The Zappos.com Story: How Superior Customer Service Launched a New Brand
You might think that shoes are not a category that would work well for e-commerce. Shoe sizes and styles are so varied, and the fit is unique to each user. But Zappos, an online merchant in business since 1999, has built an $840 million business selling over 1000 brands and 90,000 styles. How did they do it? Through service policies that make buying irresistible.
Among the generous service levels offered by Zappos are:
- Free two-way shipping. You can try on shoes to your heart’s content, knowing that returns are painless and free. All you have to do is print out a pre-paid return label and drop the package in the mail.
- Returns accepted up to 365 days from original purchase.
- Free overnight delivery. If your order is placed by 1 p.m., it ships the next day.
- Everything in stock. Zappos doesn’t make an item available on its website unless it is physically present in their warehouse.
- 24/7 call center to solve any service problems.
Admittedly, these services do not come cheap. But Zapppos believes service is the differentiator that makes them successful, so they invest heavily.
Where they do not invest is in marketing. The Zappos marketing strategy is based primarily on word-of-mouth, generated thanks to the enthusiasm of their customers, base on an excellent shoe-buying experience.
Zappos limits its marketing investments to low-cost tactics:
- An affiliate scheme called the Associates Program, which generates a 12% referral fee for sites who establish a link to Zappos and whose customers then buy shoes.
- Search engine marketing, with bids on relevant keywords like “shoes†and “high heels†as well as names of well-known shoe brands.
- Bi-monthly email newsletters to 3 million customers, plus subscription-based emails on specific brands or sizes.
- A social-networking email called Shoe Digest sent 3 times a week, that allows customers to discuss various topics like the right shoes for a wedding, or the best running shoe for a marathon
- Small ads in targeted media like The New Yorker magazine, with a compelling tag line: “You’re into great shoes. We’re into great service.â€
Another strategy Zappos pursues in its quest for excellent service is an intense focus on employee satisfaction and employee development. The company has created a warm, even quirky, culture intended to nurture and sustain its 1,500 employees. Every year, the CEO, Tony Hsieh, invites employees to write a 100-word description of the company that is published in an annual book. A dot-com era zaniness still characterizes the company, for example, employees dressing up with tiaras and top hats to conduct interviews with prospective new hires.
As to salaries, Zappos pays somewhat below its competitors. Instead, they invest in perks, like 100% medical and dental coverage, and free lunches, snacks and drinks in the office.
And the Zappos website is a shopping dream. The enormous number of SKUs are still easy to find, and browse. Visitors can choose to view 12 shoes or 99 shoes on a page. Or click for a quick look at a bigger picture and a product description.
The Zappos web store takes full advantage of Web 2.0 tools, with such features as:
- Product reviews contributed by customers
- Customer ratings based on a shoe’s looks, comfort and overall satisfaction
- A YouTube page of video testimonials from customers
The strategy is paying off. Over 65% of its transactions are from repeat customers. Nielsen Online put Zappos as #3 in terms of unique visitors among apparel and beauty sites in January 2008, just after eBay. And Tony Hsieh has proclaimed a sales goal for 2008 of $1 billion.
To fuel its growth even fasterr, Zappos bought the footwear division of eBags, a site called 6pm, which is positioned as a deep discounter. Zappos is running 6pm as a separate brand but with its transactional back office shared with Zappos. Similarly, Zappos “powers†the e-commerce sites of several shoe brands, like Stuart Weitzman and Taryn Rose.
But the competition is also evolving. Amazon recently introduced its new line of shoes and handbags at a site called Endless.com, which is matching the free 2-way shipping policy pioneered by Zappos. Who knows whether Zappos’s service differentiation approach will stand the test of time.
