SxSW 2008: Top Ten Lessons Learned in E-Commerce

by Luke Wroblewski March 9, 2008

At SxSW 2008, Zappos CEO Tony Hsieh outlined the evolution of the Zappos brand from an online shoe retailer to a culture rooted in excellent customer service in his Top Ten Lessons Learned in E-Commerce talk.

  • Zappos wants to primarily be associated with their customer service not with selling shoes. They are primarily a shoe retailer (started out as shoesite.com) but are moving into sharing clothes, fragrances, and more.
  • Zappos’ business is driven by repeat customers. Customer Service is branding opportunity used to drive word of mouth.
  • Examples of Zappos’ commitment to great customer service: 24/7 1-800 number on all web pages, free shipping, free return policy, 365 day return policy, and 24/7 warehouse fulfillment.
  • Zappos runs their warehouse 24 hours a day, which adds cost but allows them to fulfill orders immediately. Most customers are “surprised” with a free upgrade to overnight shipping. All inventory is held –no drop shipping.
  • Customer Service department does not measure call times and do no try to up-sell customers.
  • All employees get 5 weeks of culture, core values, and customer service training. Interviews & performance reviews are 50% based on core values and cultural fit. Rest of stuff falls into place when culture is right.
  • Provides “culture book” to all employees and allow them to add their content –what Zappos means to them.
  • Lesson 1: e-commerce business is built on repeat customers. In 2001, 20% of people bought again in 12 months with 1.5 average purchases. In 2008, 50% bought more than once with 2.56 average purchases.
  • Lesson 2: word of mouth really works online. Repeat customers on word of mouth are number one drivers of growth for Zappos.
  • Lesson 3: don’t compete on price. Price-conscious shoppers do not stay loyal. If only there for a discount, not true to your brand.
  • Lesson 4: Make sure inventory is completely accurate. Zappos had to build from the ground-up. Used manufacturers to drop ship and had inaccurate inventory lists.
  • Lesson 5: Centrally locate your distribution –helps ensure fulfillment.
  • Lesson 6: Customer Service is an investment not an expense. Need to think in long terms vs. minimizing costs.
  • Lesson 7: Start small & stay focused. Gradually grow into new businesses.
  • Lesson 8: Don’t be secretive. Don’t worry about competitors. Allow people to access extranet that show mark downs, inventory, etc. Traditionally retailers are very secretive. Zappos is very open with vendors & partners. They help to run the business without additional costs.
  • Lesson 9: Need to actively manage your company culture. Zappos has turned away people that were not a cultural fit but were very talented.
  • Lesson 10: Be wary of so-called experts. Consultants provided bad advice at Zappos that had to be undone. Trust your gut more and do what you feel is right. No one knows your business like you do.