Roughly four years into the game, Hsieh decided it was time to look beyond shoes and move hiscompany toward a more significant mission. His epiphany was the result of learning throughresearch that companies serving customers with a higher purpose outperformed those that focusedon market leadership and profitability in the long run.
Putting the Customer in Customer Service
In 2003, the Zappos brand evolved from an online shoe etailer toward a customer-centricorganization powered by service. Everything started with looking at the pains customers wereexperiencing and the options they faced when making purchase decisions. One of the biggest sorespots for the company was something that was out of the company’s realm of control. While dropshipping equated to 25% of the annual revenue at the time, it was also the very thing that preventedthe company from keeping its promise of delivering exceptional customer service. If the companywas truly to become customer-focused, it would need to take control of the entire experience, frombeginning to end. After killing drop shipping and taking control of its inventory, Zappos’ newcustomer service program resembled that of industry retail giant Nordstrom where the customer experience was paramount. Leaders for both companies will say that doing so, directly correlatesservice to loyalty, repeat business, word of mouth, and increased revenues.“If you’re looking for a pair of shoes, and we’re out of your size, we made it part of our policy to refer them to a competitor that had it in stock.”Almost immediately, the team noticed a difference Customers weren’t the only people singingZappos’ praises. Employees were more engaged and passionate as a result. The new focus gaverepresentatives something they could stand behind. Customers could hear the passion of the personon the other end of the phone. They cared. And, vendors noticed too. Suddenly their onsite visitswould increase in frequency and length to see what the new Zappos was all about.Focusing on customer service caused a snowball effect that helped Zappos soar to new heights. Atthe end of 2003, Zappos nearly doubled its revenues to $70mm. By 2004, the company earned$184mm.
Business leaders, especially innovators, are continually looking at what’s working, but moreimportantly, what’s possible. By the close of 2004, the Zappos team believed that focusing oncustomers and their experiences had not only boosted revenues by 600%, doing so created a globalcommunity of enthusiasts and advocates behind the Zappos brand. In 2005, the team was set for itsbiggest transformation yet.“We never really paid much attention to what other companies were doing. We never knew that thedecisions we made were in direct contrast to those of our competitors.”Tony believed that if making customers happy would help improve business, then focusing oncompany culture was a natural progression. Making company culture the number one priorityresulted in the creation of a pipeline team, a group of trained professionals who host more than 40classes to help improve morale and career development. Courses ranged from career andinterdepartmental training to Zappos history to personal development programs such as strengthfinders, the science of happiness, and optimism. In 2005, early Zappos investor and professional lifecoach Dr. Vic moved into the Zappos HQ. He offered onsite coaching to employees looking for empowerment and direction and as a result, employees continued to evolve from a role driven by