E-commerce Done Right

By: Matt Stempeck | March 9, 2008

What happens when you take all of the money you were going to spend on marketing and advertising and pour it into customer service instead? Well, first of all, customer service becomes a core value rather than an isolated department.

Zappos is an online shoe store born during the dot-com heyday. Their creation story isn’t particularly inspiring: they saw people selling stuff like pet food online and figured shoes would work, too. But they’ve since evolved into a manifestation of everything that is good about e-commerce (or online shopping, for those who swore off adding e- to everything).

I know Zappos from the boxes that come in and out of our office as my colleague Chris tries on shoes via overnight shipping. He loves sneakers, and Zappos exists for people like him. They don’t go after the bargain hunters and aren’t trying to be everything to everyone. They’ve just taken some big risks to attract and keep the kind of customer they want to serve it’s paid off. Zappos will hit $1 billion in revenue this year.

Listening to the presentation, it’s not immediately clear how. Everything they’ve done has been a short-term financial sacrifice in favor of long-term investment. In short, their accounting department must be used to hearing the word ‘no’.

Some examples of customer-friendly policies:

  • Free shipping both ways
  • Surprise most customers with free upgrade to overnight shipping
  • Pay more to run factory 24/7 to process faster
  • 365 day return policy
  • Sending exchanged items before actually receiving the return slip

Their call center sounds like a place you might actually want to call. You’ll actually find the phone number, because it’s at the top of every page on the site. They don’t measure average call time, they don’t up-sell, they refer to competitors, and everyone who answers the phone is already authorized to do what it takes to make you happy (even if that means, in one case, looking up local pizza parlors).

It’s a bold strategy. Their entire model consists of pleasing customers and creating “story-worthy moments”. These moments ideally become organic word of mouth marketing. Ever the online organizer, I asked if Zappos had considered any explicit online word of mouth campaigns or tools. Outside of a basic tell-a-friend tool, they have not. They just please people as thoroughly as possible and count on them to spread the good word.

(CEO Tony Hsieh presented)

And they’re picky. In two ways:
1. Picky with customers: They took the hyped promise of the Internet (sell to anyone, anywhere) and converted it (sell to some people, anywhere).
2: Picky with employees: Not just in the traditional sense. In fact, they turn down a lot of quality candidates who might do the company a lot of good. They do this because they work on the belief that company culture is paramount to everything else.

It’s generally agreed that culture is critical to any great company. But when you’re growing quickly, how do you maintain the culture that makes your company what it is?

You make your company values more than a plaque on the wall. They make up 50% of performance reviews and reasonable grounds for firing (or not hiring) someone. Employees must walk the talk, starting the first day with their 5-week training program, which consists of working the warehouse and answering the phone for weeks at a time. That includes senior management.

So, to summarize, Zappos’ short-term profit loses to investments in culture and thrilling customers.

I’m way too excited that this works for them and that the Internet enables it to happen.