Zappos Value Chain Model

Initially Zappos used a drop ship model for as many client deliveries as possible. In 2003, 25% of Zappos sales were imminent from drop ship [22]. Tony commented that “The drop ship business was easy money. We didn’t have to carry stock so we didn’t have any inventory risk or cash flow problems with that part of the business. But we had plenty of customer service issues. The inventory feeds that we were getting from our suppliers for our drop ship business were 95% precise at best, meaning that we would not be able to accomplish 5% of all of our drop ship orders. On top of that, the brands did not ship as swiftly or precisely as our own WHISKY warehouse, which meant we had plenty of unhappy and disappointed customers.” [23]
In the initial days
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The inventory and cash flow rewards of drop ship have led many retailers to use such an approach for B2C e-commerce, but as we can see from Zappos experience there are plentiful disadvantages to customer service as well.
The present model of value chain is:
Suppliers and Manufacturers: The Zappos vendors and manufacturers are renowned small scale shoe industries. Zappos follow a step wise procedure for vendor registration to product delivery. Initially, the vendors need to register at Zappos office. Once registered, the vendor enters into the Zappos family and will be treated with great respect unlike other companies do. Vendors need to communicate via Electronic Data Interchange for all supply chain messaging aiming at 100% paper-free model.
Vendors need to adhere to the wrapping and labeling rules for shoes and cartons as defined; fulfil all applicable State, Federal and local laws, regulations, ordinances and rules with respect to product packaging materials; adhere to the Routing Request Portal Instructions for shipping merchandise; provide Zappos with an invoice for products shipped related to a Purchase Order
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Zappos receives products from manufacturers and suppliers to central warehouse via third party services (UPS, FedEx) [26]. Once an order has shipped out, Zappos send customers an email with the tracking number. By clicking on the link and it takes to the UPS, FedEx or USPS website, depending on who shipped the package and displays the status. Choosing of third party services depends on the geographic location and availability of their service in that location.
The customers are driven by the product prices, easy navigation in the website, discounted sale. They get motivated by attractive pictures of the product and can also order in various sizes and colors encourage them to place the order. The operations and central warehousing department receives these orders timely and delivers to the customers via third party services. Customers will be sent an email with tracking number. Customers can also track the order in their order history. They just need to log into their account using email address and password, then clicking on order number in order history displays status of the shipment. Zappos made return policy friendly to its customers. They are guided to return the package with return tag (comes

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