In its second-largest acquisition, Amazon buys the company for $970 million.
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At Zappos.com, shoppers can choose from half a million SKUs of footwear--a market niche that Zappos handles so well that sales have more than doubled in each of its six years to a projected $175 million this year.
But Zappos doesn`t see itself as only a shoe retailer. "Our goal is to build up the Zappos name to associate it with getting the best service possible online," says president Tony Hsieh.
That will set up Zappos, which already sells handbags as well as shoes, with a retail horizon unlimited in the kinds of products it can offer, he says. So far, Zappos has set a brisk pace of building up customer service as well as sales. As Hsieh sees it, the two are directly linked.
By limiting spending on marketing, Zappos dedicates more of its resources to developing a strong customer service staff, already at 100 reps and growing, as well as an unusual blend of customer-serving features. As warehouse workers scan the bar codes on new products, for instance, the reader automatically triggers an e-mail to particular customers that there`s something new in their size.
Figuring that many customers like to focus on new styles, Zappos recently upgraded its site navigation to let shoppers click into a new-style-only section within product categories. "We keep focusing on providing the best service and customer shopping experience," Hsieh says.
Zappos, which Hsieh says is profitable, intends to grow into additional product categories gradually as it determines demand for them. Apparel might be a good next step, he adds.
Mary Brett Whitfield, senior vice president of consultants Retail Forward Inc., gives Zappos high marks for its site features and its emphasis on service, which includes free shipping on all orders and returns. "They give shoppers a high comfort level," she says.
But expanding into categories like apparel raises a new set of challenges, she adds. "Apparel shoppers demand more assistance with product details, which could include virtual models," Whitfield says.
But Hsieh says Zappos won`t lose sight of its focus on customer service as it expands. "More than 50% of our sales are from repeat customers," he says. "That`s a pretty good indicator of how happy people are with our site."
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