Tony Hsieh’s first entrepreneurial effort began at the age of 12 when he started his own custom button business. Realizing the importance of advertising, Hsieh began marketing his business to other kids through directories, and soon his profits soared to a few hundred dollars a month. Throughout his adolescence, Hsieh started several businesses, and by the time he was in college he was making money selling pizzas out of his Harvard dorm room. Another entrepreneurial student, Alfred Lin,bought pizzas from Hsieh and resold them by the slice, making a nice profit. Hsieh and Lin quickly became friends. After Harvard, Hsieh founded Link Exchange in 1996, a company that helped small businesses exchange banner ads. A mere two years later, Hsieh sold Link Exchange to Microsoft for $265 million. Using the profits from the sale, Hsieh and Lin formed a venture capital company that invested in start-up businesses. One investment that caught their attention was Zappos, an online retailer of shoes. Both entrepreneurs viewed the $40 billion shoe market as an opportunity they could not miss, and in 2000 Hsieh took over as Zappos’ CEO with Lin as his chief financial officer.

QUESTION

Case Study 4: Zappos

Tony Hsieh’s first entrepreneurial effort began at the age of 12 when he started his own custom button business. Realizing the importance of advertising, Hsieh began marketing his business to other kids through directories, and soon his profits soared to a few hundred dollars a month. Throughout his adolescence, Hsieh started several businesses, and by the time he was in college he was making money selling pizzas out of his Harvard dorm room. Another entrepreneurial student, Alfred Lin,bought pizzas from Hsieh and resold them by the slice, making a nice profit. Hsieh and Lin quickly became friends. After Harvard, Hsieh founded Link Exchange in 1996, a company that helped small businesses exchange banner ads. A mere two years later, Hsieh sold Link Exchange to Microsoft for $265 million. Using the profits from the sale, Hsieh and Lin formed a venture capital company that invested in start-up businesses. One investment that caught their attention was Zappos, an online retailer of shoes. Both entrepreneurs viewed the $40 billion shoe market as an opportunity they could not miss, and in 2000 Hsieh took over as Zappos’ CEO with Lin as his chief financial officer.

Today, Zappos is leading its market and offering an enormous selection of more than 90,000 styles of handbags, clothing, and accessories for more than 500 brands. One reason for Zappos’ incredible success was Hsieh’s decision to use the advertising and marketing budget for customer service, a tactic that would not have worked before the Internet. Zappos’ passionate customer service strategy encourages customers to order as many sizes and styles of products as they want, ships them for free, and offers free return shipping. Zappos encourages customer communication, and its call center receives more than 5,000 calls a day with the longest call to date lasting more than four hours. Zappos’ extensive inventory is stored in a warehouse in Kentucky right next to a UPS shipping center. Only available stock is listed on the website, and orders as late as 11 p.m. are still guaranteed next-day delivery. To facilitate supplier and partner relationships, Zappos built an extranet that provides its vendors with all kinds of product information, such as items sold, times sold, price, customer, and so on. Armed with these kinds of details, suppliers can quickly change manufacturing schedules to meet demand.

Zappos Culture
Along with valuing its partners and suppliers, Zappos also places a great deal of value on its employee relationships. Zappos employees have fun, and walking through the offices you will see all kinds of things not normally seen in business environments—bottle-cap pyramids, cotton-candy machines, and bouncing balls. Building loyal employee relationships is a critical success factor at Zappos, and to facilitate this relationship the corporate headquarters are located in the same building as the call center (where most employees work) in Las Vegas. All employees receive 100 percent company-paid health insurance along with a daily free lunch.
Of course, the Zappos culture does not work for everyone, and the company pays to find the right employees through “The Offer,” which extends to new employees the option of quitting and receiving payment for time worked plus an additional $1,000 bonus. Why the $1,000 bonus for quitting? Zappos management believes that is a small price to pay to find those employees who do not have the sense of commitment Zappos requires. Less than 10 percent of new hires take The Offer.
Zappos’ unique culture stresses the following:
1. Delivering WOW through service
2. Embracing and driving change
3. Creating fun and a little weirdness
4. Being adventurous, creative, and open-minded
5. Pursuing growth and learning
6. Building open and honest relationships with communication
7. Building a positive team and family spirit
8. Doing more with less
9. Being passionate and determined
10. Being humble
Zappos’ Sale to Amazon
Amazon.com purchased Zappos for $880 million. Zappos employees shared $40 million in cash and stock, and the Zappos management team remained in place. Having access to Amazon’s world-class warehouses and supply chain is sure to catapult Zappos’ revenues, though many wonder whether the Zappos culture will remain. It’ll be interesting to watch!19

ANSWER

Zappos: A Case Study in Exceptional Customer Service and Unique Company Culture

Introduction

Zappos, an online retailer of shoes and accessories, has emerged as a market leader through its unwavering commitment to customer service and its distinct company culture. Founded by Tony Hsieh and Alfred Lin in 2000, Zappos revolutionized the way customers interact with an e-commerce platform. This case study delves into the key factors that contributed to Zappos’ phenomenal success, including their customer-centric approach, innovative strategies, and employee-focused culture. Furthermore, we explore the impact of Zappos’ acquisition by Amazon and the potential implications for its future.

Customer-Centric Approach

Zappos’ remarkable achievement can be attributed to its unique approach to customer service. Recognizing the power of word-of-mouth marketing and the rise of the Internet, CEO Tony Hsieh made a strategic decision to allocate the advertising and marketing budget to provide exceptional customer service instead. This strategy allowed Zappos to differentiate itself from competitors and build a loyal customer base. The company offers free shipping and hassle-free returns, encouraging customers to order multiple sizes and styles to find the perfect fit. Zappos’ commitment to open communication with customers is evident through their high-volume call center, where representatives are empowered to engage in meaningful conversations and ensure customer satisfaction.

Innovative Supply Chain Management

Zappos’ success is not solely attributed to exceptional customer service. The company has also invested in streamlining its supply chain to ensure prompt delivery and a vast product inventory. By strategically locating their warehouse next to a UPS shipping center in Kentucky, Zappos can guarantee next-day delivery for orders placed as late as 11 p.m. Additionally, Zappos developed an extranet to facilitate efficient communication with suppliers, enabling them to adjust manufacturing schedules promptly and meet customer demand (Jarren, 2015). These innovative supply chain management practices have enabled Zappos to provide a wide range of products and maintain high customer satisfaction.

Employee-Focused Culture

At the heart of Zappos’ success lies its unique company culture, which places a strong emphasis on fostering positive relationships with employees. The company’s headquarters in Las Vegas is located in the same building as the call center, where most employees work. This physical proximity reinforces a sense of unity and ensures that employees remain connected to the company’s mission. Zappos goes above and beyond to nurture its employees by providing 100 percent company-paid health insurance and daily free lunches (Tjan, 2014). Moreover, the company implements a distinct hiring strategy called “The Offer,” which offers new employees the option to quit and receive a bonus. This approach helps identify individuals who align with Zappos’ culture of commitment and dedication.

Zappos’ Core Values

Zappos has established a set of core values that guide its operations and define its unique culture. These values include delivering exceptional service, embracing change and creativity, fostering a fun and unconventional environment, promoting personal and professional growth, nurturing open and honest communication, cultivating a positive team spirit, optimizing resources, displaying passion and determination, and embracing humility (Agarwal, 2018). These values have not only shaped the company’s success but have also contributed to its ability to attract and retain loyal customers and employees.

Acquisition by Amazon

In 2009, Amazon.com acquired Zappos for $880 million. The acquisition provided Zappos with access to Amazon’s world-class warehouses and supply chain, potentially accelerating its revenue growth. However, there are concerns about how this partnership might impact Zappos’ unique culture. It remains to be seen whether Zappos can preserve its distinct values and maintain the same level of customer service and employee satisfaction under Amazon’s ownership.

Conclusion

Zappos’ remarkable journey from a startup to a market leader in the online retail industry is a testament to the power of exceptional customer service and a strong company culture. By prioritizing customer satisfaction and nurturing positive employee relationships, Zappos created a loyal customer base and a motivated workforce. While its acquisition by Amazon introduces new opportunities, the challenge lies in preserving the core values and culture that have been instrumental in Zappos’ success. As we witness the evolution of Zappos under Amazon’s ownership, the industry eagerly awaits how this iconic brand will continue to shape the future of online retail.

References

Agarwal, P. (2018, August 30). How To Create A Positive Workplace Culture. Forbes. https://www.forbes.com/sites/pragyaagarwaleurope/2018/08/29/how-to-create-a-positive-work-place-culture/ 

Jarren, Y. (2015). IS3223 Group5 Zappos final. Nus. https://www.academia.edu/11905807/IS3223_Group5_Zappos_final 

Tjan, A. K. (2014, July 23). Four Lessons on Culture and Customer Service from Zappos CEO, Tony Hsieh. Harvard Business Review. https://hbr.org/2010/07/four-lessons-on-culture-and-cu