How to Create the Blue Ocean-Take Zappos as an Example

在线业务已成为社会新的业务规范。随着越来越多的竞争者进入市场，成功对于企业来着只有很小的机会了。缩小的市场机会导致商业模式的创新改革。因此，如何突破这种困境，并在网络经济各竞争对手之间跑赢是本报告的主题。 Zappos的，作为增长最快的在线鞋类零售网站之一，是作为一个例子。

Online business has become a new business norm in the society. With more and more competitors entering the market, there are only a few opportunities left for business hunters to develop a successful business. Narrowing market opportunities leads start-ups to innovate business models. Therefore, how to break this dilemma and outperform among various competitors in the online economy is the topic of this report. Zappos, as one of the fastest growing online footwear retailing sites, is taken as an example. 

1. Introduction of Zappos

Zappos is a classical case which overturns the traditional conception of footwear retailing. Unlike hardwares, such as books and digital products, footwear retailing was once believed as a traditional business which can not be successfully transplanted in the online business model. People can neither feel the material nor try shoes on. Due to this unavoidable weakness, footwear retailing is long conducted in the brick-and-mortar business model. However, even in the offline footwear stores, customers often fail to choose the right shoes. In the stores, due to the limited showroom space and storage, the availability of the right shoes are dramatically reduced. Experiencing this issue, Nick Swinmurm decided to facilitate footwear retailing market through combining the advantages of both online business and offline stores. Concluding from the concept of Swinmurn, Zappos is not born online shopping site.

2. The Footwear Market Analysis in 1999

As Swinmurm indicates, the footwear market in the US was of US$40 billion in 1999, among which the mail order shoe sales accounted for 5% of the whole market. At the same time, the online footwear market was worth only a US$37 million. 

The US$40 billion of the US footwear market depicted a picture of a huge footwear market. However, only 5% of the total footwear purchase was processed through mail order. From this figure, it could be concluded that people have the willing to buy without seeing the shoes in real and attempt to make purchase through mail order. The US$37 million of the online footwear sales occupied less than 0.1% of the total market share. It indicated the tiny online footwear market in the US, partly due to the insufficient confidence in online shopping. But to look from the other side, it implied a promising business opportunity in the online footwear retailing. 

In future, with the increasing and improving internet access, it can be predicted more and more footwear purchases could be made through the internet. A growing confidence on the online shopping could also facilitate the footwear online sales. 

3. Is Zappos a Typical Online Shoe Store?

Although Zappos conducts the footwear business in the form of online business, Zappos is not a pure online store in nature. According to the definition by Zappos, it is competing with other internet companies, but competing with the store experience. From the competitors Zappos sets for itself, it is more like an offline shoe retailer rather than an online shoe distributer. 

3.1 The Buyer Utility Map Analysis

From the perspective of purchase. Conventional online shoe stores offer a variety of shoes at the lowest price possible which is normally considered as the key competitive edge of online retailing. However, in this case, few branded shoe manufacturers are willing to entrust their brands to online resellers due to the concern of brand depreciation. Meanwhile, Zappos seeks to strike a balance between the image-maintaining and low-price strategy. On one hand, it shakes off the low-cost image by mirroring the display in the brick-and-mortar store. Shoe brands are comfortable with the brand maintenance strategy. On the other hand, it offers smaller discounts than other online shoe sites, but supplements with a better customer service. By adopting this balanced strategy, Zappos can not only gain the trust from branded shoe manufacturers but also set an economical image in the market.

Considering delivery, thanks to the 24/7 delivery team and the efficient order fulfillment system, Zappos guarantees free shipping in two to five days, and 60% of the orders are delivered within two days. However, lacking organized delivery chain, other typical online retailers take five to seven days for ground delivery. Comparing these two delivery period, it is obvious that Zappos enjoys an absolute advantage.

The user experience of online shopping website is also a key factor. Zappos shortens the loading time by avoiding flashy ads. It also categorizes shoes into different groups to cater to the different navigation habits of the customers. Owing to the limited business scale, other small online shoe stores do not design their display as carefully as Zappos.

To supplement the service, Zappos steps into the shoes of the customers to make convenience for them as much as possible. It offers detailed pictures and video to display the products, and a free, 365-day return policy etc. which allows customer shopping under no pressure. In this way, the risks of purchasing is reduced to the minimum.

To maintain the customer and realize healthy development, Zappos organizes a well-staffed call center and encourages service representatives to have a real conversation with customers rather than read the prepared script. Meanwhile, other online shops ignores the customer service sector to save the cost, which leaves a negative impression to their clients.

In regard of marketing, Zappos abandons the TV and printing ads, but allows third parties to placing the links, ads and diverting the traffic to the Zappos. It is a more efficient method to target the customers with the lowest cost.

3.2 The Value Curve Analysis 

To bring shoe store home, the factors of  purchase, price, delivery, use, and customer service are taken into consideration (see Exhibit 1). In the exhibit 1, five indicates the highest level.

Purchase from Zappos is more convenient due to its wider selection of brands, meanwhile other online retailers only have a limited amount of shoe brands. Considering the price, conventional online shoe stores have an advantage which is their key competitive edge. When comes to the using of the website, Zappos generally are handy to use due to its well-thought navigation design and short loading time. Customer service is major advantage of Zappos against other online shoe stores which offer little customer service. For the sake of customers, Zappos offers the most thoughtful service to solve any inconveniences customers meet in shoe shopping.

Through value curve analysis, it can be observed that Zappos has an overall relatively high ranking among the influencing factors. 

3.3 The Methods to Create Blue Oceans

Of the six paths to create blue oceans, Zappos put its emphasis on the customers, the complementary offerings, and functional or emotional appeal as well. 

Through establishing well-functioned call center, and designing a user-friendly navigation system, customers enjoy their shoe shopping experience with Zappos. Meanwhile, an efficient delivery system also satisfy the need of the customers. 

Through meeting these requirements, Zappos successfully creates a blue ocean in the highly competitive online retailing market.

4. Wedging into the Conventional Online Shoe Store

In order to gain a larger market share, Zappos differentiates its service from other online and offline competitors. For instance, engaging in the thoughtful customer service. Implementing a one-year penalty-free return policy makes customers feel relaxing when doing purchasing, which leads them to have a high WTP. Meanwhile, Zappos does not neglect the grade and the quality of products they offer. Through a successful brand-building strategy, shoe brands are enthusiastic to entrust their products to Zappos, which on one hand, offers a wide range of footwear selection to customers, but on the other hand, lowers the procurement price from the manufacturers. 

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