Amazon Acquires Zappos; Zappos Pretends It's Not Really An Acquisition

from the hello...-reality dept

In the last few years, Zappos has definitely come on strong as an e-commerce brand -- perhaps the first online brand ever to have a real shot at unseating Amazon in terms of serious customer loyalty. Obviously, this did not go unnoticed by Amazon. The key to Zappos' success has been their focus on overdelivering on the customer service front (sometimes to hilarious levels). Zappos execs realized a key point that many more companies really ought to understand: customer service is marketing. Customer service is where many of the interactions occur with your customers. Companies that view customer service as a cost center will discover that they end up driving away customers. Zappos, on the other hand, would bend over backwards to keep customers happy -- and because of that, customers were very loyal to the company.

While still a lot smaller than Amazon, there was definitely a lot of attention getting paid to a potential world where Zappos had a brand presence that rivaled Amazon. It's no surprise, then, that the two companies have probably discussed an acquisition, and it looks like those plans have finally come together, as Amazon is buying Zappos. The link there is to the letter announcing the deal from Zappos' CEO Tony Hsieh. I like Tony and like what he's done with Zappos, but have to admit the letter is a bit silly, as he tries to redefine the acquisition as not being an acquisition:

This morning, our board approved and we signed what's known as a "definitive agreement", in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock. Once the exchange is done, Amazon will become the only shareholder of Zappos stock.

Over the next few days, you will probably read headlines that say "Amazon acquires Zappos" or "Zappos sells to Amazon". While those headlines are technically correct, they don't really properly convey the spirit of the transaction. (I personally would prefer the headline "Zappos and Amazon sitting in a tree...")

We plan to continue to run Zappos the way we have always run Zappos -- continuing to do what we believe is best for our brand, our culture, and our business. From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.

If I had a dollar for every time an acquired company insisted that the acquirer was going to keep them running exactly the same as before, I'd be a lot wealthier. And if I had to give back that dollar for every time that wasn't true, I'd be giving all that money back. This is an acquisition, no matter how Zappos is trying to paint it. It's great (and, I believe, smart) that Amazon plans to keep Zappos running as a subsidiary, rather than fully integrate the two, but that doesn't make this any less of an acquisition -- and Zappos' attempt to paint it as something "different" is a bit disingenuous. Yes, the company always likes to present what it does as being different and unique, but an acquisition is an acquisition.

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Sounding Human: The Difference Between Good And Bad Customer Service

from the is-it-really-that-hard? dept

I'm writing up the beginning of this post while on an airplane, flying from New York to San Francisco. By the time you've read it, I'll have added some stuff to it after I landed. The issue is one of customer service and sounding human. Late last week, I saw this amusing online customer service chat transcript between a Zappos customer service representative and a guy who wanted to see if their customer service really was as good as advertised. Zappos is famous for its hiring and training practices (including paying people to quit after a month). With the customer service team, there are no scripts and reps aren't measured on how many calls they get through like many other customer service centers, but on how well they help customers. That is really evident in the transcript. Here's an excerpt, though you should read the whole thing:

You are now chatting with Jonathan
Jonathan: Hello Timmy. How can I help you?
Timmy: do you know how wide the G-Shock Atomic Solar - AWG101 SKU #7403774 is?
Timmy: i mean, how big a wrist it would fit?
Timmy: Timmy has a big fat wrist
Timmy: Timmy need watch grande
Jonathan: I'll see what I can find out for Timmy.
Timmy: awesome. and can we please continue to talk about Timmy in the 3rd person? Timmy likes to boost Timmy's ego by talking about Timmy that way
Jonathan: Jonathan would be happy to neglect the use of pronouns for the duration of this conversation.
Timmy: Jonathan and Timmy shall get along just fine
Jonathan: Will Timmy be able to measure Timmy's wrist?
Timmy: Timmy's wrist is big, but not Biggie-Smalls big. Timmy doesn't have the required measurement instruments.
Timmy: Timmy is 6'4" 220lbs if that helps Jonathan
Jonathan: Luckily, that is roughly the size of Jonathan's brother, so that does help.

Now, as I mentioned, I'm writing this from an airplane, where I had hoped to have in-flight internet access. I had it last week on the flight from San Francisco to NY and it was fabulous. And, yes, I've seen the wonderful and enlightening Louis CK bit where he talks about how ridiculous it is that anyone would complain that in-flight WiFi broke, because just think of how amazing it is (by the way, in later interviews, Louis admitted that it wasn't the guy sitting next to him who complained -- but he was really discussing his own reaction to the WiFi breaking). I'm not at all upset that the WiFi broke. It would have been cool (and useful in terms of productivity), but I am amazed that it could work at all, and I know it's new so bound to have some hiccups. That's fine. This post isn't about the fact that the WiFi broke. It's about the way Aircell/GoGo handled it.

It's not at all clear what the problem was exactly. When I first opened up the browser, the proxy server page wouldn't load at all. After a few minutes it did load, and at the top it said: "click buy to get started." Only problem? There was no "buy" to click. Just a big empty white box. However, there was a link to sign in if you already had an account -- which, thanks to my flight last week, I did. So I clicked that, and put in my username/password, and was told that it couldn't authenticate it. I checked my email to confirm the username, and even though I'm sure of the password, tried to go to "recover forgotten password" just in case... and was told it didn't recognize my username or the email address. Fine. It seemed pretty clear that their authentication system had broken down, too. I tried to go back to the main page, but it told me I couldn't until I had purchased my account...

However, I did notice a link to "contact customer service" and discovered that even though I couldn't connect to the full internet, I could have a "live chat" with a customer service rep on the ground named "Georgia." I'm asked my name, and I give it (even though it should have been obvious from the email address I had to give to login to the chat). After Georgia asked for my name and I gave it, it took about 2 minutes for a reply. No problem... I'm sure Georgia is dealing with others as well. But I'm not even sure if she's still there. Then I'm asked the problem, which I describe and am told:

"I apologize for the inconvenience and I'll be glad to help you with that."

Sounds great. So I wait. And wait. And wait. And then start wondering... am I supposed to do anything? I assume it's being looked into, but it's not at all clear. I wasn't told to wait. I was just told that she can help. But is she? So after about 5 minutes of nothing, I say "Hello?" and get a quick apology followed by a statement that they are aware of a problem on my flight and will be monitoring it, and if I'm unable to connect, they'll send me a gift code for future flights. Ok. That's fine again... but what does that mean directly for me. I ask "so should I just try again later?" and am told "I would suggest you reboot and try again."

Wait... what? I was just told the problem was with GoGo's system, so why would it make sense to tell me to reboot? I point this out in a polite manner, and am told: "It may help, yet it may not be resolved until after your flight is over." Beyond the odd use of pronouns (first "it" refers to rebooting, second "it" refers to the problem with their system), this again sounds like someone with a script, rather than anyone trying to sound human or recognize how silly it is for me to reboot after she's already admitted the problem is on her end.

Given that I was clearly communicating with someone on the ground, I figured it was worth asking if there was some way around the authentication issue, since clearly I could connect to a very limited subset of the internet on the ground. I'm then told "all ways to sign in and sign up are not properly working." Aha, so it really is a problem with their system, and not my own, but why couldn't they have just explained that problem initially so that I understood? I tell her that I'll just try to sign on later, and am asked "Is there anything else I can help you with?" Now, I understand this is rather standard closing question... but it seems rather silly in this context. Considering there's no connectivity and that's the only thing this company provides, I'm not sure what else I could possibly be helped with.

Now, this wasn't a bad customer service experience (even if it didn't resolve the problem, though that wasn't "Georgia's fault"). But it was striking to me the contrast between what I had just read with the Zappos transcript and this one. Is it really that difficult for customer service reps to sound human?

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Zappos Paying Employees To Quit; Recognizing That Customer Service Isn't A Cost Center

from the fascinating dept

Let me admit upfront that when Zappos first came along, I didn't think much of it. The founder had done amazingly well for himself in selling LinkExchange to Microsoft during the bubble years, and had then started a incubator called Venture Frogs -- with (I kid you not) a corresponding restaurant (also called Venture Frogs). The restaurant wasn't bad, even if all the dishes were named after dot com companies. I remember eating there (I think I got the CNET Curried Chicken) one day and seeing huge signs all over the restaurant for Zappos -- an online shoe store. This was pretty much near the bottom of the downswing after the dot com bubble had burst, so it was quite surprising to see someone opening up a pure e-commerce startup, especially one in a category that had failed miserably in the past. E-commerce for shoes seemed exceptionally difficult, due to the fact that shoe sales (even more than other clothing) really depend on the unique fit of each item. However, over the years, Zappos overcame all of the concerns by lowering the barriers (super fast free shipping and free returns on anything that you don't like) and an almost maniacal focus on customer service. In doing so, it's built up a hugely loyal set of customers -- including me.

Of course, to do that right, it's meant treating customer service not as a "cost center," like almost all companies these days, but as an integral part of making happy, committed customers who also act as evangelists. A good company recognizes that customer service isn't a cost center at all, but the best way to build a loyal customer base and to learn from your customers as well. Of course, in order to do that, you need to have a loyal, committed customer service staff as well -- and Zappos has done some unique things there that are worth understanding. It doesn't do many of the typical call center things: no scripts, no time limits on calls and no limits on what the customer service reps can do to make customers happy. But, in a post on a Harvard Business blog, it's explained that Zappos also offers to pay each new employee $1,000 to quit, one month after they've joined. Basically, it's offering any employee who's not truly committed to the way the company does business an easy "out" after one month. Thus, those who stick around are even more committed to living up to the service ideals the company has set. It's nice to see in an era where "good customer service" seems so rare.

Apparently about 10% of folks take the money and scram. While traditional HR metrics might think this is terrible, as the cost of recruiting, hiring and training new employees is quite high, the long term benefits of having a more strongly committed staff cannot be overstated. Basically, the company has realized that a little cost upfront can help it make a lot more on the backend.

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Shoe Store DSW Sues Zappos For Activities Of Affiliates

from the safe-harbors... dept

There's an interesting lawsuit coming out concerning the popular online shoe store, Zappos, that has built up a large business in part by being extremely focused on providing an excellent customer experience. DSW is a large shoe retailer with many brick and mortar stores and also (not surprisingly) an e-commerce operation (Update: the e-commerce part just launched recently, which has many thinking that this whole event appears to be something of a reverse Streisand Effect situation, where it's suing Zappos to get media attention). Late yesterday, DSW filed a lawsuit against Zappos, charging the company with infringing on DSW intellectual property. What was odd, though, was that DSW never contacted Zappos at all -- preferring to inform it of the lawsuit via press release. Zappos CEO, Tony Hsieh, explained all of this via Twitter, which he's used (quite successfully) to connect and communicate with fans of Zappos.

What came next is quite interesting. Various Twitter followers began investigating the matter, and noticed that a guy using the Twitter name SEOColumbus was defending DSW for filing the lawsuit, while also raving about how much better DSW was than Zappos. Carlo Longino responded to those claims, and then did a quick search discovering that the LinkedIn page of the guy said that he just happened to be DSW's E-Commerce Operations Manager -- something he declined to mention. Soon after Carlo called him on it, though, Carlo noticed that he deleted his LinkedIn profile. The guy claims that he just contracted at DSW for a few months -- but it still seems like he should have disclosed that while bashing Zappos and praising DSW. Update: This part of the story is getting even more bizarre, with claims that the SEOColumbus Twitter account is actually controlled by someone else (which doesn't make much sense, given what the accountholder was saying). And, on top of that, the SEOColubmus Twitter account has now been shut down (temporarily?). Update 2: I've removed the guy's name from this post following a polite request, claiming that the Twitter account really was controlled by someone else. There are numerous inconsistencies in his story that are hard to square up, but at this point we'll take him at his word and thus have removed his name.

As for the lawsuit itself, from the information provided by whoever owns the Twitter account, it seems like it's not due to any actions by Zappos, but by a Zappos affiliate. Just like many e-commerce companies, Zappos lets affiliates sign up and basically drive traffic to Zappos. One of those affiliates set up a site called dsw-shoes.net -- which pretty clearly does infringe on the DSW trademark (which, again, is really about consumer protection, not ownership). It seems reasonable to think that dsw-shoes.net could create some confusion in the customer's mind, even though it has (in tiny print, at the bottom of the page) a note claiming it's not affiliated with DSW. It does, however, link to Zappos using an affiliate code. Given the various safe harbors out there, it certainly seems like DSW went after the wrong target. The complaint should be against whoever operates the affiliate -- not Zappos. An affiliate linking to Zappos should not create liability for Zappos itself. It appears that in DSW's rush to sue Zappos, it didn't bother to understand Zappos is protected against the actions of its affiliates, as it most certainly was not encouraging them to pretend to be DSW. A quick call or letter to Zappos probably would have educated them on this (though, honestly, it should have been obvious from the website in question), but instead, DSW just rushed into a lawsuit, informing Zappos by press release.

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Zappos Sells More By Encouraging Returns

from the outrunning-the-competition dept

Although it may not get that much hype, Zappos has built up an impressive and successful online shoe retailer. While shipping costs are often the bane of online retailers, Zappos has thrived, not only by offering free shipping, but by offering free return shipping as welll (via Knowledge Problem). Obviously, shipping is expensive, but by subsidizing product returns, the company has removed the risk of buying shoes online. Customers don't have to worry about a pair of shoes not fitting right, because they can always send them back at no cost. In fact, the company approves of customers that buy multiple pairs, just to see which pair fits, while sending the others back. Of course this cuts into its margins to some extent, but the alternative is for customers to buy shoes at traditional stores. The basic lesson is one that plenty of retailers recognize: making it easier to return items will make customers more comfortable with purchasing them. But it's the application of this lesson online, to such an extreme degree, that has separated Zappos from the pack.

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