Zappos Milestone: Focus on Apparel

Don’t call Zappos.com a shoe retailer.

Though it made its name selling footwear, the online giant wants the world to know it’s about much more than stilettos and sneakers.

“Most people know us as a shoe company, but we’ve always said we’re a service company that just happens to sell shoes,” said Alfred Lin, chairman, COO and CFO of the company. “Now we’re changing that orientation a bit — we’re a service company that just happens to sell clothing, shoes, handbags, accessories and other stuff.”

In the near term, the company is focused on replicating its success with shoes in the clothing world. Looking into the future, however, Fred Mossler, who oversees merchandising, among other departments, said the potential for brand extensions is wide open, and he even threw out the long-term possibility of the Zappos name ending up on hotels and an airline. The common thread linking everything together would be the company’s emphasis on customer service.

But Zappos execs have always had a much larger vision for the company, said CEO Tony Hsieh. “We decided a long time ago that we didn’t want our brand to be just about shoes — or clothing, or even online retailing. We wanted to build our brand to be about the very best customer service and customer experience,” he said.

In fact, when Zappos first launched in June 1999, it was christened ShoeSite.com, but then renamed Zappos a few months later. “We ultimately chose Zappos so that we wouldn’t be tied to footwear forever,” explained Mossler.

And although the name Zappos is derived from zapatos, the Spanish word for “shoes,” most customers are not even aware of its meaning. “A lot of people actually think our name comes from the fact that we ship so fast — like we zap your order to you,” Hsieh said.

While Zappos clearly has a lot of ideas on the drawing board, building a bigger following for its apparel offerings tops the agenda for 2009. “The plan is to do for clothing what we’ve done for footwear online,” Hsieh said.

Clothing accounts for about 7 percent of the e-tailer’s sales (footwear is roughly 85 percent), according to VP of merchandising Steve Hill, but the category is expected to grow to as much as 40 percent with shoes comprising an equal 40 percent. The remaining 20 percent would come from other categories such as home goods and electronics.

The apparel merchandising strategy will mirror the company’s footwear business, with product categorized according to specialized segments — some of which are featured in their own mini sites, such as running, outdoor and couture. “We want to address the entire lifestyle of the customer,” Mossler said, adding that plans call for more mini sites, possibly including bridal and tennis. “[These sites are] places where we can create a special community [for different customer groups].” (See sidebar on page 26 for more on these sites.)

As with the footwear, clothing will come with the same generous return policy to encourage shoppers to experiment with their purchases. “We want to get customers to think of returns not as a bad thing but as part of the process and part of the service,” said Hsieh. “You pick out 10 items, try them on in the comfort of your living room, and then just send back the ones that don’t fit or don’t look good.”

Fast shipping will also be crucial. “When it comes to clothing, we view our real competition as a boutique or department store — that instant gratification,” Lin explained. “That’s what we’re really trying to replicate. And that’s why we’re constantly upgrading customers’ shipping to get orders out faster.”

The Zappos site already showcases an extensive selection of clothing — with much more to come by mid-year — but, Mossler said, “the challenge now is to change customers’ mindsets that Zappos is not just a footwear destination but a clothing destination as well.”

Furthermore, Mossler said the company also must reach out to apparel customers who have never even heard of the site.

To that end, the company recently rolled out a new TV campaign that puts the spotlight on apparel. And word-of-mouth among Zappos customers will also be key in promoting the e-tailer’s clothing business. “Every single product category expansion we’ve done previously has been through our customer base evangelizing about Zappos,” Lin noted. “The customer is more powerful than paid advertising.”

Many of Zappos’ vendor partners have applauded the company’s plans to claim a bigger stake in the clothing market, with some believing it will drive even more traffic to the site and draw more eyes to the footwear offerings.

“Today, it’s all about lifestyle,” said women’s footwear designer Bettye Muller, whose shoes have been sold on Zappos for more than five years. “People want to get the whole look in one place, and I hope this can enhance that.”

That’s especially true for female shoppers seeking to outfit themselves from head to toe for a special event, such as a wedding or prom, said Scott Silverstein, CEO of Nina Footwear, which has built a name around dress shoes. “The potential here is tremendous,” Silverstein said. “With [Zappos’] exceptional customer service, we’re confident that when they accessorize the ready-to-wear with the right shoes in all our categories, they will create an amazing opportunity to grow our business right along with theirs.”

For apparel vendors, Zappos’ push into clothing offers an opportunity to be associated with a massive e-tailer with a reputation for impeccable customer service.

“[The site] hits the masses, and it makes you feel like there’s a special point of view there,” said Gary Cohen, U.S. president of Ted Baker, which sells men’s and women’s clothing and accessories on Zappos. “They make it very easy to buy, and there’s a tremendous amount of follow-up.” 

Ted Baker made its connection with Zappos through its footwear collections, Cohen said, and over time has worked with the company to create a digital boutique with all the brand’s offerings. “Not every [retailer] will build you a whole shop with all the categories in one place. [In department stores], you’ll be in 10 different areas,” Cohen said. “But on Zappos, you’ll click on Ted Baker and see it all — from eyewear and watches to trousers and shoes.”

Beyond clothing, Zappos execs said they are open to adding any new product category that makes sense. And when it comes to making those decisions, Lin said, it’s not a matter of the numbers but of giving customers what they want. “We will go into any product category that we’re passionate about,” he said. “We don’t strategically target particular categories because we think the potential market size is large.”

Instead, he said, they listen to customer requests and see if there are employees within the company who are equally passionate about the requested category or item. “Then we start small and stay focused and let the data tell us whether we should continue to refine and expand an area.”

That approach brings with it wide-ranging potential for the Zappos brand, prompting the company to draw comparisons to Virgin, the British firm that has built an empire out of diverse industries, including retail, telecommunications and commercial aviation. “They’re able to do it just by being cool,” said Aaron Magness, business development manager for Zappos. “We want to do it by being about great customer service.”

Though Zappos hasn’t started looking for a fleet of planes or scoping out hotel real estate, Mossler said the company is positioning itself to be a long-term player across numerous industries. “Everything’s on the table,” he said. “Probably not next year, but within the next 10 to 20 years, anything is possible.”

Expert Insight

Triathlon training, 39-mile mountain hikes and high-end shopping sprees: At Zappos, it’s all part of the job.

“We take employees who have a passion for something — whether it be running or fashion — and we place them in that category,” said Galen Hardy, Zappos’ senior director of clothing, who oversees the company’s outdoor and performance divisions and includes a 50-mile hike among his list of outdoor achievements.

Infusing the Zappos teams with employees who are passionate about what they do (some of the running team members are marathoners and some on the outdoor team trek to Alaska for ice climbing) has turned Zappos into more than just an online shop.

The mega e-tailer has four specialized sites meant to create online shopping communities for runners, outdoor enthusiasts, skateboarders and fashionistas and is considering adding tennis and bridal sites, among others.

“We want to create a unique experience for those customers,” said Fred Mossler, who oversees merchandising, marketing, creative services and product presentation, among other departments. “For the ride shop, they want to see action-sports apparel along with the footwear, and they want content that is action-sports related. Those aren’t the customers who want to see a pair of black pumps.”

A click on Couture.zappos.com takes the shopper away from the main site to an online boutique specializing in high-end stilettos, apparel and perfume, while the skater-centric Rideshop.zappos.com includes surfing shorts and snowboarding boots, and Running.zappos.com offers training sneakers and stopwatches. Outdoor.zappos.com features footwear, clothing, accessories and gear for climbers, campers and hikers.

Added perks for the outdoor site include ideas for winter hiking, a phrase book for rock climbers and a blog with postings such as “How to Build a Fire.” And according to Jeanne Markel, Zappos’ director of casual lifestyle and performance, the team hopes to add the U.S. National Parks schedule to the outdoor site and post a nationwide marathon schedule to the running site, along with training programs.

“We’re cognizant that there’s a shopper who wants to have more of a boutique experience,” Markel said, “and we have a unique opportunity to really include content … and give an overall feeling of the lifestyle.”


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