women shop 37% longer per month than men (107 minutes per month versus men’s 78 minutes). In addition, online, women shop 59% longer, spending 125 minutes shopping compared to men’s 79W minutes (Lifestyle Monitor). Moreover, 87% of online young adults in the US age 18 to 29 use Facebook, 53% Instagram, 37% on Twitter and 34% Pinterest. This age group represents a representative amount of millennials, it will help Zappos to revamp and be more interactive with its social media platforms, and even more important knowing that five out of six millennials in the US connect with companies on social media networks (LeadsCon).
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Tesco is leading implementing this technology in their physical stores for their F&F clothes brand, as well as in places such as the Gatwick Airport and the Hong Kong subway. This technology has helped Tesco to enhance in store experiences, customer convenience and boost sales. Other companies using this initiative are Unilever, Target and Marriott. The other technology we will be implementing together with Tesco’s idea is the ad’s 3D projection technology, developed by the European company Holocube. This unique 3D projection platform enables product-focused and contextual 3D projections. Nike launched an advertising campaign featuring 3D holographic ads on street signs in Amsterdam (Zebra Imaging). Brands have started to think about virtual store simulations in order to meet consumers’ needs. It also helps to understand in-store behavior, store design and merchandising planning (Kelley). Asos is a pure e-commerce player always providing the best experience to its young customer. Asos is a strong competitor to Zappos due to its amazing experience and service provided to the customer, as well as being a powerful player in social media and CRM activities. Asos is a company that has the characteristics to be able to create virtual technology into a brick and mortar space. Shopbop is also considered a future competitor as well, since they are focused on providing personalization and attention to the customer. Shopbop is capable of implementing technology in order to reinforce its customer service, and since Amazon Inc. acquired it in 2006 they have the opportunity to expand and develop new ideas (Shopbop). Technology serve all these brands in order to increase purchases and basket size, while enhancing in-store and online customer experience.
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The shoe industry is a billion dollar industry that has been booming for many years. Shoes have been a staple in the market but recently there has been more emphasis having the right shoe because of the blogging influences and street style images. The industry is growing steadily and because of this there is alot of room for growth in the market. There is a gap in fashion retailing implementing technology into brick and mortar stores and with Zappos implementing Holocube technology the brand is striving to create new customer experiences to meet the demand of the market. The cost is high at first to implement the technology but with the return on investment and the customer following on social media and customer interactions it will give the brand a competitive advantage. Competitive rivalry is low which means that there is alot of room for profit. 25
Threat of New Entry
. . . .
Moderate High High fixed costs Brand Loyalty
Market growth attractive Easier to enter the online arena
. .
Moderate High Substitution is increasing among the fashion industry Cost of change is high
Threat of Substitutes
. . . .
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Competitive Rivalry Low
. . . .
No customer service & experience provided like Zappos High customer loyalty High cost of changing High amount of online retailers offering same products, but different services
High Customer service based, unique services delivered Scarce amount of suppliers Price of change is high Substitution of products is difficult
Power of Buyer
Power of Suppliers
. . . .. .
Moderate Low
Large amount of customers and sales Different from others by providing exclusive customer experience Quality and service over price High amount of customer loyalty Cost of change is high Easy to substitue to similar brands, but different services provided
Zappos is troubled due to the fact that they do not have a Brick and Mortar store for their customers to try on items and experienced in a physiscal store. We want to achieve an increase in revenue and net sales by implementing the Tesco virtual supermarket practice idea that is located in places such as the Gatwick Airport in the UK, while also implementing Holocube’s technology that allows products to be 3D displayed. Our customers will walk up and use the app on their phone to start shopping on the Holocube’s Holo Touch Tower that will provide a virtual store with a list of categories of shoes to chose from just like on your computer. After they pick their shoe of choice they can then use the Holo Touch Tower technology further and slide the product up and see it be virtually 3D displayed for a better view and customer experience.
The objective of the new initiative is to implement Tesco’s Virtual Grocery Shopper concept with Holocube’s 3D virtual display platform to allow customers a more diverse way of shopping through Zappo’s virtual store. We hope to increase foot traffic within the virtual store by locating this initiative in technological malls such as the Westfield Mall located in San Francisco while merging online experience in stores to help increase sales, customer loyalty, and create a new modern way of communicating to our customers. To engage our customers and provide them with a more sense of security and privacy they can download the Zappos app where they can go and scan the QR codes of the products then adding them to their cart on their phones. We hope to relate to our customer’s further by playing an interactive video that will be targeted towards our millennial customers. Also we will offer expedited shipping to Zappos customers for the grand opening of this initiative to increase customer loyalty. Currently you can only shop on Zappos through your mobile device or personal computer, but implementing Tesco’s Virtual Grocery Store idea to the Westfield Mall in San Francisco we will be providing a virtual store within the mall that will allow customers to see a plethora of styles of shoes while using the Holocube’s technology the Holo Touch Tower to help support this idea while also providing a 3D virtual platform to help increase customer experience by having our customers be more interactive with the product. In the long term by having this initiative it will help sales rate grow by the increase number of transactions and providing a better customer experience to loyal Zappos customers.
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The technology driving our initiative is Tesco’s Virtual Grocery Store idea that uses electronic billboard display shelves stocked with products, each with their own barcodes. By scanning the barcode of a product you can then add it to your cart, choose a time of delivery, and then finalize the purchase (Retail). To help support this idea we will be implementing Holocube’s technology the Holo Touch Tower with its combination of the most advanced projection techniques in a contemporary platform housing that will allow products to be displayed in a 3D manner for a better viewing for the customers before purchasing (Holocube).
Holocube is its own supplier of high quality goods that helps differentiate one through its unique specs of your product. Holocube comes with an optional floor stand kit, which seamlessly matches its cool design (Holocube). ScanLife by Scan Buy will provide Zappos with an update to their current app for their customers that will help engage them while allowing them to scan the QR codes for purchase (QR).
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The Zappos team in charge of web designing and developing along with the interaction designer would work together to develop a design that enables a retail space that allows customers to shop while seeing a virtual 3D form of the product using Holocube technology. To further inform the consumer about this new technology, Zappos will have it’s marketing and branding teams find an interactive but informative ways to draw in consumers while also having human resources be present in the retail location to help create a better customer experience. After this initiative is fully developed and tested, foot traffic and amount of sales would need to be evaluated. 29
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“As we grow as a company, it has become more and more important to explicitly define the core values from which we develop our culture, our brand, and our business strategies. These are the ten core values that we live by” (Zappos.com). 1. Deliver WOW 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 With Communication 7. Build a Positive Team and Family Spirit 8. Do More With Less 9. Be Passionate and Determined 10. Be Humble Brand Essence: The Web’s Most Popular Shoe Store! Brand Colors: Light Blue Black White Personality: Empathetic Humble Open/Honest Positive Passionate Determined Internal culture/values: Embrace and drive change Create fun and a little weirdness Be adventurous Creative and Open Minded Pursue growth and learning Do more with less (See Mood Board & Story Board P. 20)
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mood for Zappos Ad 2016
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Zappos Kiosk Installation 2016 Westfield Mall San Francisco, CA
+ Youtube and Instagram will be for posting the ad introducing the Holocube. Models are wearing different shoes and telling consumers to download the Zappos App to get ready for the grand opening at Westfield.
Facebook will be used to post an image of the holocube showing Zappos’ app on the Ipad and the 3D hologram.
Twitter will be used for customer comments and support as well as to work out bugs in the operating system. 33
Digital marketing for the Holocube initative is broken down into four social media platforms: Facebook, Instagram, Twitter and YouTube. On Zappos’ Facebook and Twitter beginning in December 2015 the focus is to inform the customer on the new technology and when it is coming to the Westfield Mall in San Francisco. This promotional channel will continue through March 2016. Posts will consist of updated inventory and new styles with the use of new technology. Instagram and Youtube will also post starting in January before the launch to inform the customers of the steps on how to use the technology and how it works. Youtube will be set up for longer tutorials January through April and shorter videos, GIF’s and images will be posted on Zappos’ Instagram from January through the next year in January. During the pre-launch phase, Zappos will post on their Twitter account which will be set aside for customer service questions and concerns. Zappos’ twitter will deal with the one-to-one basis for customer service interaction. This will address the concerns of the customer and work out issues customers are having with the software as well as maintaining excellent customer service that Zappos is known for.
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Zappos will have a $1,031,568 year investment, which will serve as a communication and experience tool to the customer by introducing a new technology and a new way of having fun while shopping.The new virtual space provides a clear potential growth for the future. Zappos retail space can be expanded in the future after testing by adding more interactive screens in order to increase productivity and traffic into the new virtual space. Zappos Virtual Store Revenue: We were able to come up with Zappos Virtual Store revenue by first multiplying the number of unit sales by the average unit price of each product category. Then, adding up the revenue for each product category. Goods Returned: Based on Zappos School).
35%
return
rates
(Harvard
Business
Cost of Merchandise Sold: Based on 50% gross margin (Harvard Business School). Technology: This number contains Holocube Technology quotes for Zappos retail space. The model will cost $1.500, 000 plus $1,000 technology software development and $11.000 for each HoloTower itself. Shipping: This number includes the cargo shipping cost of the Holocube Tower from Canada, where Holocube Technology has its warehouse. The HoloTowers will be shipped to Zappos Warehouse in Kentucky and after will be picked up by Zappos team to send them to Westfield San Francisco. The shipping will take about a week to get to Kentucky. 37
App Update: This includes the new Zappos app update including a new amount of inventory and the QR scanning technology. Testing: The technology, software, and QR scanning implementation will be tested before the store opening App Maintenance: The app maintenance cost is the 20% of the total app cost (Fierce Developer). We will need the app maintenance to be done yearly in order to provide secure and easy access to our technology. Rent: This number includes our “Brand Space” cost for the year including an initial fee of $1,500 in “key money”, which pays for a store designer to build and design the space with the right look (Entrepeneur). Furniture: This number constitutes all furniture the space will have. Two sofas, four chairs, and two carpets. Payroll: Zappos virtual space will have two sales associate that will be trained in order to provide information and teach customers about the use of the Holocube Tower and its process of purchasing. Sales associates will be trained for two weeks and in store for a period of 6 months. There will be one sales associate per side of the space. Numbers are based on Zappos current salaries and time shifts. Promotional Activities: This number gathers a social media video ad, three gifs and one still ad. Two Westfield indoor digital ads, print ads, events and data collection. 38
BUDGET, ZAPPOS
NOTES
2016 REVENUE Virtual Stores $ Minus goods returned $ Total Revenue
$
EXPENSES Cost of merchandise sold $ Technology $
1,883,255
941,628 Based on a 50% margin (Harvard Business School) 1,555,000
$
2,350 UPS Cargo Shipping from Canada 37,000
Testing
$
10,000
App Manteinance
$
20,000
Rent $
150,000
Shipping App Update
Furniture
$
2,897,316 1,014,061 Based on 35% returns (Harvard Business School)
$
Payroll $
6,058 149,388 Based on 5% revenue
Promotional Activities
$
43,360
Total Expenses
$
2,914,783
EARNINGS BEFORE TAX
$
(1,031,528)
The total revenue that the Holocube initiative will make is approximately 1 million. With total expenses the project will cost 2 million. This will put Zappos at a loss of 1 million but if the test pop up shop proves to be successful this initiative will be able to expand and Zappos will see a return on investment projected in the next five years. (See more for Budget in Appendix)
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After doing research and analyzing best practices outside and in the fashion industry we developed a new strategic idea; the new Zappos retail space. Zappos virtual space will be opened in San Francisco Westfield Centre in order to provide convenience along with better services and to get more exposure of a new way of shopping experience in a retail environment by implementing interactive technology and m-commerce for the customer. Holocube technology has not been used in the United States and we want Zappos, as a pure and strong eCommerce player, to start with this new initiative by demonstrating that this is a viable solution that will enhance the customer’s experiences.
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Guertin, Bill. “The 800-Pound Gorilla of Sales: How to Dominate Your Market.” Web. 25 Apr. 2015.“The Human Support Experience That Tech-Savvy Consumers Crave - See More At: Http://corp.support.com/sio-mattersright-now/#sthash.HsUDRxC5.dpuf.” Support.com, 10 Dec. 2014. Web. 24 Apr. 2015. “Holocube: Products: HOLO TOUCH TOWER.” Holocube: Products: HOLO TOUCH TOWER. N.p., n.d. Web. 03 May 2015. “Holocube: Products: HOLO TOUCH TOWER.” Holocube: Products: HOLO TOUCH TOWER. N.p., n.d. Web. 03 May 2015. “How to Start a Kiosk Business.” STARTING A BUSINESS. Entrepeneur. Web. 16 May 2015. Hsieh, Tony. “CEO Letter | Zappos.com.” CEO Letter | Zappos.com. Zappos, 22 July 2009. Web. 18 May 2015. Instagram. Web. 27 Apr. 2015. <https://instagram.com/zappos/>. “Mall Screen Advertising.” AdSemble. Web. 21 May 2015. “Millennials, Social Media and Fashion.” The Social Observers. United States Census. Web. 24 Apr. 2015. “Mobile Forms and Applications Blog.” 2015. Web. 8 May 2015. “Nike Uses 3D Holographic Advertising on Street Signs.” News. Zebra Imaging, 16 Apr. 2013. Web. 3 May 2015. “Our Perspective on High Street Retail in Major U.S. Cities.” Jones Lang LaSalle. Web. 24 Apr. 2015. Pinterest. Web. 27 Apr. 2015. <https://www.pinterest.com/zappos/>. “QR Code Generator - Create, Integrate and Track QR Codes | ScanLife.”QR Code Generator - Create, Integrate and Track QR Codes | ScanLife. ScanBuy, n.d. Web. 18 May 2015. “Retail Innovation - Tesco in the United Kingdom.” Agriculture and Agri-Food Canada;Government of Canada. N.p., 15 Oct. 14. Web. 03 May 2015. Safino, Catherine. “OMNI-CHANNEL RETAIL APPEALS TO MEN AND WOMEN.” THE GENDER DIVIDE. Lifestyle Monitor, 15 May 2014. Web. 24 Apr. 2015. “Shaping Retail: The Use of Virtual Store Simulations in Marketing Research and Beyond.” Industry Insights. Kelley School of Business. Web. 3 May 2015. “SHIPPING AND RETURNS.” Zappos. Web. 24 Apr. 2015. <http://www.zappos.com/shipping-and-returns>. Soper, Spencer. “Brown Shoe Co. Sells Shoes.com Web Business to Shoeme.” Bloomberg Business, 15 Dec. 2014. Web. 25 Apr. 2015. Stampler, Laura. “Why Zappos Sees Sponsored Posts On Facebook As ‘A Necessary Evil’” Advertising. “Statistics and Facts about Amazon.” Web. 26 Apr. 2015. <http://www.statista.com/topics/846/amazon/>.
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4.0 Overview of the Retailer
SWOT Zappos is a global brand that is recognized in many countries. Their products include shoes, apparel, handbags, and accessories for both men and women. Their are a high volume of products and they sell exclusively on their website. Zappos values excellent customer service and hires employees who share this same goal by encouraging them to have conversations with the customers to show they care more about the relationship than the sale. Within the culture of Zappos it thrives on making the environment for the employee as fun as possible with holiday events and team building outings. The brand is very open about how they run their company with tours of the facility and Q&A sessions with the Zappos leaders and live training events for entrepreneurs. Currently Zappos does not have brick and mortar stores for customers who like to try on their clothes and shoes before purchasing. Customers wanting to see the products more extensively then their computer or mobile device are also wanting an in-store experience which will be addressed with having kiosks in the mall with 3-D capabilities. The highly saturated market and key competitors implementing technology into their stores poses a threat to the the brands net profit. Additionaly, the highly saturated market allows for other companies to copy the implimenation easily.
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4.0 Overview of Retailer
PERCEPTUAL Chart: Sketchers: Average Price-$87 Stores-1,000 DSW: Average Price-$265 Stores-305 Rockport: Average Price-$160 Stores-50 markets Crocs: Average Price-$56 Stores-101 outlets Merrel: Average Price-$114 Stores-116 Nine West: Average Price-$99 Stores-250 Shoebuy.com: Average Price-$415 Stores-Online Asos: Average Price-$261 Stores-Online Shopbop: Average Price-$268 Stores-Online
Unique point of difference The USP (Unique Point of Difference) is implementing the use of technology in creating a brick and mortar like store in the technologically centered Westfield Mall. In alligning the business strategy in these malls, Zappos is showing that they value technology and setting a trend for the future of how to shop. Through this initative Zappos will be the example of how an online retailer can create a â&#x20AC;&#x153;brick and mortar storeâ&#x20AC;? easily without having to pay high fees for an actual space.
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4.0 Current Placement
Overview In November 2014, the company launched its first physical store, the Zappos.com Pop-Up Shop Showroom store in Las Vegas, Nevada as part of a collaboration with ShopWithMe, a technology company in order to integrate technology and online and in-store shopping experiences. The launched started in November 21st until December 31st in time for the holiday shopping season (Integrated Solutions for Retailers).
CURRENT DISTRIBUTION Zappos uses Kiva robots, small, soft machines that scurry along the floor, in their warehouse to pick items off the shelves. The robot area gets about twice storage density and twice the labor efficiency of other storage areas and uses half the electricity. Another advantage is that Zappos can change its product mix easily since the robot-operated storage is that shelving is easily reconfigurable. This helps to move and add new categories all the time.Robot storage has also advantages when it comes to picking and packing, robots bring multiple items in an order to a picker, so that the picker can also be a packer, saving enormous time. When an online shopper buys a pair of shoes, they are in the UPS truck 48 minutes later; multiple orders take closer to three hours. But if a shopper buys apparel, which is handled by robots, it is in the truck 12 minutes later. “It causes a funny kind of problem,” Adkins says. “If a customer changes his mind half an hour later, it’s too late to undo it online. It’s hard for them to believe it’s on the truck already!” (Of course, because Zappos is dedicated to customer service, call center employees will recall the item from the truck.) As Zappos expands, Adkins says, new storage areas will all be robot-operated. And at some point in the next few years, it will probably become worthwhile to replace existing shelving with the Kiva system.
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4.0 Current Advertising & CRM Activities
Interest-Based Ads Zappos.com uses third party ad-serving companies and Amazon to display internet-based advertising. These advertisements are displayed based on the customersâ&#x20AC;&#x2122; information gathered by Zappos from the interaction with their sites and services (Zappos). http://www.zappos.com/c/interest-based-ads-policy
Ask Zappos Real people will help customers to find what they are looking for from any store. The person only needs to take a picture and send it to Ask Zappos. Since everyone prefers different type of technologies, they can send the pictures via text message, email, Zappos website, or Instagram (Zappos Labs).
Glance by Zappos Zappos found customers want to get inspiration. Glance is a fun and simple shopping experience, which brings curated collections of the most exciting product from Zappos.Top Pins and PinPointing Zappos built Top Pins to highlight the most popular Zappos pins on Pinterest. PinPointing recommends Zappos products to users based on their boards and pins.
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2.0 Market Analysis
50
2.0 Market Analysis
51
2.0 Market Analysis
52
2.0 Porters 5 forces The Porterâ&#x20AC;&#x2122;s five forces determines the intensity of in an industry by analyzing the potential success of a business when entering a new market or industry. The five forces help companies to determine the attractiveness of the market and understand who has the power. The five forces are power of buyer, power of supplier, threat of substitutes, threat of new entry, and competitive rivalry. THREAT OF SUBSTITUTES Moderate High - Substitution is increasing among the fashion industry - Cost of change is high Substitutes are easy to find nowadays even if companies are not implementing the same exact technology, as we want to. Even though there does not exist yet the exact same idea we are developing, we have seen many companies implementing new ideas into brick and mortar spaces as well as in online platforms. Even though ideas have been implemented by many companies, there is a small number of suppliers that determine prices, which is why it can turned costly for a company. E-commerce retailers can have the idea and the technology, but it may be difficult for customers to find the right supplier with the right prices to offer. POWER OF SUPPLIERS High - Customer service based, unique services delivered - Scarce amount of suppliers - Price of change is high - Substitution of products is difficult There exist a few technology suppliers offering a wide range of options to the customer, but there still exist nowadays m-commerce, e-commerce and QR scanning options available to integrate. Holocube technology is developed in Europe therefore the price of changing suppliers with the same characteristics, as the one that we want to use will be difficult. There is a small amount of clients for suppliers since companies are implementing technology by testing and analyzing data first. Companies are first analyzing the technology functionality and opportunities.
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2.0 Porters 5 forces POWER OF BUYER Moderate Low - Large amount of customers and sales - Different from others by providing exclusive customer experience - Quality and service over price - Easy to substitute to similar brands, but different services provided - High amount of customer loyalty and preferences - Cost of change is high Buyers do not have the power to be price sensitive because the technology offered differentiates the company from competition providing better experiences to the customer. On the other hand, the shoe market is a huge market providing thousands of different styles providing the customer the power of choosing different brands and styles, but what will make it different will be the services provided by the company. We will focused on quality and services provided over price. Buyers have the ability to do research into the competition but it will depend on the customersâ&#x20AC;&#x2122; preferences and loyalty. Zappos has a high percentage of returned customers and loyalty programs which have been one of the most important tools for the company. Zappos provides customers value that is superior to its competitors (Course Hero). https://www.coursehero.com/file/p6ore9h/New-entrants-could-not-duplicate-Zappos-business-model-andtechnology-which/ THREAT OF NEW ENTRY Moderate High - High fixed costs - Brand loyalty - Market growth attractive - Easier to enter the online arena - Easy access to technology Online retailers have the opportunity to grow into the brick and mortar spaces but fixed costs could be high depending on the technology to be implemented in the physical store. Zappos is an established brand with high customer loyalty helping them to take advantage of the market. We have seen nowadays that online retailers are using new ways of providing customer experience by using technology and creating more competition among brands.
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2.0 Porters 5 forces
COMPETITIVE RIVALRY Low - No customer service and experience provided like Zappos - High customer loyalty - High cost of changing - High amount of online retailers offering same products, but different services The competitive rivalry to Zappos is low because no other company is providing the same services and experiences Zappos have been providing during several years. It will be more difficult for competitors to compete with Zappos new virtual space implementing technology. Online competitors could enter into the brick and mortar but will be too risky since the changing costs might be high. Additionally, Zappos has already a high percentage of customer loyalty making them to come back more often. Even though there exist a considerate amount of competitors selling the same products, no other is like Zappos when it comes to customer service and experience, as well as employee empowerment.
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6.0 Financial Plan
Units Projection Table Annual Traffic: Westfield San Francisco has 16,300,000 annual customer visits. Zappos retail space will have 4 interactive screens working 7 days a week, 10.5 hours per day, 362 days a year. Units per Transaction: This number is based on the Average order $130 * Average price per item $98Assortment: Numbers and percentages based on Zappos Best Sellers and Trending Now products at zappos.com
Budget BUDGET, ZAPPOS NOTES
2016 REVENUE Virtual Stores $ Minus goods returned $ Total Revenue
$
EXPENSES Cost of merchandise sold $ Technology $ Shipping
$
1,014,061 Based on 35% returns (Harvard Business School) 1,883,255
941,628 Based on a 50% margin (Harvard Business School) 1,555,000 2,350 UPS Cargo Shipping from Canada
$
37,000
Testing
$
10,000
App Manteinance
$
20,000
Rent $
150,000
App Update
Furniture
$
Payroll $
56
2,897,316
6,058 149,388 Based on 5% revenue
Promotional Activities
$
43,360
Total Expenses
$
2,914,783
EARNINGS BEFORE TAX
$
(1,031,528)
6.0 Financial Plan
SALES PROJECTIONS
UNIT SALES Womens Sandals Wedges Pumps Sneakers Flats Mens Sandals Sneakers Dress shoe Casual shoe Boots UNIT PRICE Womens Sandals Wedges Pumps Sneakers Flats Mens Sandals Sneakers Dress shoe Casual shoe Boots REVENUE BY CATEGORY Womens Sandals Wedges Pumps Sneakers
2016
NOTES
2,723 2,118 4,840 2,420 3,328 3,025 3,630 2,420 4,235 1,513
$ $ $ $ $
65 97 98 112 65
$ $ $ $ $
51 112 113 114 156
$ $ $ $
176,979 205,417 474,365 271,066
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6.0 Financial Plan UNIT PROJECTIONS
Annual traffic
2016 91,224
NOTES 24 screens * 10.5 hours = 252 * 362 days
Conversion rate Number of transactions Units per transaction
25% 22,806 1.3
High Performing Brick and Mortar conversion rate
Total units sold
30,253
Womens Sandals Wedges Pumps Sneakers Flats Mens Sandals
9% 7% 16%
2,723
8% 11%
2,420 3,328
10% 12% 8%
3,025
14% 5% 100%
4,235 1,513 9,681
Average order $130. Average price per item $98
2,118 4,840
Based on Zappos Best Sellers and Trending Now
Sneakers Dress shoe Casual shoe Boots
3,630 2,420
*Prism Skylabs software doesn’t just do counting, it does any-camera counting. It lets you know how many people are in any space over any period of time. There’s no better way to understand occupancy, optimize staffing and above all, measure conversion.
Assortment Plan
Prism Skylabs software doesn’t just do counting, it does any-camera counting. It lets you know how many people are in
Womens
Size
Sandals Wedges Pumps Sneakers Flats
5,6,7,8,9 5,6,7,8,9 5,6,7,8,9 5,6,7,8,9 5,6,7,8,9
Mens
Size
Sandals Sneakers Dress Shoe Casual Shoe Boots NOSE
6,7,8,9,10,11 6,7,8,9,10,11 6,7,8,9,10,11 6,7,8,9,10,11 6,7,8,9,10,11
Average Retail Price $ $ $ $ $ Retail Price $ $ $ $ $
Based on Zappos Best Sellers and Trending Now
Fixture Costs for Pop-Up: Sofa x 2 Chairs x 4 Carpet x 2
58
$ $ $ $
1,519.98 3,160.00 1,377.80 6,057.78
65 97 98 112 65
Average % 9% 7% 16% 8% 11% Average %
51 112 113 114 156
10% 12% 8% 14% 5% 100%
6.0 Financial Plan
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