Zappos ETail Europe - Top 10 Lessons Learned in eCommerce

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Top 10 Lessons Learned in eCommerce - presented at eTail Europe Conference June 4, 2008

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Zappos ETail Europe - Top 10 Lessons Learned in eCommerce

  1. 1. Tony Hsieh Alfred Lin CEO COO/CFO Etail Europe Conference -- June 4, 2008
  2. 2. Zappos at a Glance <ul><li>Background </li></ul><ul><ul><li>Founded in 1999 </li></ul></ul><ul><ul><li>Zappos is powered by service </li></ul></ul><ul><ul><ul><li>Providing the best online shopping experience possible. </li></ul></ul></ul><ul><ul><ul><li>Fast Free Shipping . Free return shipping. 365-day return policy. </li></ul></ul></ul><ul><ul><ul><li>Fast fulfillment. Expedited delivery. Fast, friendly & expert customer service. </li></ul></ul></ul><ul><ul><li>Best selection </li></ul></ul><ul><ul><ul><li>Over 1200 brands. </li></ul></ul></ul><ul><ul><ul><li>Over 200,000 styles. </li></ul></ul></ul><ul><ul><ul><li>Over 900,000 unique UPCs. </li></ul></ul></ul><ul><ul><ul><li>Over 4.0 million items in our warehouse. </li></ul></ul></ul><ul><ul><ul><li>100% of products inventoried (no drop ship). </li></ul></ul></ul><ul><ul><li>Zappos is a service company that happens to sell shoes, clothing, handbags, eyewear, watches (and eventually a bunch of other stuff). </li></ul></ul>
  3. 3. Customer service value proposition in action… <ul><li>Zappos is committed to WOWing each and every customer. </li></ul><ul><ul><li>Customers come… </li></ul></ul><ul><ul><ul><li>8.0M total purchasing customers (2.7% of US population) </li></ul></ul></ul><ul><ul><ul><li>3.5M have purchased in the last 12 months </li></ul></ul></ul><ul><ul><li>Customers come back… </li></ul></ul><ul><ul><ul><li>On any given day, ~75% of purchases from returning customers </li></ul></ul></ul><ul><ul><ul><li>Repeat customers order >2.5x in the next 12 months </li></ul></ul></ul><ul><ul><li>Customers come back, order more and order more often… </li></ul></ul><ul><ul><ul><li>Repeat customers have higher average order size </li></ul></ul></ul><ul><ul><ul><li>$111.98 – first time customers in Q406 </li></ul></ul></ul><ul><ul><ul><li>$143.22 – returning customer in Q406 </li></ul></ul></ul>
  4. 4. Accolades for Zappos.com… <ul><ul><li>Zappos.com was named “2005 E-tailer of the Year” by Footwear News </li></ul></ul><ul><ul><li>Zappos.com listed in Inc. Magazine’s 500 Fastest Growing Private Companies four years in a row (2004, 2005, 2006, 2007). </li></ul></ul><ul><ul><li>Zappos.com rated the fastest-growing top 100 web site by Internet Retailer </li></ul></ul><ul><ul><li>Zappos.com called “positively the best place to buy shoes online” by Time Magazine’s list of the 50 Coolest Websites. </li></ul></ul><ul><ul><li>Zappos.com was voted as a “Top 50 Retail Site” by Internet Retailer </li></ul></ul><ul><ul><li>Zappos.com has continually been rated the #1 traffic site in the footwear industry, according to Alexa.com </li></ul></ul><ul><ul><li>Zappos.com receives over 3.0M unique visitors per month </li></ul></ul><ul><ul><li>Zappos.com goal is to “WOW” each and every customer that visits the site; on any given day over 75% of our customers are repeat customers </li></ul></ul><ul><ul><li>Ranked #1 in customer satisfaction for apparel and accessories by ForeSee Results </li></ul></ul>
  5. 5. The popular press has taken note of Zappos’ commitment to WOW each and every customer.
  6. 6. But we pay more attention to our customers…. <ul><ul><li>To: Zappos </li></ul></ul><ul><ul><li>From: XXXXX BaehrBaehr </li></ul></ul><ul><ul><li>Subject: </li></ul></ul><ul><ul><li>I understand you referred an on-line customer to us for a Kate Spade wedding shoe. I wanted to say THANK YOU very much!! we are so new and small that this one order means a great deal to us. And just so you know, we refer our customers to you as well. </li></ul></ul><ul><ul><li>Gratefully yours, </li></ul></ul><ul><ul><li>XXXXX BaehrBaehr </li></ul></ul><ul><ul><li>Feet Shoe Boutique </li></ul></ul><ul><ul><li>www.baehrfeet.com </li></ul></ul>Sample customer emails <ul><ul><li>To: Zappos </li></ul></ul><ul><ul><li>From: Michael XXXXX </li></ul></ul><ul><ul><li>Subject: </li></ul></ul><ul><ul><li>My name is Michael XXXXX. I just ordered two pair of New Balance 606s in navy and grey on 3-26-07. You guys really sold me with the free 1 day shipping on New Balance. Did I mention I got them today? One day later! I didn't think I had made the 1pm PST cut-off, but I guess I did. I just wanted to let you know how happy I am with the super-fast service. I ordered a pair of work boots from you a couple of years ago and was quite happy with them as well. So when I found out the 606s were discontinued, I figured I would try to get a pair. You were the first place I looked. The price was right and the free 1 day shipping sealed it. Zappos is the best! Since I ordered two pair, I might not need sneakers any time soon. But I will certainly pass on my great experience to my friends. Thanks again. You made my day! </li></ul></ul><ul><ul><li>– Mike </li></ul></ul>
  7. 7. Word of mouth speaks louder than press clippings… 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008F Gross Sales $1.6 $8.6 $31.9 $70.1 $184.4 $370.4 $597.0 $840.0 $1,000 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Gross Sales ($ in Ms)
  8. 8. Customer Service in Action
  9. 9. Customer Service: What Customers First See <ul><ul><li>24/7 1-800 number on every page </li></ul></ul><ul><ul><li>Free fast shipping </li></ul></ul><ul><ul><li>Free return shipping </li></ul></ul><ul><ul><li>365-day return policy </li></ul></ul>
  10. 10. Customer Service: What Customers Experience <ul><ul><li>Fast, Accurate Fulfillment </li></ul></ul><ul><ul><li>Most customers are “surprise”-upgraded to overnight shipping </li></ul></ul><ul><ul><li>Friendly, helpful “above and beyond” customer service </li></ul></ul><ul><ul><li>Occasionally direct customers to competitors’ web sites </li></ul></ul>
  11. 11. Customer Service: What We Do Internally <ul><ul><li>No call times </li></ul></ul><ul><ul><li>No sales-based performance goals for reps </li></ul></ul><ul><ul><li>Run warehouse 24/7 </li></ul></ul><ul><ul><li>Inventory all product (no drop-ship) </li></ul></ul><ul><ul><li>5-week customer service and culture training for everyone in Las Vegas </li></ul></ul><ul><ul><li>Interviews and performance reviews are 50% based on core values and culture fit </li></ul></ul><ul><ul><li>Culture book </li></ul></ul>
  12. 12. Top 10 Lessons in E-commerce
  13. 13. LESSON #1 THE E-COMMERCE BUSINESS IS BUILT ON REPEAT CUSTOMERS.
  14. 14. Repeat Customer Data for Zappos.com % customers who buy again within next 12 months (repeat customers) avg # purchases by repeat customers over next 12 months % repeat customers multiplied by avg # purchases March 2001 20.4% 1.50 0.31 March 2002 27.0% 1.74 0.47 March 2003 33.5% 1.96 0.66 March 2004 44.6% 2.36 1.05 March 2005 51.0% 2.53 1.29 March 2006 51.3% 2.66 1.37 March 2007 54.9% 2.68 1.47
  15. 15. LESSON #2 WORD OF MOUTH REALLY WORKS ONLINE.
  16. 16. LESSON #3 DON'T COMPETE ON PRICE.
  17. 17. LESSON #4 MAKE SURE YOUR WEB SITE INVENTORY IS 100% ACCURATE.
  18. 18. LESSON #5 CENTRALLY LOCATE YOUR DISTRIBUTION.
  19. 19. LESSON #6 CUSTOMER SERVICE IS AN INVESTMENT . (NOT AN EXPENSE)
  20. 20. LESSON #7 START SMALL. STAY FOCUSED.
  21. 21. LESSON #8 DON'T BE SECRETIVE. DON'T WORRY ABOUT COMPETITORS.
  22. 22. LESSON #9 YOU NEED TO ACTIVELY MANAGE YOUR COMPANY CULTURE.
  23. 23. Our Core Values <ul><ul><li>Deliver WOW Through Service </li></ul></ul><ul><ul><li>Embrace and Drive Change </li></ul></ul><ul><ul><li>Create Fun and a Little Weirdness </li></ul></ul><ul><ul><li>Be Adventurous, Creative, and Open-Minded </li></ul></ul><ul><ul><li>Pursue Growth and Learning </li></ul></ul><ul><ul><li>Build Open and Honest Relationships with Communications </li></ul></ul><ul><ul><li>Build a Positive Team and Family Spirit </li></ul></ul><ul><ul><li>Do More with Less </li></ul></ul><ul><ul><li>Be Passionate and Determined </li></ul></ul><ul><ul><li>Be Humble </li></ul></ul>
  24. 24. <ul><ul><li>From: Dana C. </li></ul></ul><ul><ul><li>I placed an order with your company on Saturday... Your employee ... spoke with me on the phone. I am battling breast cancer and this girl sent me the NICEST card, a bouquet of flowers which were received on Monday, card, flowers, and shoes. You couldn't have a nicer employee. </li></ul></ul><ul><ul><li>Talk about GREAT Customer Service, she is the GREATEST! I can't thank her enough for all she has done. I never expected the card or flowers. All I had asked was for the shoes to be sent overnight. She asked me what her favorite color was, and if I guessed it she would send the shoes overnight. </li></ul></ul><ul><ul><li>When I answered her that I didn't know her favorite color but mine has become PINK, due to battling breast cancer, she told me she would send them. Again I PRAISE Her and your company for SUPERIOR CUSTOMER SERVICE. </li></ul></ul><ul><ul><li>Many thanks go out to her and your company. </li></ul></ul>Email from a customer…
  25. 25. LESSON #10 BE WARY OF SO-CALLED EXPERTS. INCLUDING US...
  26. 26. Questions and Answers <ul><ul><li>Email us… </li></ul></ul><ul><ul><ul><li>Tony Hsieh (CEO) Alfred Lin (COO/CFO) </li></ul></ul></ul><ul><ul><ul><li>Tony[at]zappos.com alfred[at]zappos.com </li></ul></ul></ul><ul><ul><li>for: </li></ul></ul><ul><ul><ul><li>A copy of this presentation </li></ul></ul></ul><ul><ul><ul><li>Answers to any additional questions not addressed today </li></ul></ul></ul><ul><ul><ul><li>Copies of our culture book </li></ul></ul></ul><ul><ul><ul><li>Tour of our offices when you’re next in Las Vegas </li></ul></ul></ul><ul><ul><ul><li>Job Opportunities </li></ul></ul></ul><ul><ul><li>Follow us on Twitter: </li></ul></ul><ul><ul><ul><li>Tony Hsieh (CEO) Alfred Lin (COO/CFO) </li></ul></ul></ul><ul><ul><ul><li>http://twitter.com/zappos http://twitter.com/zappos_alfred </li></ul></ul></ul>
  27. 27.
  28. 28. <ul><ul><li>P.S. You might be wondering why we need to have a legal and financial disclaimer in this presentation, but you are still reading, so our lawyers, auditors and accountants would really like to make sure we make the following clarifications. </li></ul></ul><ul><ul><li>Although an audit was underway and almost done, the financial information presented in this slide show was unaudited. We made every effort to present the best information we had at the time. </li></ul></ul><ul><ul><li>Gross merchandise sales is a non-GAAP metric. We use it to express the total demand across all of our web sites and stores. This number measures the dollar value of the orders placed in the year before accruing for certain items such as returns, and it ignores certain timing cut-offs that are required by GAAP for revenue recognition purposes. If we were a public company, we would have to reconcile gross merchandise sales to the nearest GAAP metric (net sales), but we are currently a private company so the gross merchandise sales number should be viewed just as an interesting number that we want to share with our friends. </li></ul></ul><ul><ul><li>This presentation contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they ever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by the forward-looking statements and assumptions. These risks and uncertainties include, but are not limited to, the risk of economic slowdown, the risk of over or underbuying, the risk of consumers not shopping online or at our web site at the rate we expected, the risk of supplier shortages, the risk of new or growing competition, the risk of a natural or some other type of disaster affecting our fulfillment operations or web servers, and the risk of the world generally coming to an end. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements of expectation or belief; and any statement of assumptions underlying any of the foregoing. Zappos.com assumes no obligation and does not intend to update these forward-looking statements. </li></ul></ul><ul><ul><li>Congratulations on making it through all the fine print. If you enjoy fine print, look for openings on our legal and finance team at jobs.zappos.com . </li></ul></ul>Legal and Financial Disclaimer

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