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

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How do companies figure out if their new product will be in demand? Usually, the question of whether it makes sense to enter the market with a new offer is decided through expensive market research and surveys of potential consumers. However, despite the cost and thoroughness of this research, most new offerings of goods and services do not take root in the market. How do you prevent your products from joining the ranks of losers? And how do you avoid expensive marketing research?

“Zappos is the world’s largest online shoe store. Its annual turnover exceeds one billion dollars. It is considered one of the most successful and user-friendly online stores in the world, but it hasn’t always been this way.

It all started when Zappos founder Nick Swinmern could not find a single large store with a decent selection of shoes. He decided he could offer customers a new and much nicer alternative. Swinmern could wait and test his vision in its entirety first: with warehouses, distribution partners, and projected sales. Many e-commerce pioneers have done just that, including the infamous dot-com losers.

But instead he started experimenting. His assumption was that customers are willing to buy shoes online. To check this, the first thing he did was walk around local shoe stores and ask permission to photograph their assortment. In exchange for permission to take pictures, he posted them on his website, and then, if a customer placed an order there, he bought shoes at regular prices in those stores.

The Zappos business started with a humble and simple service. First of all, Swinmern wanted to find out one thing: is there sufficient demand for a convenient online shoe store? However, a smart experiment, such as the one that started Zappos, allows testing more than just one aspect of a business plan. In testing the first hypothesis, Swinmern tested many other hypotheses. To sell shoes, a company needs to interact with consumers: accept payment, somehow handle product returns, and create a customer support service. This approach is drastically different from conventional marketing research. If Swinmern had relied on existing market research or conducted such research himself, he would have figured out what customers want – in their own opinion. But instead, he created a new product, albeit very simple, and thanks to this, he learned a lot more.

The company collected more accurate data on consumer demand because it was able to observe actual consumer behavior without asking them theoretical questions.

She got the opportunity to interact with real customers and learn about their needs. For example, a business plan can justify the need for discounts, but how will the discount strategy affect the perception of the product?

Clients began to behave in ways that Swinmern did not expect, and through this he learned something about which, perhaps, he would not even have guessed to ask. For example, what if customers start returning purchased shoes?

Zappos’ first experiment yielded clear, measurable results: it answered the question of whether an online shoe store would attract enough customers or not. It also allowed the company to observe, interact with, and learn from customers and partners behavior. Such quality learning is a necessary complement to quantitative testing. At first, the company’s actions were very modest in scope, but this did not stop it from realizing its grandiose vision. It was bought by e-commerce giant Amazon.com in 2009. According to some estimates, the deal was worth $ 1.2 billion. “

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