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We would still need to convince the brands to sell to us.
We would need to update our software to enable our Web site to sell
We would need a warehouse to hold all the inventory we were buying.
To address number 2, we would need to open up a physical retail store and hire staff to actually run it.
come up with the cash to purchase the inventory we wanted.
We had been shipping out of California, which meant that ground shipments to the East Coast were taking as long as seven or eight days. By shipping out of a more central state such as Kentucky, we would be able to reach 70 percent of our customers within two days by UPS ground.
Meanwhile, it was getting stressful back at Zappos. Things weren’t going well at eLogistics. The salesman had oversold their capabilities, and a lot of our customers weren’t getting what they had ordered. From a company-survival point of view, though, what was even worse was that as more and more pallets of new shoes that we had ordered were showing up in our new warehouse, the eLogistics staff wasn’t able to put them away in a timely manner.
This meant that we couldn’t offer any of those items on our Web site. We calculated that we were losing tens of thousands of dollars’ worth of sales every day
We told the people at eLogistics that we had opened up our own warehouse because we weren’t happy with the service levels we were getting from them. We told them that they still had a chance to keep our business, but we were going to have our WHISKY warehouse operations compete against their operations for shipping and inventory accuracy. Every week, if WHISKY outperformed eLogistics, then we would take ten thousand pairs of shoes out of eLogistics and move them over to the WHISKY warehouse.
It was a valuable lesson. We learned that we should never outsource our core competency.
As an e-commerce company, we should have considered warehousing to be our core competency from the beginning. Outsourcing that to a third party and trusting that they would care about our customers as much as we would was one of our biggest mistakes.
Our strategy of combining inventoried product with drop shipped product continued to drive our sales growth. We ended up doing $32 million in gross merchandise sales in 2002—almost four times what we had done in 2001.
Internally, we set an audacious long-term goal for Zappos: $1 billion in gross merchandise sales by 2010. It was a big number, but based on our growth rate so far, we felt confident that we could get there.
I thought back to my poker days and about the most important decision being which table to sit at. We had been sitting at the online footwear sales table. It was time to make a switch and move to a bigger table. I wondered if we could think of something even bigger than shoes, handbags, and apparel online.
“We had a customer e-mail us the other day,” I said. “He had ordered a pair of shoes that we had in our warehouse and we surprised him with a shipping upgrade so that he got his order in two days instead of our original promise of a week. He said he loved our customer service and would tell his friends and family about us.
“He talks about what separates the great companies from just the good ones over the long term. One of the things that he found from his research was that great companies have a greater purpose and bigger vision beyond just making money or being number one in a market. A lot of companies fall into the trap of just focusing on making money, and then they never become a great company.”
At the time, about 75 percent of our sales were coming from inventoried product. If it wasn’t for our decision to start carrying inventory, our gross merchandise sales in 2002 would have been $8 million instead of $32 million. For 2003, we were projecting sales to double, with about 25 percent of our overall sales coming from our drop ship business. The drop ship business was easy money. We didn’t have to carry inventory so we didn’t have any inventory risk or cash-flow problems with that part of the business. But we had plenty of customer service challenges.
The inventory feeds that we were getting from our vendors for our drop ship business were 95 percent accurate at best, meaning that we would not be able to actually fulfill 5 percent of all of our drop ship orders.
On top of that, the brands did not ship as quickly or accurately as our own WHISKY warehouse, which meant we had plenty of unhappy and disappointed customers. But it was easy money. We all knew deep down inside that we would have to give up the drop ship business sooner or later if we were serio...
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To keep our culture strong, we wanted to make sure that we only hired people who we would also enjoy hanging out with outside the office. As it turned out, many of the best ideas came about while having drinks at a local bar.
someone else chimed in. “You know what?” I said. “We should just ask all of our employees to write a few paragraphs about what the Zappos culture means to them, and compile it all into a book.” And just like that, the idea for the Zappos Culture Book was born,
Looking back, a big reason we hit our goal early was that we decided to invest our time, money, and resources into three key areas: customer service (which would build our brand and drive word of mouth), culture (which would lead to the formation of our core values), and employee training and development (which would eventually lead to the creation of our Pipeline Team).
Cultivating the Culture Book by Jenn
Over the years, the number one driver of our growth at Zappos has been repeat customers and word of mouth. Our philosophy has been to take most of the money we would have spent on paid advertising and invest it into customer service and the customer experience instead, letting our customers do the marketing for us through word of mouth.
We put our phone number (1-800-927-7671) at the top of every single page of our Web site, because we actually want to talk to our customers. And we staff our call center 24/7.
As unsexy and low-tech as it may sound, our belief is that the telephone is one of the best branding devices out there. You have the customer’s undivided attention for five to ten minutes, and if you get the interaction right, what we’ve found is that the customer remembers the experience for a very long time and tells his or her friends about it.
Usually marketing departments assume that the lifetime value of a customer is fixed when doing their ROI calculations. We view the lifetime value of a customer to be a moving target that can increase if we can create more and more positive emotional associations with our brand through every interaction that a person has with us.
a lot of customers order as late as midnight EST, and are surprised when their orders show up on their doorstep eight hours later. This creates a WOW experience,
we don’t measure call times (our longest phone call was almost six hours long!), and we don’t upsell.
what we’ve found is that on average, every customer contacts us at least once sometime during his or her lifetime, and we just need to make sure that we use that opportunity to create a lasting memory.
Top 10 Ways to Instill Customer Service into Your Company 1. Make customer service a priority for the whole company, not just a department. A customer service attitude needs to come from the top. 2. Make WOW a verb that is part of your company’s everyday vocabulary. 3. Empower and trust your customer service reps. Trust that they want to provide great service… because they actually do. Escalations to a supervisor should be rare. 4. Realize that it’s okay to fire customers who are insatiable or abuse your employees. 5. Don’t measure call times, don’t force employees to upsell, and
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Find and hire people who are already passionate about customer service. 10. Give great service to everyone: customers, employees, and vendors.
In most companies, logging in to the computer systems requires a login and password. At Zappos, an additional step is required: a photo of a randomly selected employee is displayed, and the user is given a multiple-choice test to name that employee.
We’ve formally defined the Zappos culture in terms of 10 core values: 1. Deliver WOW Through Service 2. Embrace and Drive Change 3. Create Fun and a Little Weirdness 4. Be Adventurous, Creative, and Open-Minded 5. Pursue Growth and Learning 6. Build Open and Honest Relationships with Communication 7. Build a Positive Team and Family Spirit 8. Do More with Less 9. Be Passionate and Determined 10. Be Humble
So the challenge to everyone is this: Make at least one improvement every week that makes Zappos better reflect our core values. The improvements don’t have to be dramatic—it can be as simple as adding in an extra sentence or two to a form to make it more fun, for example. But if every employee made just one small improvement every week to better reflect our core values, then by the end of this year we will have over 50,000 small changes that collectively will be a very dramatic improvement compared to where we are today.
We are ever evolving. If we want to continue to stay ahead of our competition, we must continually change and keep them guessing. Others can copy our images, our shipping, and the overall look of our Web site, but they cannot copy our people, our culture, or our service.
The applicant is willing to think and act outside the box. • “Give me an example from your previous job(s) where you had to think and act outside the box.” • “What was the best mistake you made on the job? Why was it the best?” • “Tell me about a time you recognized a problem/area to improve that was outside of your job duties and solved without being asked to. What was it, how did you do it?” The applicant is more creative than the average person. • “Would you say you are more or less creative than the average person? Can you give me an example?” • “If it was your first day on the job at
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At Zappos, we think it’s important for employees to grow both personally and professionally. It’s important to constantly challenge and stretch yourself, and not be stuck in a job where you don’t feel like you are growing or learning. We believe that inside every employee is more potential than even the employee himself/herself realizes. Our goal is to help employees unlock that potential.
Sometimes it may seem that new problems crop up as fast as we solve the old ones (sometimes faster!), but that just means that we’re moving—that we’re getting better and stronger. Anyone who wants to compete with us has to learn the same things, so problems are just mile markers. Each one we pass means we’ve gotten better.
It may seem sometimes like we don’t know what we’re doing. And it’s true: we don’t. That’s a bit scary, but you can take comfort in knowing that nobody else knows how to do what we’re doing either.
In any relationship, it’s important to be a good listener as well as a good communicator. Open, honest communication is the best foundation for any relationship, but remember that at the end of the day it’s not what you say or what you do, but how you make people feel that matters the most. In order for someone to feel good about a relationship, they must know that the other person truly cares about them, both personally and professionally.
The best leaders are those that lead by example and are both team followers as well as team leaders. We believe that in general, the best ideas and decisions are made from the bottom up, meaning by those on the front lines that are closest to the issues and/or the customers. The role of a manager is to remove obstacles and enable his/her direct reports to succeed. This means the best leaders are servant-leaders. They serve those they lead.
Many corporations like to say that their people are their most important asset. There are a few problems with that approach. First, as soon as someone leaves, you’ve lost an asset.
Our philosophy at Zappos is different. Rather than focusing on individuals as assets, we instead focus on building as our asset a pipeline of people in every single department with varying levels of skills and experience, ranging from entry level all the way up through senior management and leadership positions.
“If you have more than 3 priorities then you don’t have any.” —Jim Collins
In the end, it turns out that we’re all taking different paths in pursuit of the same goal: happiness.
As I studied the field more, I learned that one of the consistent findings from the research was that people are very bad at predicting what will actually bring them sustained happiness. Most people go through their lives thinking, When I get ___, I will be happy, or When I achieve ___, I will be happy.
Happiness is really just about four things: perceived control, perceived progress, connectedness (number and depth of your relationships), and vision/meaning (being part of something bigger than yourself).
Studies have shown that engaged employees are more productive, and that the number of good friends an employee has at work is correlated with how engaged that employee is.
Pleasure The pleasure type of happiness is about always chasing the next high.
