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The threat of new entrants into the online shoe/apparel market is relatively small due to the fact that Zappos is such an established brand and has specialized their business model. It would be far too expensive for a new company to copy the characteristics of Zappos including their next day delivery and large overhead. The fact that Zappos was losing money initially illustrates this difficulty. Another issue that would create a high barrier to entry is Zappos commitment to the consumer through overnight shipping. Zappos stated that the overnight shipping caused them to leave their warehouses open for the entire day. Any other company would be at a competitive disadvantage if they didn't match this business practice. In all the way Zappos does business creates too high a barrier to entry for threats of new entry to be high; for that reason we would rate it 2 of 5.
We would rate substitutes at 3 of 5, being that the threat is somewhat average. With the uniqueness of Zappos, not many stores can match such a shopping experience service as Zappos. The reason we ranked the threat of substitutes at 3 of 5 is because there are Brick and Mortar Stores that may be used as substitutes of Zappos. These specialty stores are not up to Zappos standards, but at the same time their specialization with certain products make them a threat to Zappos. The whole person-to-person contact can have a big advantage in terms of customer service. Zappos answers by extraordinary customer service, which really makes the average consumer feel as if they are special and are in contact with a real person.
The rivalry with existing firms for Zappos is fair,