Expanding your firm’s products portfolio to meet customer needs

Back in 2000, the online shoe retailer zappos.com sold to customers through dropship relationships with shoe manufacturers. This strategy allowed the firm to avoid expensive stocking costs. They signed up many manufacturers and offered a large choice of shoes online. However, when the firm wanted to increase sales and meet customer expectations, they realized that they had to stock shoes to provide better choice. In 2000 they did $1.6 million in sales. In 2001, they ended up doing $8.6 million. Expanding the product mix turned out to quintuple sales. 75% of sales came from inventories.