Anyone who dreads the prospect of spending an hour in the local grocery store is a natural potential customer for online grocers who promise to bring the goods to your home at a predetermined time. This is particularly true for customers in urban locations where the selection in grocery stores often leaves much to be desired and carrying bags home without a car can be unappealing. With what appears to be a natural customer base, why have nearly all online grocers failed to come up with a profitable business model?
When Nick Swinmurn initially pitched his idea for an online shoe store, Tony Hsieh thought it sounded like “the poster child of bad Internet ideas.” Intuitively, it seems obvious that customers prefer to try on shoes prior to making a purchase. However, the statistics on the size of the paper mail order catalog business for shoes convinced Mr. Hsieh to give the idea more thought. Delivering Happiness: A Path to Profits, Passion, and Purpose is the story of how Zappos rose from obscurity to achieve a $1.2 billion valuation when Amazon.com acquired the company in 2009. Read this article for a book review.
Tony Hsieh is known for taking an unconventional approach to management. Nothing proves this point more clearly than his standing offer to pay new hires at Zappos $2,000 on their first day of work if they agree to quit. The logic is that he would rather not have employees working at Zappos who are inclined to accept such a short sighted offer. When Mr. Hsieh sold Zappos to Amazon.com for $1.2 billion last year, he insisted on unconventional terms as well.