Lessons We Can Learn From Zappos Part 2 of 2

By Tinuiti Team

In Part 1, we established that Zappos is all about one thing: extraordinary customer service.  There are certain aspects of this “extraordinary” that any retailer can adopt and master, even if not electing to focus primarily on customer service.  Let us continue our lesson.

Drop Shipping

In Zappos’ early years, the company didn’t carry any inventory and so they relied primarily on drop shipping.  Drop shipping means that the different shoe manufacturers shipped their products directly to customers, rather than going through Zappos.  They found that this wasn’t the best way to go about shipping because they never received accurate information regarding their vendors’ inventories.  On top of it, estimated shipping times are less predictable when you have numerous separate vendors spread out across the country.

Lesson Learned: Don’t drop ship.  You may have to start out doing this if you’re in the early stages of your company, but it should remain a mere means to an end.  Buy your inventory instead so that you alone are responsible for delivering your customers’ orders on time.

Free Shipping

One of Zappos’ most unique aspects of their customer service is their free shipping policy.  If you haven’t already figured out in today’s online shopping world, free shipping is a make-or-break point for many online shoppers and is quickly becoming an expected bonus.  Remarkably, Zappos removes almost all the risk in their transactions by offering free shipping both ways, for purchases and returns.

In addition, they couple this with their unheralded 365-day return policy.  Zappos actually started out with a 30-day return policy, but kept increasing it because they found that customers became happier and kept returning with the gradual increase.

The reality is that 2-way free shipping in addition to a 365-day return policy can burden considerable costs on a merchant, yet Zappos, being the customer-centric company that they are, views these costs as marketing expenses.

VIP Membership

Another of Zappos’ more unique features of their online store is the opportunity for VIP Membership.  The VIP status entails that those select customers will receive free next business day shipping on all their orders in addition to some other exclusive features.  The concept of VIP Membership can be very beneficial to your online store because not only does it subtly instill a sense of a belonging and loyalty in a customer to the specific retailer, but the added benefits that come along with it are a logical reason for why a customer would return to your stores for future purchases.

You don’t even have to offer free or upgraded shipping, and to offer something like a free monthly coupon for X % off or better tiered discounts exclusively to members only would be enticing.  The idea relates back to our bottom line question:  How far are you willing to go to offer a unique, exceptional experience for your customers?

Warehouse Management

With the purchasing of inventory came significant warehousing costs for Zappos, yet it’s another tool that Zappos uses to better the customer experience.  The most efficient way to go about running a warehouse is to let orders pile up, so that your workers can grab more products in a smaller range of the warehouse.

Zappos has a different warehousing policy.  They leave their warehouse open 24/7 and fulfill orders the moment they’re received.  This is indeed another significant cost that Zappos self-imposes for the sake of the customer, but it sends out products more quickly and quite simply, it reinforces Zappos outstanding reputation for product fulfillment.

Brand vs. Reputation

On that note, let’s talk about your brand and your reputation.  To dispel any preconceived notions, they’re not the same thing.  For example, Coca Cola and Sony are unquestionably two of the most well-known brands in the world.  But what’s their reputation?  They arguably don’t really have one.  Sure they have solid products, but a retailer that lets their products alone speak for their brand and reputation will never separate itself from the pack.  Besides, you don’t need me to tell you that once another retailer figures out how to offer the same quality of products as you do (god forbid at a lower price), then you’ve just lost your only selling point.

You have to provide more for your customers.  You need a reputation.  I’m talking about how sociable and helpful is your customer service?  How effective and efficient is your fulfillment? Do you go the extra mile and do random nice deeds for loyal customers?  Do you make it a priority to beat your competitors’ prices?  All these questions essentially boil down to an essential question you NEED to ask yourself: What’s your company’s reputation?  Only by developing your reputation will you be able to both grow and protect your brand.


The lesson we can learn from Zappos is that they’ve found unheralded success by going above and beyond for their customers.  More importantly, they legitimately express this core value in their everyday business operations.  If you decide to take your customer service, or any other business aspect, to a new level, you need to quite figuratively put your money where your mouth is.  The first step is deciding who you’re trying to please, customers or employees?  Once you’ve accepted that going above and beyond often requires some self-sacrificing, the next step, and truly the hard part, is identifying how you can make this focus exceptional and unique.

In case you missed it, check out “Lessons We Can Learn From Zappos Part 1” here.

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