December 2, 2003, 12:00 AM

Specialty / Apparel and Accessories:Stitching the details into winning formulas

(Page 7 of 7)

WesternWarehouse.com
Date
1999
Unique Visitors (monthly)
NA
Site Design
in-house
CRM
in-house/Sale Point
Affiliate Management
Be Free
Fulfillment
in-house
Order Management
in-house
Web Analytics
Site Brand
Payment Processor
Bank of America
Content Management
in-house/Site Brand
E-Mail Management
CoolerEmail
Site Search
Foresite Design
Search Engine Management
Traffic Leader
Content Delivery Network
Site Brand

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Zappos.com
Service and selection walk together

Since joining footwear retailer Zappos.com as an investor and CEO in 1999, Tony Hsieh has set a goal of reaching $1 billion in sales by 2010.

That goal may sound lofty, but consider the performance of Zappos so far: Sales have surged each year, climbing from $1.6 million in 2000 to $8.6 million in 2001, then to $32 million in 2002. Hsieh says this year he’s on pace to hit $70 million and realize his first year of net profits. Next year, he figures to reach $125 million.

So Hsieh speaks matter-of-factly about hitting 2010 sales of $1 billion-and that’s only in footwear. “We chose the name Zappos because it doesn’t limit us to any one product category,” he says. Already Zappos is experimenting with sales of handbags designed to match footwear styles from brands like Kenneth Cole and Anne Klein, and it’s planning to roll out more handbags early next year. Longer term, it’s also looking at apparel and other lines. “We could expand to any category,” Hsieh says. “We don’t want people to think of us as a shoe company.”

Zappos is gearing up for growth with a focus on customer service while limiting expenditures on marketing and technology. Its in-house IT team, for example, developed a warehousing system with open-source software that individually codes each of the more than 350,000 pairs of footwear in Zappos’s inventory and provides shoppers real-time view of each SKU’s availability.

Saving on operating costs has enabled Zappos to invest in other areas to further improve customer service, Hsieh says. A year ago, Zappos kept about $5 million worth of inventory in its warehouse; now it keeps $13 million and plans to expand inventory further. “We’re adding brands, and within brands, more styles and sizes,” he says.

Jim Okamura, senior partner with retail consultants J.C. Williams Group, says Zappos’ broad product selection coupled with a high level of customer service could be a winner. “They’ve been able to deliver a big, broad selection with a high degree of customer service-and that’s unusual, because it’s usually one or the other,” he says.

Zappos offers free shipping on all orders and returns. But while it promises free delivery within four to five days, it upgrades most orders at no charge to second-day delivery. “That results in our customers being happier,” Hsieh says. “We absorb the extra cost of shipping as a marketing cost. But about 20% of our customers say they heard about us through word-of-mouth, so it’s worth it.”

Zappos.com
Date
1999
Unique Visitors (monthly)
2,000,000
Sales (annual)
$70,000,000
Site Design
in-house
CRM
in-house
Affiliate Management
Commission Junction/in-house
Fulfillment
in-house
Order Management
in-house
Web Analytics
in-house
Payment Processor
Authorize.net
Content Management
in-house
E-Mail Management
in-house
Site Search
in-house
Search Engine Management
in-house
Content Delivery Network
Akamai

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