From zero to billion. The history of Zappos and the Lean Startup method

The early history of Zappos illustrates a useful question for anyone developing a business: what must you learn before committing substantial resources? A complete shop, a warehouse and a detailed expansion plan can all look convincing while the most important assumption remains untested. In this case, that assumption concerned customers’ willingness to buy shoes online.

The example appears in discussions of Eric Ries’s Lean Startup approach because the first experiment was much smaller than the eventual company. Its lesson is not that research is unnecessary or that every successful retailer should copy the same steps. It shows how a limited service can produce evidence about a specific uncertainty.

Start with the assumption that matters

Zappos founder Nick Swinmurn explored an online shoe business by photographing shoes available in local shops, with their permission. When somebody ordered through his website, he could purchase the shoes and fulfil the order. This allowed him to test an offer without first holding a large inventory of his own.

The distinction between a website and a business is important. A website demonstrates that an offer can be displayed. A customer order shows a stronger form of interest, but it still does not establish that the operation will be profitable, dependable or easy to expand.

For a different venture, the central uncertainty might be something else entirely. Customers may already want the product, while the difficult question concerns delivery time or support costs. A useful experiment targets the actual doubt rather than repeating a famous example mechanically.

Make the first service small but credible

A minimum viable product is often discussed as an early, limited version of a proposed solution. Limited should refer to scope, not permission to mislead customers or ignore the commitments made to them. The offer still needs to be clear enough for people to understand what they will receive.

Imagine a local business considering a subscription for office plants. Before building an elaborate ordering system, it might test a small service with a few nearby workplaces. It would still need to explain the delivery arrangements, what maintenance includes and how problems will be handled.

That trial could reveal whether customers value the plants themselves, the convenience of maintenance or advice about suitable locations. Each possibility points towards a different service. A simple experiment becomes valuable when it allows the team to distinguish between those possibilities.

Measure behaviour and ask why

The Zappos story highlights the difference between saying an idea sounds appealing and making a purchase. Actual behaviour provides useful evidence because it involves a concrete decision. However, numbers alone rarely explain everything that happened.

If several visitors abandon an order, the reason could be price, uncertainty about sizing, delivery conditions or a confusing form. Customer conversations can help interpret the pattern. Interviews, observation and transaction data can complement one another rather than compete for the title of best research method.

Choose the evidence before running the test. For the plant service, that might include how many workplaces accept a trial, the time required per visit and which requests generate extra work. Recording those details prevents enthusiasm about a few positive comments from overshadowing an operational problem.

An experiment is not a complete business model

Buying shoes from another shop after receiving an order helped test demand, but it did not settle every question about a mature retailer. Inventory, returns, margins and customer service would still require attention as the business developed. Early learning opens the next set of questions.

Likewise, a plant service that works for three offices might struggle with thirty spread across a wide area. Travel time could change the economics. An experiment should therefore identify both encouraging results and the conditions under which those results were obtained.

Amazon acquired Zappos in 2009. That later outcome makes the founding story memorable, but it should not turn the initial experiment into a guaranteed route to similar success. Many small tests reveal that an idea needs substantial revision.

Turn learning into a decision

The practical value of the Lean Startup approach lies in connecting a test to a decision. State the assumption, choose a limited experiment and decide what evidence would justify continuing. Afterward, compare the result with the expectation, including inconvenient findings.

The next step may be to improve the offer, investigate a different customer group or stop. A useful test reduces uncertainty even when its answer is disappointing. That is a stronger foundation for building a business than treating an attractive plan as if it were already proven.

Online Solutions Group BV, led by owner Sergej Dergatsjev, has maintained CompanyGids for ten years and continues to develop the business directory. Find online and mail-order retailers on CompanyGids for business contacts. Explore digital services from OSG: contentmarketing.