Contemporary Marketing 16th Edition by Louis Boone,David Kurtz

Exercise 16

From its humble beginnings as the first online shoe store, Zappos has grown to nearly gargantuan proportions. Now owned by Amazon, the online retailer carries most of the top footwear and apparel brands, along with handbags and luggage, and last but not least, home furnishings and beauty products. In other words, if Zappos were a brickand- mortar store, you could live there.
"When Zappos first started out, it was all about the best selection of products," recalls Steve Hill, vice president of merchandising. In many respects that's still true-but as the company has expanded, it has adjusted the way it manages brands as well as entire categories of goods. A decade ago, Fred Mossler (former vice president of merchandising, recently promoted to the position of "No Title") went to the annual World Shoe Accessories show in Las Vegas in hopes of luring a few brands to the site. (According to the company, Mossler's "No Title" enables him to oversee a variety of departments within the organization.) He talked with more than 100 vendors there, but only 3 agreed to offer their products on Zappos. Today, the company carries 1,165 brands and counting. "We carry the top brands," says Hill.
The merchandising team, which includes lead buyers, buyers, assistant buyers, and merchandising assistants, scours the earth for the best brands in any product category-then meets with vendors and decides which will sell best at Zappos. The company's buyers concentrate entirely on a single category of products. "Our buyers are aligned around lifestyles-so our hiking buyer will buy only hiking products and our running buyer will buy only running products." But specialization doesn't stop there. "Our buyers buy stuff that they're passionate about," explains Hill. "For example, our running buyers are running marathons and half-marathons and 5Ks." This makes them virtual experts in the category of goods they buy for Zappos to sell online to consumers.
Zappos prefers to hire its buyers based on their passion for a specific activity or product category. "If we can hire them for their passion for the category, we can teach them all the skills of buying," says Hill. In fact, the buyers themselves have created categories at Zappos, based on their own interests. That's how Zappos began selling outdoor apparel and footwear, as well as designer fashions. The other avenue that Zappos takes for developing categories is through customer feedback-if enough customers request a new category or specific brand, Zappos will work hard to bring it to them.
Although Zappos remains focused on manufacturers' brands with names such as Nike, Billabong, Guess, Lacoste, Steve Madden, and Mountain Hardwear, the retailer also has a few couture offerings, such as the family brands 10 Crosby by Derek Lam and Adidas by Stella McCartney. Recently, the company has been testing the waters with its own private footwear and apparel label called The Cool People. It's not a huge chunk of business-instead filling niches not covered by Zappos' branded partners. One of the most successful private-label products for Zappos is a wide-calf boot for women-so much so that branded manufacturers have begun to create their own wide-calf boots.
While Zappos is the self-proclaimed merchant of happiness, managing the growing collection of brands is serious business. This doesn't mean Zappos employees don't have fun or enjoy what they are doing-it's quite the opposite. It's just that Zappos inspires its buyers with a sense of entrepreneurship within a large company. "We want buyers to feel like they're buying for their own boutique or storefront," explains Hill. "We call it the shopkeeper's mentality. We want them to feel if they don't buy the right stuff, they won't be able to keep the lights on. We are part of a much bigger company now, but we want everyone to feel like they're running their own business and in control of what they're doing."
Hill acknowledges that, despite the huge success of online retailing over the last decade, it still represents only about 8 to 9 percent of overall retailing in the United States. However, he and other marketing experts predict that number will grow to 30 percent in the next ten years. This means that Zappos is poised to make huge gains if it continues to offer an expanding array of brands backed by superior customer service. Hill believes that his company's mix of goods and services will keep shoppers coming back. "Once they find us," he says, "they'll stick with us and be loyal to us."
Questions for Critical Thinking
1. Describe how Zappos builds brand equity along the four dimensions of brand personality.
2. What steps might Zappos take to build its private brands without endangering its relationship with the producers of manufacturing brands?