Survival Strategies

Zappos laid off 8% (about 135 people) of its workforce yesterday; the first firing in almost nineyears.  Letting go of people is always hard and often psychologically damaging to remaining employees.  What this tells me is that even a first-rate company is experiencing softening demand, so watch out below!

If you've ordered from Zappos before, you know their website is better than average.  You will also know that they have a hugh selection of shoes that is unrivaled on the web or at your local brick-n-mortar.  They also use 3-day shipping and offer free shipping both ways.  Moreover, their customer service is excellent, best-in-class across any industry.  

I've seen the recent layoff headlines, but none really caught my attention as Zappos did.  This was a small startup that grew into the largest profitable online shoe retailer.  It is still privately owned so I imagine that the entrepreneurial atmosphere is still very vibrant.  To see that even they have to handout notices is disappointing and sad.  They may have hired too many people or the more realistic reason is that the economy really is that bad.  

Zappos is preparing to weather the storm and the best internal way to preserve capital is to reduce the expenses, and frequently the largest expenses, on your balance sheet.  This also spells to me that the credit markets are really disturbing businesses that are in expansion mode no matter profitability.  Zappos must be worried about raising funds in the open market and so took steps to reduce cost.

This may turn out to be a worse recession than many currently think, including me.  I will keep my eyes open going forward for further tells to this market.