In 2009, Amazon acquired Zappos for roughly $1.2 billion. The story of Zappos’ success is full of hilarity and wonder, but one factor in particular stands out: inversion. Inversion gave Zappos an edge against other retailers by focusing on—and succeeding at—what others weren’t.
Delivering Happiness: A Path to Profits, Passion, and Purpose, by Tony Hsieh chronicles the inception and rise of Zappos.com, an online retailer for shoes. Tony was an early investor in Zappos and became CEO to grow the company into a large, successful seller of footwear. This was quite the feat, especially when considering the limitations of the internet at that time combined with selling a product that people had always tried on before they bought. This was made all the more impressive by the fact that Tony didn’t care about shoes at all. Yet he still grew the company into a billion-dollar enterprise.
But what if that last point isn’t as impressive as we first thought? What if instead of it being a hurdle to overcome, it was one of the reasons for Zappos’ success?
Because Tony was an outsider to the shoe industry, he approached Zappos’ strategy from a different perspective. By marrying a different perspective with a new means by which to sell products, Zappos injected innovation into a sleepy industry.
Inverting to Overcome Obstacles
Listing out the obstacles with online retailing, there are a few that top the list in terms of impact. One of the most challenging aspects of selling anything online is product returns. Consumers return purchases all the time, but it was previously done by returning the item to the store where they purchased it. What if there is no store?
This is especially troublesome for apparel and footwear, where customers have particular preferences for fit and appearance.
Another obstacle is customer service. For business executives, customer service is often a drag. It’s viewed as a necessary expense, but one that should be minimized because there isn’t anything to be gained from it. Customer service merely keeps the company in line with its peers, following the mindset that something is better than nothing.
Sometimes the thought is that if customer service is enough of a hassle (i.e. long wait times, unpleasant or incoherent customer service representatives, etc.), then customers won’t bother trying to return the goods they bought. It would take too much effort.
The problem with this thinking is that the customer might not buy from you in the first place if they fear customer service will be abysmal. And even if they did, they probably wouldn’t again. It’s playing short-term tactics in a long-term game.
Tony Hsieh recognized these dilemmas. It all boiled down to the customer and making their experience as enjoyable as possible. So he inverted the issues with online retailing. Instead of complicating returns, he made them quick and easy, even encouraging them. And instead of putting the bare minimum effort and capital into the customer service division of Zappos, he made it the company’s focal point. Where other companies viewed returns and customer service as burdens to their cash flow, Tony saw them as investments. As such, they shouldn’t be shunned; they were opportunities to delight the customer, turning them into loyal buyers.
Zappos Succeeded by Delighting the Customer
Tony Hsieh saw that to succeed as an online retailer, Zappos had to be customer-centric. It was from this principle that everything in the company was constructed. Customer-facing associates at Zappos were trained regularly and incentivized to do well by the customer. Examples of Zappos’ strategy include free standard shipping both ways, a 365-day return policy, and random free upgraded shipping.
In fact, Zappos employees would go out of their way to solve the problems of the customers. Tony includes a story in Delivering Happiness about just how far a customer service representative went for someone who called with a request that wasn’t about shoes at all.
I’m reminded of a time when I was in Santa Monica, California, a few years ago at a Skechers sales conference. After a long night of bar-hopping, a small group of us headed up to someone’s hotel room to order some food. My friend from Skechers tried to order a pepperoni pizza from the room-service menu, but was disappointed to learn that the hotel we were staying at did not deliver hot food after 11:00 PM. We had missed the deadline by several hours. In our inebriated state, a few of us cajoled her into calling Zappos to try to order a pizza. She took us up on our dare, turned on the speakerphone, and explained to the (very) patient Zappos rep that she was staying in a Santa Monica hotel and really craving a pepperoni pizza, that room service was no longer delivering hot food, and that she wanted to know if there was anything Zappos could do to help. The Zappos rep was initially a bit confused by the request, but she quickly recovered and put us on hold. She returned two minutes later, listing the five closest places in the Santa Monica area that were still open and delivering pizzas at that time.
If the representative would go that far for a pizza request, imagine what they’d do for an actual customer.
Conclusion
Inversion is a useful mental model for solving problems of all sizes. In the case of Zappos, Tony used it to grow a nascent e-commerce startup into a $1.2 billion company that lives on today under the Amazon umbrella. But as he states in the book, the money was secondary. He was already wealthy from endeavors before Zappos. Instead, he wanted to connect with people. And that might be his and Zappos’ true source of success.
Of course, Zappos needed to make money just like any other business. And there were significant hurdles that the company had to overcome to stay alive. But instead of focusing only on the money, Zappos focused on a process first. The point was to connect with people. The company’s strategy revolved around that point, and the money followed. In a business landscape where competitors were focused on money more than the customers, Zappos excelled because they inverted the status quo.
The story of Zappos exemplifies the power of inversion. Instead of avoiding obstacles, they embraced them as part of the solution. To stay competitive in business, and life, we have to keep finding better and more creative solutions. And inversion is one of the most powerful tools for doing that.
