DanielsFundEthicsInitiative
UniversityofNewMexico
http://danielsethics.mgt.unm.edu Zappos:DeliveringHappinessto
Stakeholders
INTRODUCTION
Canacompanyfocusedonhappinessbesuccessful?Zappos,anonlineretailer,isprovingthatitcan.
Thecompany’srevenuegrewfrom$1.6millionin2000to$1.64billionin2010.TonyHsieh,
Zappos’CEOsays,“It’sabrandabouthappiness,whethertocustomersoremployeesoreven
vendors.”Zappos’zanycorporatecultureandfocusoncustomersatisfactionhasmadeitboth
successfulandamodelforothercompanies.
ThiscaseexamineshowZappos’focusonstakeholderhappinesshascontributedtoitssuccess.
First,weexaminethehistoryofZappos,itscorevalues,anditsuniquebusinessmodel.Next,we
analyzethecompany’scorporatecultureandhowitinfluencesitsrelationshipswithemployees,
customers,theenvironment,andcommunities.Wethenlookatsomeofthechallengesthecompany
hasfacedandhowitplanstomoveintothefuture.
HISTORY
NickSwinmurnfoundedZapposin1999afterafruitlessdayspentshoppingforshoesinSan
Francisco.Afterlookingonline,Swinmurndecidedtoquithisjobandstartashoewebsitethat
offeredthebestselectionandbestservice.OriginallycalledShoeSite.com,thecompanystartedasa
middleman,transferringordersbetweencustomersandsuppliersbutnotholdinganyinventory(a
“dropship”strategy).ThewebsitewassoonrenamedZappos,aftertheSpanishwordforshoes
(zapatos).
In2000,entrepreneurTonyHsiehbecamethecompany’sCEO.Hsieh,26atthetime,wasanearly
investorinZappos,havingmade$265millionsellinghisstartupcompanytoMicrosoftin1998.
Hsiehwasn’tinitiallysoldontheideaofanInternetshoestore.HetoldInc.magazine,“Itsounded
liketheposterchildofbadInternetideas…butIgotsuckedin.”AfterbecomingCEO,Hsiehmadean
unconventionaldecisiontokeepZapposgoing,evensellinghisSanFranciscolofttopayforanew
warehouseandoncesettinghissalaryatjust$24.
Zapposstruggledforitsfirstfewyears,makingsalesbutnotgeneratingaprofit.Thedot‐comcrash
forcedZappostolayoffhalfitsstaff,butthecompanyrecovered.Bytheendof2002,Zapposhad
salesof$32millionbutwasstillnotprofitable.In2003,thecompanydecidedthatinordertooffer
thebestcustomerservice,ithadtocontrolthewholevaluechain—fromordertofulfillmentto
delivery—andbeganholdingitsentireinventory.ZapposmovedtoLasVegasin2004totake
advantageofalargerpoolofexperiencedcallcenteremployees.Thecompanygenerateditsfirst
profitin2007afterreaching$840millioninannualsales.Zapposalsostartedtoberecognizedfor
itsuniqueworkenvironmentandapproachtocustomerservice.
ThismaterialwasdevelopedbyHarperBaird,BernadetteGallegos,andBeauSheltonunderthedirectionofO.C.FerrellandLindaFerrell.It
isprovidedfortheDanielsFundEthicsInitiativeattheUniversityofNewMexicoandisintendedforclassroomdiscussionratherthanto
illustrateeffectiveorineffectivehandlingofadministrative,ethical,orlegaldecisionsbymanagement.Usersofthismaterialareprohibited
fromclaimingthismaterialastheirown,emailingittoothers,orplacingitontheInternet.PleasecallO.C.Ferrellat505‐277‐3468formore
information.(2012) 2
In2010,Amazonboughtthecompanyfor$1.2billion.AlthoughHsiehhadrejectedanofferfrom
Amazonin2005,hebelievedthatthisbuyoutwouldbebetterforthecompanythanmanagement
fromthecurrentboardofdirectorsoranoutsideinvestor.Hsiehsaid,“WithAmazon,itseemedthat
Zapposcouldcontinuetobuilditsculture,brand,andbusiness.Wewouldbefreetobeourselves.”
AmazonagreedtoletZapposoperateindependentlyandtokeepHsiehasCEO(athiscurrent
$36,000annualsalary).Hsiehmade$214millionfromthemerger,andAmazonsetaside$40
millionfordistributiontoZapposemployees.Afterthemerger,thecompanyrestructuredinto10
separatecompaniesorganizedundertheZapposFamily.
COREVALUES
Zapposhastencorevaluesthatguideeveryactivityatthecompanyandformtheheartofthe
company’sbusinessmodelandculture.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
DeliverWOWthroughservice.
Embraceanddrivechange.
Createfunandalittleweirdness.
Beadventurous,creativeandopen‐minded.
Pursuegrowthandlearning.
Buildopenandhonestrelationshipswithcommunication.
Buildapositiveteamandfamilyspirit.
Domorewithless.
Bepassionateanddetermined.
Behumble.
Zappos’corevaluesdifferfromthoseofothercompaniesinacoupleofways.Inadditiontobeing
untraditional,thecorevaluescreateaframeworkforthecompany’sactions.Thisisexemplifiedin
thecompany’scommitmenttotheircustomers’andemployees’well‐beingandsatisfaction.
ZAPPOS’CUSTOMER‐FOCUSEDBUSINESSMODEL
TheZapposbusinessmodelisbuiltarounddevelopinglong‐termcustomerrelationships.Zappos
doesnotcompeteonpricebecauseitbelievesthatcustomerswillwanttobuyfromthestorewith
thebestserviceandselection.Thecompanystrivestocreateauniqueandaddictingshopping
experience,offeringawideselectionofshoes,apparel,accessories,andhomeproducts,free
shippingtothecustomer,freeshippingandfullrefundsonreturns,andgreatcustomerservice.
SHOPPINGANDSHIPPING
Zapposstrivestomaketheshoppingexperienceenjoyable.Thewebsiteisstreamlinedforaneasy
shoppingexperience.Productsaregroupedinspecializedsegments,withsome(likeoutdoor
products)ontheirownmini‐sites.Customerscanvieweachproductfrommultipleanglesthanksto
photographstakenatthecompany’sstudio,andZapposemployeesmakeshortvideoshighlighting
theproduct’sfeatures.Zapposanalyzeshowcustomersnavigatethesitetoimprovefeatures,adapt
searchresults,andplaninventory.
3
Thespiritofsimplicity,innovation,andgreatserviceextendstoZappos’inventoryanddistribution
systemsaswell.Zapposhasoneofthefewliveinventorysystemsontheweb.IftheZapposwebsite
displaysanitem,itisinstock.Oncethecompanysellsoutofanitem,thelistingisremovedfromthe
website.Thishelpstoreducecustomerfrustration.Itsinventoryandshippingsystemsarelinked
directlytothewebsiteviaacentraldatabase,andallitsinformationsystemsaredevelopedin‐
houseandcustomizedtothecompany’sneeds.Theirwarehousesoperatearoundtheclock,which
allowsthemtogetaproducttothecustomerfaster.Fastshippingcreatesaninstantgratification
thatissimilartoshoppinginaphysicalstore.
Mostcompanieshaveanegativeviewtowardreturns,butZappos’mentalityisthecomplete
opposite.Itseesreturnsastheabilitytomaintaincustomerrelationshipsandtoincreaseitsprofits.
Zapposoffersa100%SatisfactionGuaranteedReturnPolicy.Ifacustomerisnotsatisfiedwitha
purchase,heorshecanreturnitwithin365daysforafullrefund.Thecustomercanprintapre‐
paidshippinglabelthatallowsalldomesticcustomerstoreturntheproductforfree.Thisreturn
policyencouragescustomerstoorderseveralstylesordifferentsizesandreturntheitemsthatdo
notworkout.
Whilethisstrategyseemsexpensive,itactuallyworkstoZappos’advantage.Theaverageindustry
merchandisereturnrateis35percent,butZappos’mostprofitablecustomerstendtoreturn50
percentofwhattheypurchase.Thecustomerswhohavethehigherreturnpercentagesarethe
mostprofitablebecausetheyhaveexperiencedZappos’customerserviceandreturnpolicy,which
createloyaltytothecompany.Thesecustomersarelikelytomakepurchasesmoreoftenandto
spendmoreoneachpurchase.CraigAdkins,whoisthevicepresidentofservicesandoperations,
statedthatthisisexactlywhathasmadeZappossosuccessful,saying,“Sinceitcoststhesameto
shipa$300pairofpumpsasitdoesa$30pairofsandals,theZappospolicyofwinningover
shopperswithitsreturnspolicyhashelpedtobringinhighprofitmarginsonmanyofitsorders.”
CUSTOMERSERVICE
WhatreallymakestheZapposbusinessmodeluniqueisthecompany’sfocusoncustomerservice.
Thecompanyhasestablishedamethodofservingcustomersandhandlingtheirissuesthatis
distinctivefromtherestoftheindustry.Zapposbelievesgreatcustomerserviceisanopportunity
tomakethecustomerhappy.
CustomersareencouragedtocallZapposwithanyquestions.Thenumberisdisplayedonevery
pageofthewebsite.Hsiehsays,“…AtZappos,wewantpeopletocallus.Webelievethatforming
personal,emotionalconnectionswithourcustomersisthebestwaytoprovidegreatservice.”
CustomerservicerepresentativesalsoactivelyusesocialmediasitessuchasFacebookandTwitter
torespondtocustomerissues.
AnotherkeyaspectofZappos’customerservicemodelisthatnothingisscripted.Employeeshave
freereignintheirdecision‐makingandareexpectedtospendasmuchtimeastheyneedto“wow”
customers.Theyhelpcustomersshop,evenontheircompetitors’websites,encouragethemtobuy
multiplesizesorcolorstotry(sincereturnshippingisfree),anddoanythingittakestomakethe
shoppingexperiencememorable.
4
Zappos’customerservicerepresentativestrytodeveloprelationshipswiththeircustomersand
makethemhappy.Storiesaboutgreatcustomerserviceincludecustomersupportcallsthatlastfor
hours,sendingflowerstocustomersontheirbirthdays,andsurpriseupgradestofastershipping.
SomeextremecaseshaveincludedZapposhand‐deliveringshoestocustomerswhohavelost
luggageandtoagroomwhoforgottheshoesforhiswedding.Zapposhasevensentpizzastothe
homesofcustomerswhohavetweetedtothecompanyaboutbeinghungry.
Zapposbelievesthatgreatcustomerexperiencesencouragecustomerstousethestoreagain.In
addition,Zappos’long‐termstrategyisbasedontheideathatgreatcustomerservicewillhelpthem
expandintoothercategories.Whilearound80percentofZappos’orderscomefromshoes,the
marketsforhousewaresandapparelaremuchlarger.Thecompanysaysitwillexpandintoany
areathatitispassionateaboutandthatmeettheircustomers’needs.
Thecompanyalsoconsidersword‐of‐mouthmarketingtobethebestwaytoreachnewcustomers.
CFO/COOAlfredLinsays,“Thecustomerismorepowerfulthanpaidadvertising.”Withover75
percentofpurchasesmadebyrepeatcustomers,itisevidentthatZappos’missionto“providethe
bestcustomerservicepossible”isworkingwellforthecompany.
TRANSPARENCY
TransparencyisalsoacriticalpartoftheZapposmodel.Employeesreceivedetailedinformation
aboutthecompany’sperformanceandareencouragedtoshareinformationaboutthecompany.
Zapposbelievesthatemployeesshoulddevelopopenandhonestrelationshipswithall
stakeholderswiththehopethatthiswillassistinmaintainingthecompany’sreputation.Hsiehuses
FacebookandTwittertoshareinformationwithemployeesandcustomers(hehas2.2million
followers).WhenZapposlaidoff124employeesin2008,HsiehannouncedthedecisionviaTwitter
andlaterbloggedaboutit.Althoughsomecompaniesmayhesitatetoopenthemselvestopublic
criticism,Zapposfeelsithasnothingtohide.Infact,mostofthepublicpostsonZappos’social
mediasitesarepraisefromcustomers.
ZAPPOSINSIGHTS
Zappos’businessmodelissosuccessfulthatthecompanyofferstoursandworkshops,whichcost
$5,000fortwodaysatthecompany’sheadquarters.ThecompanyalsocreatedZapposInsights,an
onlineservicethatallowssubscriberstolearnmoreaboutZappos’businesspracticesthroughblogs
andvideos.Theseprogramshavehighprofitpotentialforthecompanybecausetheyarebuilton
whatZapposalreadydoesbest.
CORPORATECULTURE
ThecorporatecultureatZappossetsitapartfromnearlyeveryothercompany.AsAmazon’sCEO,
JeffBezos,says,“I’veseenalotofcompanies,andIhaveneverseenacompanywithaculturelike
Zappos.’”Zappos’unorthodoxcultureistheworkofCEOTonyHsieh,aninnovativeandsuccessful
entrepreneur.Hsiehbuiltthecultureontheideathatifyoucanattracttalentedpeopleand
employeesenjoytheirwork,greatserviceandbrandpowerwillnaturallydevelop.
5
WORKENVIRONMENT
Zapposisfamousforitsrelaxedandwackyatmosphere.Employeeanticsincludenerfballwars,
officeparades,uglysweaterdays,anddonut‐eatingcontests.Theheadquartersfeaturesan
employeenaproom,awellnesscenter,andanopenmicinthecafeteria.Otherquirkyactivities
includeforcingemployeestoweara“reply‐all”hatwhentheyaccidentallysendacompany‐wide
email.Thisenvironmentisn’tjustfun;it’salsostrategic.AccordingtoZappos,“Whenyoucombinea
littleweirdnesswithmakingsureeveryoneisalsohavingfunatwork,itendsupbeingawin‐win
foreveryone:Employeesaremoreengagedintheworkthattheydo,andthecompanyasawhole
becomesmoreinnovative.”
HIRINGANDTRAINING
Thekeytocreatingazanyworkenvironmentliesinhiringtherightpeople.Thejobapplication
featuresacrosswordpuzzleaboutZapposandasksemployeesquestionsaboutwhichsuperhero
they’dliketobeandhowluckytheyare.Theymayalsocheckhowpotentialemployeestreatpeople
liketheirshuttledriver.Zapposislookingforpeoplewithasenseofhumorwhocanworkhardand
playhard.Potentialemployeesgothroughbothculturalandtechnicalinterviewstomakesurethey
willfitwiththecompany.However,evenHsiehadmitsthatfindinggreatemployeesistough.“One
ofthebiggestenemiestocultureishyper‐growth.You’retryingtofillseatswithwarmbodies,and
youendupmakingcompromises,”saysHsieh.
Allnewemployeesthenattendafive‐weektrainingprogram,whichincludestwoweeksonthe
phonesprovidingcustomerserviceandaweekfulfillingordersinawarehouse.Tomakesurethat
newemployeesfeelcommittedtoafuturewiththecompany,Zapposoffers$2,000toleavethe
companyafterthetraining(lessthan1percentofnewemployeestakethedeal).
Evenaftertheinitialtrainingisover,employeestake200hoursofclasses—withthecompany,
coveringeverythingfromthebasicsofbusinesstoadvancedTwitteruse—andreadatleast9
businessbooksayear.
BENEFITS
AnotheraspectofZapposthatisuniqueisthebenefitsthatitprovidestoitsemployees.The
companyhasanextensivehealthplan,whereitpays100percentofemployee’smedicalbenefits
andonaverage85percentofmedicalexpensesforemployees’dependents.Thecompanyalso
providesemployeeswithdental,vision,andlifeinsurance.Otherbenefitsincludeaflexible
spendingaccount,pre‐paidlegalservices,a40percentemployeediscount,freelunchesandsnacks,
paidvolunteertime,lifecoaching,andacarpoolprogram.
Alongwiththeextensivebenefitspackage,Zapposhasdevelopedacompensationmodelforits
“CustomerLoyaltyTeam”(callcenterrepresentatives)thatincentivizesemployeedevelopment.All
employeesarepaid$11perhourforthefirst90days.After90days,theemployeemovesto$13
perhour.Tomovebeyond$13anhour,employeesmustdemonstrategrowthandlearningby
completingspecificskillsetcoursesthatallowemployeestospecializeincertainareasofthecall
6
center.AlthoughthereasoningforZappos’compensationmodelistomotivateemployeesand
promotepersonalgrowth,the$13basepayislessthanthenationalhourlyaverageof$15.92
earnedbycallcenterrepresentatives.Zappossays,“WhiletheZapposFamilytendstopayonthe
low‐averagetoaveragesideofthescale,therelaxedenvironmentandpotentialforadvancement
bothaddvaluethatcannotbecountedonapaycheck.”
WORK‐LIFEINTEGRATION
OneofZappos’corevaluesis“Buildapositiveteamandfamilyspirit,”sothecompanyexpects
employeestosocializewitheachotherbothinandoutoftheoffice.Infact,managersspend10to
20percentoftheirtimebondingwithteammembersoutsideofwork.Zapposoutingsinclude
hikingtrips,goingtothemovies,andhangingoutatbars.Hsiehsaysthatthisincreasesefficiency
byimprovingcommunication,buildingtrust,andcreatingfriendships.
Alongwithcreatingfriendships,employeesareencouragedtosupporteachother.Anyemployee
cangiveanotheremployeea$50rewardforgreatwork.Zapposemployeescompileanannual
“culturebook”comprisedofessaysontheZapposcultureandreviewsofthecompany.Theculture
bookhelpsemployeestothinkaboutthemeaningoftheirworkandisavailableuneditedtothe
public.
Aswithitscustomers,thefoundationofZappos’relationshipswithitsemployeesistrustand
transparency.Thecompanywantsitsemployees,likeitscustomers,toactivelydiscussanyissues
orconcernsthatmaycomeup.Hsiehdoesnothaveanoffice;hesitsinanopencubicleamongthe
restoftheemployees.Hebelievesthat“thebestwaytohaveanopen‐doorpolicyisnottohavea
doorinthefirstplace.”Zappos’managementisveryopenwithemployeesbyregularlydiscussing
issuesonthecompanyblog.
However,thispositiveworkenvironmentcomeswiththeexpectationthatemployeeswillwork
hard.Employeesareevaluatedonhowwelltheyembodythecorevaluesandinspireothers;Zappos
willfirepeoplewhoaredoinggreatworkiftheydon’tfitwiththecultureofthecompany.Hsieh
says,“Wedefinitelydon’twantanyonetofeelthatthey’reentitledtoemploymentforlife.It’smore
aboutuscreatinganenvironmentandgrowthopportunitiesforouremployeessuchthattheywant
tobeemployeesforlife.”
CORPORATESOCIALRESPONSIBILITY
Zapposalsotakesanunconventionalapproachtocorporatesocialresponsibilityandphilanthropy.
ManycompanieshaveCSRprogramsthatarededicatedtoacertainareaorcausesuchas
education,butZappospreferstosupportavarietyofprogramsbasedontheneedsofcommunities
andtheinterestsofemployees.
PHILANTHROPY
Zapposisinvolvedinavarietyofphilanthropicefforts.Programsincludedonatingshoesandgifts,
givinggiftcardstoelementaryschoolstudents,andparticipatinginLIVESTRONGDay(wearing
7
yellowtocreateawarenessaboutcancer).Zapposdonatesmoneytoorganizationssuchasthe
ShadeTree,anon‐profitthatprovidessheltertowomenandchildren,andtheNevadaChildhood
CancerFoundation.
SUSTAINABILITY
Zapposrecentlystartedacampaigntoimprovethecompany’simpactontheenvironment.Agroup
ofemployeescreatedtheinitiative,whichisknownasZapposLeadingEnvironmentalAwareness
fortheFuture(L.E.A.F.).Thecampaignfocusesonseveralenvironmentalefforts,includinganew
recyclingprogram,communitygardens,andgettingLEEDcertificationforthecompany.L.E.A.F.’s
mostrecenteffortwasZapposRecyclesDay,aneventtoraiseawarenessonrecyclingandother
waysthecompanycanreduceitscarbonfootprint.Liketherestofthecompany,L.E.A.F.isvery
openwithitsprogresspostedonitsTwitteraccountandblog.
Anotherareaonthecompany’sblogisasectionon“Eco‐friendlyProducts.”Here,thecompany
highlightsnewproductsthatareorganicorweremanufacturedusingenvironmentallyfriendly
procedures.Thepostingsalsolistwaysthatcustomerscanlivemoresustainablelifestyles,
includingtipsonhowtothrowaneco‐friendlypartyandgreenproductrecommendations.
RECOGNITION
Inadditiontobeingthenumberoneonlineshoeretailer,Zapposhasbeenrecognizedforits
innovativebusinesspractices.Thecompanyhasappearedonseveralprestigiouslistsincluding
Fortune’s“BestCompaniestoWorkFor,”FastCompany’s“50MostInnovativeCompanies,”
BusinessWeek’s“Top25CustomerServiceChamps,”andEthisphere’s“World’sMostEthical
Companies.”Thecompanycontinuestogetrecognizedforitseffortsincreatinganenvironment
andbusinessmodelthatencouragestransparencyandstrongrelationshipsamongallstakeholders.
ETHICALCHALLENGESFORZAPPOS
Likeanycompany,Zapposhasfacedsomechallengingbusinessandethicalissuesinthepast.When
theseissuesoccur,Zapposattemptstohandlesituationsinaprofessionalandefficientmanner.
However,thetransparencyatZapposmakessomebusinessandethicalissuesmorecomplexasthe
companystrivestosolveproblemswhilekeepingitsstakeholdersinformed.
2008LAYOFFS
Zapposisknownforitscommitmenttoitsemployees,butthecompanyhasalsofacedhard
economictimesthatdemandedtoughdecisions.InOctober2008,SequoiaCapital,aventurecapital
firmthatwasacontrollinginvestorinZappos,mettodiscusstheproblemspresentedbythe
economicdownturnanditseffectontheirportfoliocompanies.SequoiaCapitalthentoldZapposto
“cutexpensesasmuchaspossibleandgettoprofitabilityandcashflowpositiveassoonas
possible.”Asaresult,Hsiehhadtomakeadifficultdecisionandlayoff8percentofZappos’
employees.
8
Zapposstrivedtohandlethelayoffsinarespectfulandkindmanner.Hsiehsentanemailnotifying
employeesofthelayoffandwashonestandupfrontaboutthereasonsbehindthedecisions,even
discussingthemoveonTwitter.Employeeswhowerelaidoffreceivedgenerousseverance
packages,includingsixmonthsofpaidCOBRAhealthinsurancecoverage.Becauseofthecompany’s
honestyandtransparency,employeesandcustomersweremoreunderstandingofthetough
decisionHsiehandZapposhadtomake.
MERGERWITHAMAZON
In2009Zapposwasacquiredbye‐commercegiantAmazon.com.ManyZapposcustomerswere
confusedbytheunexpectedmoveandexpressedconcernsaboutthefutureofthecompany’s
cultureandcustomerservice.MostCEOswouldnothavefeltanyobligationtoaddresscustomer
concernsoverthemerger,butTonyHsiehvaluedthesupportofZappos’employeesandcustomers.
Shortlyaftertheacquisition,HsiehissuedastatementaboutwhyhesoldZappostoAmazon.Inthe
statement,HsiehdiscussedthedisagreementbetweenZapposandSequoiaCapitalover
managementstylesandcompanyfocus.Specifically,Hsiehsaid,“Theboard’sattitudewasthatmy
‘socialexperiments’mightmakeforgoodPRbutthattheydidn’tmovetheoverallbusiness
forward.Theboardwantedme,orwhoeverwasCEO,tospendlesstimeonworryingabout
employeehappinessandmoretimesellingshoes.”HsiehandAlfredLin,ZapposCFOandCOO,were
theonlytwomembersontheboardcommittedtopreservingZappos’culture.Theboardcouldfire
HsiehandhireanewCEOwhowouldfocusmoreonprofits.
Hsiehdecidedthatthebestwaytoresolvetheseissueswastobuyouttheboard,buthecouldnot
dothisonhisown.AftermeetingwithAmazonCEOJeffBezos,Hsiehcommittedtoafull
acquisition,aslongasZapposcouldoperateindependentlyandcontinuetofocusonbuildingits
cultureandcustomerservice.ManycustomerswereconcernedthatAmazonwasnotagoodfitfor
Zappos,butHsiehaddressedthoseconcerns,saying,“Amazonwantstodowhatisbestforits
customers—even,itseemedtome,attheexpenseofshort‐termfinancialperformance.Zapposhas
thesamegoal.Wejusthaveadifferentphilosophyabouthowtodoit.”Althoughconsumerswere
notpleasedwiththeacquisition,theyatleastunderstoodwhyitoccurred.Moreover,Hsieh’s
commitmenttohisbeliefsandmanagementstyleresonatedwithconsumers.
MORETHANSHOESCAMPAIGN
TobringawarenesstothefactthatZappossellsmorethanjustshoes,Zapposcreatedamarketing
campaignin2011thatwasdesignedtocatchpeople’sattention.Thecompanyreleasedseveral
advertisementsthatfeaturedpeoplewhoappearedtobenakeddoingdailyactivitiessuchas
running,hailingacab,anddrivingascooter.Thecreativeadvertisementshadcertainpartsof
models’bodiesblockedoffwithaboxthatsaid“morethanshoes.”
Thecampaignreceivedcriticismfromseveralgroupsbecauseoftheir“sexualnature.”However,the
catchwiththeseadswasthatthesubjectsoftheadswerenotactuallynude;theyworebathing
suitsorsmallshortsthatwerelatercoveredbythebox.Becauseofthenegativeattention,Zappos
pulledtheadsandreleasedanapologythatexplainedtheproductionprocess.
9
Source:AarronMagness,“M
MorethanShoessPrintCampaiggn,”ZapposBlo gs,July12,201
11,
http://blog
gs.zappos.com/m
morethanshoesp
printcampaign((accessedMay225,2012).
TECHNI CALDIFFIC
CULTIES
InOctobeer2011,Zapp
posexperien
ncedsometechnicaldifficcultiesthatresultedindeelaysand
problemssincustomerrs’ordersan
ndshipmentss.Zapposupggradedoneo
ofitsprocessingsystems,,and
inthepro
ocessmanyo
orderswered
deletedordeelayed.Someeordershadtheincorrecctshipping
informatiion,andprod
ductsweresh
hippedtotheewronglocaation.Althoughthisupsettseveral
customerrs,Zapposhaandledtheprroblemsandreassuredcu
ustomersthaatitwouldgeettheir
merchand
diseassoonaspossible.Thecompanyalsooffereeddifferentp
perks,depend
dingonthe
circumstaancesofeach
hcustomereexperience.
Anotherp
problemZap
pposencountteredwasthaateveryitem
mfrom6pm.ccom,oneofittswebsites,w
was
pricedat$49.95forsixhoursin2010.Thecom
mpanyhadtooshutdownthewebsiteforafewhours
tosolvettheproblem.Zapposhono
oredalltheo
ordersfromtthepricingm
mistake,whicchresultedin
na
$1.6milliionloss.
THEFTO
OFCUSTOM
MERINFORM
MATION
InJanuarry2012hack
kersbrokeinttoZappos’co
omputersysttem,andthecompanyhaadtorespond
dto
thetheftof24million
ncustomers’criticalperso
onalinformaation.Thesto
olendatainccludedcustom
mers’
names,em
mailaddressses,shippingandbillingaaddresses,ph
honenumberrs,andthelaastfourdigitssof
theircred
ditcards.Zap
pposimmediiatelyaddresssedthesituaationbysend
dinganemaiiltocustomeers
notifyingthemofthesecuritybreach.Zapposassuredcusttomerstheseerverscontaainingtheirfu
ull
onwerenoth
hacked.Zapp
pos’nextmo vewastodissconnectitscallcenter,
creditcarrdinformatio
reasoning
gthattheexp
pectedamou
untofcallsw
wouldoverloaadtheirsysteem.
10
WhileZapposhasareputationfordeliveringcustomerservicethatisunmatchedbyany
competitor,somecustomerswereunhappywithhowZapposhandledthehacking.Manycustomers
wereupsetbytheirinformationbeinghacked,butthesituationwasmadeworsebyZappos’action
ofdisconnectingitscallcenter.AlthoughthissituationcausedproblemsforZapposandblemished
itscustomerservicerecord,thecompanybelievesthatitcanrestoreitsreputation.
THEFUTUREOFZAPPOS
Zapposremainscommittedtoservingitscustomersandemployees.Sofar,thecompanyhas
retaineditsuniquecultureandcontinuestoexpandintonewproductcategories.Inarecent
interview,HsiehtalkedaboutthegrowthofZapposandhowhebelievesthatexpandingintothe
clothingandmerchandisemarketwillhelpthecompanytogrow.Hsiehsaysthat“theskyisthe
limit”forZappos,andthatgrowingandexpandingintomanydifferenttypesofbusinessesis
Zappos’future.Duringhisinterview,Hsiehstates,“AlthoughZapposisalongwaysfrombecominga
companythatissimilartoVirgin,itdoesconsiderVirginarolemodelinhowZapposwantsto
shapeitself.”(VirginGroupLimitedisasuccessfulU.K.conglomerate.)AsZapposexpands,itwill
havetoworkhardertohiretherightpeople,avoidethicalissues,andmaintainitsquirkyculture.
Leadershipisakeyfactorinthesuccessofanycompany,andforZappos,havingTonyHsiehasa
leaderisastrongindicatorforfuturesuccess.Hsiehhasexpressedthathewilldowhateverittakes
tomakehisemployees,customers,andvendorshappy.Thefutureforanycompanylooksbright
whenitsleadershipiscommittedtosuchstrongvalues.However,Zapposneedstomakesurethatit
continuestofocusonitsstakeholdersanditslong‐termvisionwithorwithoutHsieh.
Ultimately,Zapposintendstocontinuetodeliverhappinesstoitsstakeholders.Hsiehsays,“At
Zappos,ourhigherpurposeisdeliveringhappiness.Whetherit’sthehappinessourcustomers
receivewhentheygetanewpairofshoesortheperfectpieceofclothing,orthehappinesstheyget
whendealingwithafriendlycustomerrepoverthephone,orthehappinessouremployeesfeel
aboutbeingapartofaculturethatcelebratestheirindividuality,theseareallwayswebring
happinesstopeople’slives.”
QUESTIONS
1. DoesZapposeffectivelyfocusonstakeholderhappiness,andhowdoesthisapproachaffectthe
ethicalculture?
2. HowdoesZappos’transparencyinfluencerelationshipswithcustomersandemployees?
3. HowhasZapposmanagedethicalrisk,andwhatarepotentialethicalrisksinthefuture?
11
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