Zappos and Lululemon

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Chapter 11: Zappos: Taking Steps toward Maximizing Stakeholder Satisfaction: 11-4a Shopping and Shipping Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Toure Williams ([email protected]) © 2019 Cengage Learning, Cengage Learning

11-4a Shopping and Shipping

Zappos strives to make the shopping experience enjoyable. The website is streamlined for an easy shopping experience. Products are grouped in specialized segments, with some (like outdoor products) on their own mini-sites. Customers view each product from multiple angles thanks to photographs taken at the company’s studio, and Zappos employees make short videos highlighting the products’ features. Zappos analyzes how customers navigate the site to improve features, adapt search results, and plan inventory.

The spirit of simplicity, innovation, and great service extends to Zappos’s inventory and distribution systems as well. Zappos has one of the few live inventory systems on the Web. If the Zappos website displays an item, it is in stock. Once the company sells out of an item, the listing is removed from the website. This reduces customer frustration. Its inventory and shipping systems are linked directly to the website via a central database, and all its information systems are developed in-house and customized to the company’s needs. Its warehouses operate around the clock, which allows it to get a product to the customer faster. Fast shipping creates an instant gratification similar to shopping in a physical store.

Most companies have a negative view toward returns, but Zappos has the opposite mentality. It sees returns as the ability to maintain customer relationships and to increase its profits. Zappos offers a 100 percent satisfaction guaranteed return policy. If customers are not satisfied with a purchase, they can return it within 365 days for a full refund. The customer prints a prepaid shipping label that allows all domestic customers to return the product for free. This return policy encourages customers to order several styles or different sizes and return the items that do not work out.

While this strategy seems expensive, it actually works to Zappos’s advantage. The average industry merchandise return rate is 35 percent, but the company’s most profitable customers tend to return 50 percent of what they purchase. The customers who have the higher return percentages are the most profitable because they experienced Zappos’s customer service and return policy, which creates loyalty to the company. These customers are likely to make purchases more often and to spend more on each purchase. This is what helps make Zappos so successful.

Chapter 11: Zappos: Taking Steps toward Maximizing Stakeholder Satisfaction: 11-4a Shopping and Shipping Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Toure Williams ([email protected]) © 2019 Cengage Learning, Cengage Learning

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