Case Study: Open Source's Sole Purpose at Zappos

 
 
By Duff Mcdonald  |  Posted 2006-11-10
 
 
 
Pop quiz: Name the fastest retail Web site for American consumers, as measured by the number of seconds it takes to load the home page. If you said Amazon, you're probably not alone. But you're wrong. Likewise if you answered Overstock.com, BestBuy.com or even Netflix. The correct response is Zappos.com, one of the most startling success stories in online retailing over the past several years. The site, which was founded in 1999 and is known mainly for selling shoes, had just $1.6 million in gross sales in 2000. This year, they're projecting $600 million.
Zappos, which is derived from zapatos, the Spanish word for shoe, also sells handbags, eyeglasses and other accessories. But according to Tony Hsieh, CEO of Las Vegas-based Zappos.com Inc., that's all beside the point. "We're a service company that happens to sell shoes and bags," he says. He alludes to their fanatical obsession with customer service, exemplified by a trio of promises: fast—and free—shipping (including returns), 24/7 live customer support, and a 110 percent price guarantee, which says if you find a better price on an item, the company will refund 110 percent of the difference to you. Customers also enjoy the inventory advantage that Web sites have over bricks-and-mortar stores: Zappos has over 106,000 styles, 918 brands, and more than 3 million items in stock.

They're doing something right. With more than 4 million paying customers, over 1 percent of the U.S. population has bought something from Zappos. In recent years, the company has expanded beyond basic shoes, adding a couture line in December 2003, women's bags in February 2004 and men's bags in the spring of 2005. And some 60 percent of sales come from repeat customers. "Ten years ago, we were all skeptical that anyone could make money selling shoes online," says analyst Sucharita Mulpuru of Forrester Research Inc. "But they've proven us wrong."

Given the company's status as a Web-only retailer, IT obviously plays a large role in the business. But according to Jon Athan, director of development at Zappos, beyond a preference for open-source solutions the company eschews an explicit, overall IT philosophy. The only imperative is that IT must serve the business and not the technologists themselves.

In other words, it's never about technology for technology's sake. "We always make sure it's used to serve people and customers," says Athan. "We try to avoid excess technology for the heck of it." What follows is the story of a company that uses IT as well as anybody, but only if—and when—it serves the ultimate aim of making customers come back for more.

Read the full story on CIO Insight: Case Study: Open Source's Sole Purpose at Zappos.