How free shipping saved Zappos By Jennifer Reingold

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Part 2

Reingold starts then the story by pointing out that some business decisions are made after hours and hours of impassioned debate with intense analysis, however sometimes the decisions are often quickly produced because nothing can be better than them. Because that is what happened at Zappos in 1999, where a decision for conducting a free shipping and returns services was made. This decision elevated the company to the best satisfying service supporter in the world, which is more than just mere a shoe company. Nick Swinmurn, the Zappo’s founder that time in 1999, was desperate to survive in online shoe selling industry. Under the prospecting companies that time including, eToys, and, to be successful Swinmurn approached Tony Hsieh, a venture capitalist who had sold his company LinkExhange for $265 million. Swinmurn had talks with Hsieh to gain funding from him. Agreeing to invest for a few months until more can be raised from other big capital firms, Hsieh requested one condition to Swinmurn to bring someone who really knows about shoes in his company. That is when Fred Mossler, who has experienced selling shoes at Nordstrom, was hired by Swinmurn.  Zappos seemed to have its business material-related weaknesses in that nobody would like to buy easily shoes without trying them on and the business took the fast running out of cash. Knowing these elements, Mossler and Swinmurn decided to offer free return services for customers so that they can try even several times their shoes without paying for a delivery. Cost analysis was not taken by them, neither probability of its success was known. They followed their intuitions to offer this service despite of such uncertainty. They did not even upload a banner promoting this service on their main page; a customer needed to see the customer service page to know more about this service.

Part 3

Their intuitions brought greatly positive responses from their customers. The numbers of customers and their orders started to increase, which influenced Hsieh to keep funding the company. Other online retailers also started to have free shipping services but Zappos still was distinct from them considering that they have free returns as well. When it comes to costs, around 40% of the total orders made in Zappos were returned which the company considered as marketing fees. It was added in this chapter that customers who bought shoes from Zappos with loyal and highest payment were also the biggest returners. Reingold then described her own experience when she ordered eight pairs of black boots to try on, then returned seven out of them to select only the best one that fits well with his/her design preference. Aside from free shipping and return services, Zappos were well aware of the importance in relationship with customers which inspired the company in 2003 to have their own stocking and shipping control for their own inventory. Swinmurm quoted, ‘’There came a point where we realized we were not really an Internet or tech company; we were really a shoe store’’ (Jennifer Reingold, 2012: 42). When Hsieh and Mossler had a drink one day, they decided then to have another momentous decision to equip a brick-and-mortar store, not only an online store, with their own warehouse. Zappos fired its existing logistics company and built their own system called WHISKY (Ware House Inventory System in KentuckY), which brought dramatic sales increase from $1.6 million in 2000 to $8.6 million the next year and $32 million the following year. Zappos enabled faster shipping system in this way to raise higher customer satisfaction.