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Let’s go back to 1999.
At that time, there was no Facebook, Twitter, or even YouTube. Google was a new company competing with AltaVista for more searches.
The major eCommerce companies were Amazon and eBay (they still are).
And most people had to visit local malls to purchase their everyday needs.
I mean, you couldn’t just open an eCommerce app in the comfort of your living room, browse through tens of t-shirts, and order one that fits your needs excellently.
Nor could you expect that product to be delivered within a day to your doorstep.
Therefore, it’s no surprise that Nick Swinmurn had a problem dear to him.
Finding shoes was hard
Living in San Francisco, Nick, like every other person at the time, had to buy many things from their local malls.
Unfortunately, these local malls always had limited options when Nick wanted to buy a pair of shoes. This was understandable considering that these malls only served a small location.
In this case, Nick wanted to buy a pair of brown Airwalk Desert Chukka boots.
“One store had the brand I wanted, but not the size,” he said. “Another had the right size, but not the color I wanted. The third store I went to was out of stock. I told myself, ‘There has to be a better way!’”
After searching for hours, Nick left the malls empty-handed and frustrated.
Whatever the reason for the inefficiency, this situation shortchanged the buyers. Nick thought he couldn’t be the only person having this issue in the United States.
So, he decided to solve the problem for himself and millions of others. If it was successful, he could build a profitable business.
But Nick couldn’t be sure if people had the same problem and wanted the solution he was creating.
What if he was just asking for too much? What if buyers were fine with their current options?
Testing the demand for buying shoes online
As someone who had worked for an internet startup (Autoweb.com), his idea was to build an online shoe store where people would have access to hundreds of shoes. So he built the website Shoestore.com.
As you already know, purchasing an inventory of thousands of shoes will cost a lot of money. Furthermore, if the idea fails, that’s money that will go to waste.
How did Nick Swinmurn test the viability of his business idea without committing too much financially?
Initially, he went to a mall, Footwear Etc., in Sunnyvale, California, and presented an idea. “I’ll take some pictures, put your shoes online, and if people buy them, I’ll buy them from you at full price.”
The store agreed, and Nick began operations in his online store.
After getting orders on the website for these shoes, Nick confirmed that people wanted to buy their shoes online. But to launch and run an eCommerce store, you need funding.
To raise funds, he worked as a contractor for Silicon Graphics. Here, he made money to live on and raised funds from his friends, co-workers, and even his chiropractor.
After he raised $150,000, he quit his job at Silicon Graphics. Then, he hired a few people to run his online shoe store.
In 1999, the online store rebranded from Shoestore.com into Zappos.com to make it distinctive. The name Zappos was adapted from the Spanish word “Zapatos” which means shoes.
From there, he had to grow Zappos into a more viable business.
Building Zappos
Even though $150,000 is a lot of money, it won’t do much if you’re trying to build an online store that will serve national and international buyers. Therefore, Nick had to obtain more funding for Zappos.
He started meeting with Venture Capital (VC) firms to sell his business ideas to them. However, even in the midst of the internet bubble in the late 1990s, Nick found it challenging to convince VC firms to invest.
Nobody would buy shoes without trying them on, they said. As a result, Nick presented statistics that 5% of shoes were already sold through mail-order catalogs.
Nobody would buy shoes without trying them on, they insisted.
Therefore, Zappos sold shoes online but found it hard to expand without funding.
If you’ve read to this point, you’re probably still surprised that I’m yet to mention Tony Hsieh. After all, if you’re like most people, you probably assumed that Tony founded Zappos.
How did Tony Hsieh enter the picture at Zappos?
After getting rejected by VC firms, Nick’s attorney, Art Schneiderman told him about a VC firm called Venture Frogs. This VC firm was founded by Alfred Lin and Tony Hsieh.
The two entrepreneurs had sold their company, LinkExchange, to Microsoft for $265 million in November 1998.
The firm gave $500,000 to Zappos initially. When Tony got involved, he improved many tech aspects of the company.
Beyond that, Tony invested more in the business. In fact, he sold some of his apartments to fund the business to ensure it kept running.
In total, Tony Hsieh invested $15 million of his own money into Zappos. In 2001, Tony became co-CEO with Nick.
By 2004, Nick suggested Tony become the CEO as he was making the financial decisions. This would make it easier to engage with VC firms that wanted to fund Zappos.
Unfortunately, in 2006, Nick Swinmurn left Zappos.
He got bored and wanted a new challenge.
After Nick left, Zappos would go on to hit a billion dollars in sales in 2008. But despite huge sales, their business operations had a thin margin of profits.
As a result, going for an IPO would make less sense for the company than being acquired by a bigger company.
Therefore, in 2009, a long-time admirer of the company, Amazon, purchased Zappos for $1.2 billion.
Today, Zappos continues to sell thousands of footwear products to customers around the world. Furthermore, the company has added clothing, handbags, and accessories to its product catalog.
Marketing and business lessons from Zappos
What are lessons business owners and marketers can learn from the founding and growth of Zappos into a successful brand? Here are 4 lessons:
Create and test your minimum viable product (MVP)
Sometimes, the novelty and excitement of your idea can lead to the erroneous assumption that it will sail smoothly into success. If ‘genius’ ideas always worked out, you wouldn’t see so many businesses failing.
So, before you commit all your life savings to that business venture, you need to create a minimum viable product.
A minimum viable product (MVP) is the minimum version of your product that shows the core features of your ideas.
With your MVP, you can take feedback from early users on how to improve your product. You can also track product usage to see which aspects users use most.
In other cases, you can discover that your idea won’t gain much traction. Thereby, you’ll save money that would have been wasted otherwise.
In the case of Nick Swinmurn, he started an online shoe store without even buying shoes.
Provide excellent customer support
No business can survive without loyal customers. After all, loyal customers are the best brand evangelists you can have.
But without excellent customer support, you can fail to turn prospects into customers and customers into repeat customers.
During the buying process, customers often need to contact support to ask questions or complain. How you handle these interactions will determine their overall user experience.
Furthermore, customers will tell other people about their great experience with your brand. Undoubtedly, this is the best form of marketing for your business.
Zappos’s unique selling proposition is its excellent customer service. In fact, Zappos prides itself as a customer service company that sells shoes.
It’s so crucial that Zappos moved from San Francisco to Las Vegas in 2004 to find more customer support agents and make its customer service better.
Hence, you’ll find many stories online of Zappos’s customer support reps going the extra mile to ensure customer satisfaction.
Implement fair pricing
Just like the internet has made it easy for shoppers to find products on your website, it’s also easy to find competitors’ websites. So, shoppers can compare prices between 3 or more websites before making a purchase.
If your prices are much higher than competitors for the same product, they’ll likely buy from your competitors. Apart from offering fair pricing, you can add free shipping for products or purchases beyond a threshold.
For example, Zappos offers free shipping and has a free 365-day return policy.
“I have learned a lot about the footwear industry in the past couple of years,” Nick Swinmurn said, “but from the beginning we knew that brand selection and customer service, fair pricing and fast returns, would be the keys to our success.”
The business idea is bigger than your ego
Although you’re the founder, there’s no guarantee you’re the best person to make the business idea successful. As businesses grow, they face challenges that the founder may lack the skills to overcome.
In such cases, the founder may need to transfer the business leadership to someone more qualified. For example, in 2004, Nick concluded that Tony was in a better place to take the leadership position of Zappos.
Despite being the founder, Nick encouraged Tony to become the CEO. This was because Tony had the skills to grow Zappos to become successful.
The success of the business was more important than Nick’s ego.
Over the years, Tony Hsieh grew the company to become popular with shoppers. Although Tony is now late, Zappos continues to exist and serve customers.
Conclusion
Success stories of companies are always easy to read. They tell of the ultimate triumph of an idea and a group of people against all odds.
However, there are many parts to building a successful online business. Even at that, companies like Zappos go through many years with their survival on a knife edge.
Take these essential lessons and implement them in your business.
If you’ve found this post helpful, share it with your friends and tell us your biggest lesson in the comments!
Samuel writes long-form guides to help businesses and entrepreneurs achieve better results from their marketing activities. He also writes for marketing and SaaS companies that want more leads and customers. Get in touch with him to discuss your content needs.