Abstracting the blogosphere

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How Zappos turned profitable by Startup-review.com

Posted by suntzu on September 22, 2006

Following reasons:

  • They recognized that people buy shoe by brand. They knew they were not going to build zappos shoe brand so they didn’t bother to spend on it. They chose to spend on SEM i.e. Search Engine Marketing.
  • They were aware that they don’t have to educate consumers. The consumers knew their product well. Money saved is spent on SEM i.e. Search Engine Marketing again.
  • Shoes are sold with around 50% margin. This again gives lot of money to spend on SEM campaigns.
  • They understood that customers wouldn’t mind buying shoe online as long as they could easily return it. Zappos followed free return shipping up-to 365 days on defective or unworn shoes.
  • They understood that they are competing with offline retailers who makes it possible to buy a shoe in less than an hour. They brought down 4-5 days road shipping to next day air shipping. This had HUGE impact.
  • Excellent customer service. All customer reps were properly trained and directed to remain helpful and generous towards customer.
  • They started with small number of brands. This avoided building inventory.
  • They avoided drop shipping as it leads to less fulfillment to consumers.

Author provides good insight about Zappos turnaround. At the end of the post are links to some good referenced articles. Skip the full post.

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