People often ask us: what’s the most important reason to start their own dropshipping business?

There are many possible answers to this question – for example, an opportunity to work on something you’re passionate about.

But there is actually more to it, you know?

In a way, dropshipping can be a starting point for learning how online retail works.

To illustrate our point, we will tell you a story of a well-known company.

Please note: Zappos is not affiliated with or endorsed by AliDropship. This article is based on publicly available information about the company’s history. Zappos’ results are exceptional and are not a prediction of what any dropshipping business can achieve.

Zappos: a company that started out with dropshipping

You’ve probably heard of Zappos. It is a large USA-based online store specializing in selling various types of shoes, bags, and clothes. It is well-known for its customer service (and we will cover this part later).

According to D&B Hoovers data available at the time this article was originally written (2017), Zappos stocked millions of shoes, handbags, apparel and accessories from more than 1,000 brands, and its gross sales were reported to exceed $1 billion per year. In 2009, Amazon acquired Zappos in a deal reportedly valued at about $1.2 billion.

Zappos became one of the largest online shoe retailers in the US.

Interestingly, the company started out using the dropshipping business model.

Tony Hsieh, who later became Zappos’ longtime CEO, got involved in this business back in 1999, when the company (with a different name) had almost no sales and was basically fighting for life.

At that time, the company based its activity on the dropshipping model. Operating as middlemen, the workers started collecting orders from customers and transferring them to suppliers or other sellers.

Such a model meant no need to manufacture products, or to manage stocks, or to be responsible for shipments and delivery. And in those conditions, it was a practical way of running this business. Due to the lack of sales, the company had almost no working capital and couldn’t afford buying products in bulk and storing them. Therefore, the dropshipping model allowed the company to minimize storage and delivery costs, and to invest the money it earned into client support.

Still, everything changes in due time. As the company grew, it got its own storage facilities and started purchasing products from suppliers in advance. By 2003, only about 25% of the company’s revenue was originating from dropshipping activity. To stand out from the competition and create a unique brand image, the company decided to walk away from the familiar business model and take full responsibility for inventory and fulfillment.

This decision, together with years of work, significant investment, and a strong focus on service, shaped the company Zappos became – it has one of the most famous stories in the history of e-commerce.

The dropshipping model helped the Zappos team start developing this business without buying inventory upfront, and gain the necessary experience to understand what works for this business.

Want to learn more about how to start your own dropshipping business?

What else can we learn from the Zappos story?

The company’s history can teach us a number of valuable lessons.

We looked at it to create this mini-set of rules for an e-commerce venture – it can be applied both to dropshipping business and to any other kind of online trade.

• Make sure that customers are the central part to your whole business

It sounds a bit obvious, we know. But even the company’s name was created with customers’ convenience in mind. ‘Zappos’ comes from the Spanish word ‘zapatos’ (shoes), and its spelling makes it easier to pronounce and remember for people who don’t speak Spanish.

In dropshipping, this issue is even more relevant. If you’re operating on a global scale, you need to always remember that not all people speak your own language. Nevertheless, it should be easy for them to memorize your store name and type it in. And of course, you need to make sure your store visitors can easily navigate your site and understand what is going on!

• Don’t be afraid of returns and refunds

Obviously, it hurts to know your buyer is unhappy with the purchase. (To be honest, it hurts both your heart and your wallet). Still, it’s not the end of the world – you can deal with it and keep going.

Zappos doesn’t treat returns as something extraordinary. Shoes are quite a tricky product category, which is why everyone understands it’s easy to get mistaken. At the time this article was written, Zappos offered free return shipping and a 365-day return window. Return policies change over time, so check the company’s website for the current terms.

As an owner of a dropshipping store, you can set your own return & refund policy, as long as it complies with the consumer protection laws in the countries you sell to. As AliExpress sellers say, they understand the difficulties that dropshippers are going through. This is why you can get in touch with them to explain the situation with a damaged or faulty item, and ask for at least a partial refund. And, to protect yourself from any kind of an unpleasant situation, be sure to always have some money kept on your bank account – don’t spend all your store revenue immediately!

• In general, treat customer service as your top priority

Zappos is known for investing heavily in customer service. There are reports that the company has historically spent less on advertising than on customer service. Zappos encourages its store visitors to call or leave a message, and its support team is known for going the extra mile. There is a story of a legendary phone call that reportedly lasted around 10 hours, and we can only envy the patience of Zappos support team 🙂

Never underestimate the power of word of mouth! The quality of your communication with customers makes a huge impact on your business. If you are involved in dropshipping, there’s a practical approach – use automated services for routine tasks, and spend the time you save talking to your clients.

Want to build a business with a strong focus on customers?

Learn more about how to make your very first step in dropshipping.

*Individual results vary and depend on the work you put in. Zappos is a trademark of its respective owner and is not affiliated with or endorsed by AliDropship.