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Focusing on Service - Nick Swinmurn's Key Move

Nick Swinmurn is not one of those guys who hangs around shoe stores just to meet women. He was there to observe the shortcomings of nob retailers. And he has cobbled his conclusions into a snugly successful Web-based shoe seller, Zappos.com.

Nick graduated from college in 1996 with only the vague idea that he wanted to succeed in business. He knocked around for awhile, serving as a group-ticket salesman for the San Diego Padres of Major League Baseball and then as a sales manager for a successful Net-based automotive retailer.

But then, one day, he went to the mall in search of another pair of his favorite Van’s shoes. “I couldn’t find the shoes that I wanted, and that was frustrating,” Nick recalls. “I’d worn Van’s my whole life and they just happened not to carry this certain style anymore. And I started thinking that if what happened to me was a common experience, there might be a business in trying to solve it.”

Being a child of the Net generation, Nick’s other main question about his notion was whether it could translate into a web-based business.

“I found out that the footwear industry is a $40-billion business and that 5% -- already at that point -- was done by mail order,” he recalls. “I realized that a shoe store might carry only 10 brands and a few styles of each – but in reality there are hundreds of brands of shoes, each offering dozens of styles. And if someone has extra-narrow or extra-wide feet, they’re restricted in what they can find.

“A lot of customers didn’t know how much footwear really was available, and what they were seeing in bricks-and-mortar wasn’t reflective of the variety.”

But what about fit – can you really sell shoes online when how a pair fits is such an important part of satisfying the customer? “I wondered about that, but the fact is reality most people are the same size in most shoes,” Nick answers.

In early 1999, Nick experimented with the concept using a couple of small shoe stores in his neighborhood and then bounced his idea around at a shoe-industry trade show. By June, he had raised $150,000 in initial capital from friends and family, and in July he snared a key recruit for his venture: a shoe buyer from Nordstrom, the department-store chain. “It created validity for my company in the eyes of the shoe brands,” Nick says.

And now, shoe manufacturers are coming to him: Zappos.com, with nearly 500 employees (just a tad under the SBA’s definition of a small business at “500 employees or less”), generated sales of $184 million last year and is on its way to more than $300 million in sales for 2005.

Nick’s Key Move: Focusing on Service

Consumers will purchase just about anything on the web as long as it’s easy to reverse the transaction if they aren’t happy with it. Shoes can be a little trickier to sell online than, say, books. But Nick has found that providing great service has helped Zappos.com overcome just about any qualm that a customer can have.

Sharp, complete images of each pair of shoes. Free shipping. A 365-day policy for the return of defective or unworn shoes. Quick response when a customer calls for service. All of those things make a difference.

Perhaps most important, says Nick, is how Zappos.com has used rapid delivery to narrow the “convenience gap” for consumers between online retailing and running to a store.

“What we’re trying to do is bridge the gap between the experiences,” he explains. “To buy shoes from a store, you have to drive there, wait maybe 15 minutes and drive home. The whole thing might take you an hour and a half. But a lot of people are willing to take the time to do that instead of ordering their shoes online – even being sure it’s the exact pair they want – and waiting five days to get them.”

So Zappos.com focused on shipping orders the same day they’re received and offering free two- and three-day delivery. “In many cases,” Nick says, “customers know they’re going to get the shoes tomorrow, and most of them are happy about that.”

As the site emphasized this practice and other hallmarks of great service, Nick says, the buzz about Zappos.com has risen steadily.

“Every day, 60% of our orders are from repeat customers, and another 20% are from people who heard about us through word of mouth,” he says. “That’s exactly the kind of formula you want. And we wouldn’t have it without providing superior service.”

Nick’s Bonus Insight:

Surely the best defense can be a good offense – Zappos.com zipped to leadership in online shoe retailing largely because Nick took a well-considered chance and ran hard with it.

But he’s also smart enough to realize the importance of high “barriers of opportunity” in preserving his spot at the top. “It has taken us a long time to get some brands on board, and it would take someone else a long time to duplicate that work,” he says.

Good luck also helps: Nordstrom ran its own, dedicated shoe site for awhile, which “actually validated the industry for us” in the eyes of consumers and investors. Then the chain folded its Internet shoe business back into its humongous Nordstrom.com business – leaving the field to Zappos.com.