The Legend of Zappos – Building a Brand with great Customer Service


How did they do it? Seemingly, this one question is what everyone wants to be answered. How? In an atmosphere of commerce and e-tailing where just delivering the product was considered an achievement in itself, how did these guys come in and create the impact they did? Not easy questions to answer, you might think.

 Well, wrong.

Zappos did it because they got their priorities right.

But still, how?

The answers can be found if we explore the history behind arguably the biggest customer service brand on the planet.

The Birth of Zappos

It was 1999. Nick Swinmurn wanted to buy a pair of Airwalks from his local store. He couldn’t find them, as much as he searched for it, and it was there that he saw an opportunity. He came up with a plan to sell shoes online, nothing more, nothing less, and approached Tony Hsieh and Alfred Lin of Venture Frogs with what he’d charted out. Tony Hsieh wasn’t too impressed with the idea and almost deleted Swinmurn’s voice mail. But as luck would have it, seeing some merit in the Bay Area entrepreneur’s pitch, Venture Frogs invested $500,000 in what was first called, quite simply, A few months later, the shoe site became Zappos.

After pulling in revenues of over $8.5 million in 2002, Hsieh and Zappos executives decided that the company needed some direction, a guiding principle, that would set them apart from the ever-growing crop of online retailers. They sat down and set down some long-term goals for 2010.

Any other organization that had achieved this volume of success so fast would have concentrated on profits and the numbers associated with it. But this is where Zappos took the first steps towards becoming what they are today. They did not just make the plans. They gave themselves a cause and executed it with single-minded ruthlessness.

The Execution

The first step that indicated that they were doing things differently was when Zappos abandoned Drop Shipping, which then accounted for 25% of their revenue base. Dropshipping is the practice when the retailer does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer.

The decision was based on supplying superior customer service, which would later become what Zappos would stand for. As Hsieh said at that time, “I wanted us to have a whole company built around customer service and we couldn’t control the customer experience when a quarter of the inventory was out of our control.”

In 2008, Zappos hit $1 billion in annual sales, two years earlier than expected, and a year later, they fulfilled their other long-term goal, debuting at #23 on Fortune’s Top 100 Companies to Work For. And in 2009, Amazon announced that it would buy Zappos for $940 million, wherein Zappos would continue operating as a separate entity from within Amazon.

How did the company grow so fast? For most of its formative years, Zappos had minimal advertising, and the company grew mainly by word of mouth and by repeat customers. It turns out that 75% of Zappos’ customers are repeat clientele, which is a mind-blowing stat.

There is no secret here. Zappos became Zappos because of the fanatical customer support is offered. That is the company’s brand. As Hsieh puts it, “Back in 2003, we thought of ourselves as a shoe company that offered great service. Today, we really think of the Zappos brand as about great service, and we just happen to sell shoes.”

The company’s policies are drawn from their stated goal of giving “the best service in the industry”. Shipping is free, they have a 365-day return policy, and of course, they have the legendary Zappos call center. The service has acquired cult status, customers swear by it, and thousands refuse to buy from anywhere except Zappos.

The Legends themselves

Here are a couple of stories that might help you understand the type of service that Zappos distinguishes itself on.

Zaz Lamarr meant to return some shoes to Zappos, but her mother passed away and, naturally, she just didn’t have the mental time for it. Replying to a Zappos mail regarding the return, Lamarr sent a short reply stating that her mother had died and that she would get around to doing it soon. Zappos arranged to have UPS come and pick up the shoes, so she could take care of more important things – and then sent her flowers.

In 2009, a traveler checked into a hotel in Las Vegas, Nevada. When the traveler was unpacking she realized that she’d forgotten a pair of her favorite shoes. She had purchased the missing shoes at Zappos, so she headed to its website. When she could not find another pair of the same shoes, she called to service. Zappos no longer had the shoes, but its headquarters are just outside of Las Vegas. The Zappos team located the shoes at a nearby mall, went there, purchased the shoes, and then hand-delivered them to her hotel, all at no charge.

There are other stories out there in the blogosphere, some of them truly incredible. But what is evident is that delivering great customer service works. Zappos has built a brand from the bottom up focusing on only one principle – exceptional customer service. There is no reason why others can’t as well.

Getting the Culture right

In 2009, Zappos was awarded for the “best use of social media” by Abrams Research. Company policies encourage employees to engage customers on Social Media and give them authority to amaze customers however they want. Hsieh’s edict to employees is to present a human face to customers, to let them know that someone at Zappos is listening, and waiting to give them anything they might need. They have succeeded in doing this. Zappos employees are explicitly told to go above and beyond traditional customer service. Call center employees don’t have scripts, and there is no limit on call times. The longest call recorded was reportedly over five hours long.

After saying all this, it is important to state that it isn’t easy to build a company with all its employees united by a single-minded dedication to the cause. The values have to be embedded in the organization, the employees have to believe in it, support agents should be given a lot of decision-making authority. Hsieh’s belief is that “if we get the culture right, then everything else, including the customer service, will fall into place.” He’s right. Whatever processes are put in place, if the passion is missing, all the effort will be for nothing.

Today, there are customer support tools that enable you to do what Zappos does. Some of them have evolved so much that it actually makes it easier for you (than Zappos might have found it then) to serve customers on Social Media. It’s just the small matter of the decision to do so, and then enabling your organization as well.

In conclusion, it is important to remember that rules can be easily framed and hanged on a wall, but only if the spirit of customer service is infused inside an organization, will an organization even come close to what Zappos has achieved.

PS – Zappos were ranked 6th on Fortune’s list of “Best Companies to Work For” in 2011.