Zappos is reportedly worth $1.2 billion. What was once an unpopular idea not only became mainstream but started a chain reaction that birthed many e-commerce sites. In this guide, we look at how Zappos became a billion-dollar shoe brand and much more in just a decade.
What would you do if you couldn’t find what you were looking for? You would probably give up, go to bed, because you got work in the morning. But not Nick Swinmun. He couldn’t rest until he found the right pair of shoes, which happened to be Airwalk Desert Chukka shoes. And when he looked and still couldn’t find the right blend of size, color, and style.
Can you imagine what he did? He opened an online shoe store out of frustration.
It was 1991, the internet had reached its adulthood, and the world saw the first email from space sent by Astronauts Shannon Lucid and James C. Adamson that read: “Hello Earth! Greetings from the STS-43 Crew.”
It was an exciting time for internet startups because the internet was opened to the public. Amazon was one of the very first eCommerce sites that started selling products online. So you see why the fervid Swinmurn would be optimistic about selling shoes online. He foresaw the future, realized that there’s potential for eCommerce, and acted upon it.
He quit his job and started shoesite.com that we now know as Zappos with the mission:
“When 30% of Americans start buying shoes online, Zappos will offer the best styles and the customer service.”
A lot of the earlier investors either turned away or didn’t see potential in the idea. So Swinmurn built the scaffolding for his startup using funds collected from friends and family.
In late 1999, Swinmun met with Tony Hsieh (Venture Frogs) and the two found common ground. In the early days of Zappos, Tony reportedly spent millions to keep the company afloat.
Zappos growth strategies
1. A customer-centric approach
From day one, Zappos has been customer-centric, putting customer satisfaction first even when it costs the company a lot of money. Although the company’s business model started as dropshipping, after Hsieh joined, it changed to delivery and fulfillment.
In 2002, the company created its own 825,000 square-foot fulfillment center in partnership with UPS, so it could eliminate the glitches in the pipeline and make product delivery faster. Just a year later, the company started offering 365-day returns to make sure that customers can try their shoes and exchange if they don’t find the right fit.
On the surface, it doesn’t look like a smart strategy to offer such a long return period. But in the long run, Zappos retained many of its customers. Today, over 75% of Zappos purchases are made by long-term customers.
Just a year later, in 2003, the company started hiring agents that would help customers through support. By 2005, Zappos had upped its customer service game by hiring additional agents that would fulfill customer requests on phone. According To the Zappos website, one agent stayed on a call with a customer for over 6 hours!
Customer service is pertinent for a successful business. We see that Zappos has been utilized as one of the core growth strategies. It’s one of those strategies that easily stands the test of time–Zappos has been in service for over 20 years and has grown from a million-dollar company to an almost 2 billion-dollar company.
2. Stringent employee hiring and training
Another growth factor that we have noticed in Zappos 20 years of service is finding the right candidates for the job. Zappos’ recruits have to fit in emotionally, socially, and intellectually. So it’s not your run-of-the-mill job interview. As of 2014, Zappos has adjourned the conventional job postings and has since moved to hire the right candidates through ‘team ambassadors’. These ambassadors look very closely at the applicants who apply to be “insiders” rather than candidates. The ambassadors do a series of video interviews to see if the insiders are a good fit for the company before they are invited for the “real” job interview.
If the candidates are not local, they are treated to a free Zappos ride from the airport to the company’s headquarters in Las Vegas. If the candidates don’t treat the driver right, they are just checked off the list without any further consideration. Hsieh told the Wall Street Journal, “It doesn’t matter how well the day of interviews went, if our shuttle driver wasn’t treated well, then we won’t hire that person.”
Even after the employees are hired, they have to go through rigorous training that includes a whole week on the job. If by the end of that week, they decide the company is not for them, they are offered a $2000 bonus and a payment for their time. According to Zappos, about 2-3% of the new hires take the offer.
Earlier, Hsieh introduced “Holacracy” and offered employees to quit with a severance package if they didn’t want to be a part of a new system. Around 210 employees out of 1,503 took the offer and quit.
Lessons learned from Zappos hiring strategy
Zappos isn’t looking for short-term employees, they are looking to build a family that can go on forever. So the company wants to make sure that the employees are not only good at their job but can easily adapt. We believe that this is a significant factor in Zappo’s growth. Unlike many other companies, Zappos doesn’t have to go through the hiring process over and over. They train their employees and make sure they are around for a long time to become a part of Zappo’s self-governing teams. Those who don’t want to are eliminated so only the right people stay on board.
3. An open mind towards diversification
According to Zappos’s official website, the company became more than just shoes when it started acquiring other brands and launched its clothing line called Newbalance. And in 2008, the company launched Zappos insights which is focused on helping other growing businesses build more sales. Perhaps it’s the constant innovation and acquisition of new strategies that Amazon bought the company for a whopping all-stock deal of $1.2 billion.
Lessons learned from 20 years of Zappos
1. Make customer service your priority. Make your customer your God; leave no stone unturned to facilitate a customer.
2. Find the right people who can become long-term contributions to your company. Part ways with employees who are no longer “contributors”.
3. Always be on your toes. Whenever an opportunity presents itself, grab it by its reins. Zappos has actively taken on massive opportunities by branching out into different companies.
In our opinion, Zappos was never a shoe company; it has always been and will always be a customer service company. And as long as it has its core values administered through rigorous self-governing mechanisms, Zappos will continue to be fruitful in the coming years.