A course on Retail and Merchandising now has to include a study of a purely online retailer, and I chose to look more closely at fashion retailer Zappos as an interesting example for my recent series of lectures. This wholly-owned subsidiary of Amazon started out as an online shoe retailer, and quickly gained traction with the young set. The company has a reputation for extraordinary customer service, going ‘above and beyond’ in an area where expectations are generally low, and so are able to maintain a loyal customer base. But what is their real USP?
From early days in the noughties, Zappos recognised the value of social media in building strong customer relationships. CEO Tony Hsieh regularly tweets – and not just about the business – and encourages all his employees to do the same. The effect has been to retain customers who feel they are part of the Zappos family, with genuine involvement and value, and with less of the prevailing feeling of being just a ‘number’ and the product of some clever algorithms. The long-term trick for Zappos will be in finding a good balance between keeping in touch and becoming intrusive, but for the younger generation, that day still seems to be a long way off.
These days, the fashion market seems to be a very crowded place to be. With so many choices for young buyers both on the high street and online, it must be difficult for many retailers to survive. I have always taken an interest in the rise of the Spanish chain Zara, which seems to have bucked the trend and enjoyed several years at the top, and so I chose to include it in my recent series of lectures on Retail and Merchandising as a company that has taken a slightly different approach.
Zara has cleverly chosen to house its stores in prime retail locations, with top-quality fittings and great merchandising, all disguising the fact that the product is very competitively priced and often mid-range on quality. However, their adoption of ‘fast fashion’ – the disruptive strategy that allows them to make rapid changes to their offering in response to buying patterns – means that they always have something new and stylish on show. And so Zara’s owner Amanico Ortega is now the richest retailer in the world, not least because of his huge holding in prime real estate – a great exit strategy, should he ever need it.
When thinking of interesting examples of retailers for my series of lectures on Retail and Merchandising, I could not ignore the mighty IKEA. This extraordinary success story has impacted on most of our lives in the UK and in most countries around the world. Whether we have a Billy bookcase somewhere in the house or have kitted out our kids’ student accommodation with extra IKEA lamps and duvets, the chances are that we have all experienced the joys of the showroom maze, the ‘marketplace’ and the ‘warehouse’.
Founder Ingvar Kamprad certainly had noble ideals. As a keen environmentalist, he was intent on keeping costs down to ensure a fair price for customers, and the revolutionary idea of flat-pack, self-assembly furniture made this a reality. But has this very affordability encouraged us to be more wasteful? Are we not more likely to replace our IKEA purchases more regularly, as fashions change, simply because we can afford to do so? Whatever the long-term effects, no one can deny that as a retailer, Kamprad has it made.