Zappos Makes Nice with Vendors
As part of a determined effort to build more collaborative partnerships,
vendors of Zappos are given access to the same information as their buyers
— including inventory levels, sales and profitability, according to a Harvard
Business Review article. They can suggest orders for buyers to approve as well
as any recommend changes to their brand boutiques on the site.
Fred Mossler, who heads up merchandising at Zappos, believes providing
vendors with the tools and accessibility will hopefully lead vendors to spend
more hours helping drive sales at Zappos than their typical account.
“The average buyer at Zappos has a portfolio of 50 brands, but because
of transparency, there are an additional 50 pairs of eyes helping run the business,
too,” he wrote in an excerpt to the book Delivering Happiness by
his boss and Zappos’ CEO Tony Hsieh. “Not only that, vendors are the experts
at what they do. No one buyer knows a brand better than the brand’s own representative.
So why not leverage their knowledge to help us run a better business?”
Other
ways Zappos works to reinforce vendor partnerships:
- In communications, Zappos tries to return any vendor call on the same day
and respond to e-mails within a few hours.
- In negotiations, if Zappos is looking for longer payment terms, different
sales plans based on days-of-payment terms are presented. Wrote Mr. Mossler, “We
decide together what makes the most sense for the business, the amount of
risk we want to sign up for, and how quickly we want the business to grow.” Marketing
approaches feature the same approach.
- When vendors fly to Zappos offices, they are greeted at the airport by
one of Zappos shuttles. First timers are given a tour. Vendors are given
drinks and snacks at headquarters.
- Once a year, Zappos throws a lavish Vendor Appreciation Party timed around
the WSA footwear show designed to be an industry event. On the last Friday
of each month, golf tournaments for vendors are thrown.
- When a brand achieves a certain milestone, they’re given T-shirts reading,
for example, “My brand did a million dollars on sales on Zappos.com.”
- When dining with vendors, Zappos always tries to pick up the check.
Mr. Mossler, who joined Zappos 11 year ago, acknowledged that developing strong
relationships was instrumental in helping the website gain access to brands
in the early days of e-commerce. But the former footwear buyer at Nordstrom
also saw firsthand the shortcomings of rude and sometimes abusive treatment
of vendors that he believes is still fairly common across retail.
“I saw buyers abuse
their vendors daily and use their positions of power for short-term wins; these
buyers ultimately failed in the long run,” wrote
Mr. Mossler. “Then there were the buyers who partnered closely with their
vendors, treated them with respect, and created long-term opportunities;
these buyers always had the best business.”
Discussion Questions
Discussion Questions: What are the biggest impediments to collaboration and how can they be overcome? Is a collaborative approach along the line of Zappos’ practical for many retailers?
There are two different issues, and to start with the first question: Collaborative planning, forecasting and replenishment (CPFR) is hardly a new development. Most successful retailers have moved to a much more collaborative model of information-sharing and merchandise planning with their vendors than we saw ten years ago. It’s driven by advances in information technology, more focus on supply chain management and greater consolidation by both retailers and suppliers. So Zappos is to be congratulated, I guess, for adapting best practices widely at use in the retail world.
The other issue pertains to Zappos’ treatment of its vendors as a broader reflection of company culture. The courtesy of same-day returned phone calls (and other little “touches” to help vendors feel like they are partners in success) is something that most other retailers could learn from, even if they have already adapted collaborative planning.
I am just finishing Tony Hsieh’s book “Delivering Happiness–A path to Profits, Passion, and Purpose” so the timing is perfect to write about this subject.
Over the last 18 months I have experienced firsthand retailers that abuse vendors and others that embrace their vendors. Let me ask you the simple question. Which retailer would I be more inclined to help if they needed something from me? The old saying of treating people like you would want to be treated rings load and clear and Zappos is taking charge by building incredibly strong vendor relationships. I commend them for their efforts and encourage other retailers to follow.
The good news for Zappos and other retailers that embrace their vendors is most won’t, so this competitive edge will continue to help them thrive.
How refreshing in today’s world to treat others the way you’d want to be treated! So often customers and clients treat vendor suppliers as outsiders and commodities. In today’s world where intellectual capital is so critical, the smart organizations from retailers to agencies to manufacturers to, yes, consulting firms, are building strategic business partners with their trading partners–vendors and customers.
The biggest impediment for most retailer merchants is recognizing that there is a shared goal between retailer and vendor and far greater success is achieved through collaboration and partnership than in the far too typical “zero sum” game played by many, if not most retailers. As noted, nobody knows the brand better than the vendor. Also, they have insight into markets and competitive environment that can be invaluable to the retailer.
As an example, the department stores made abusing the vendor into an art form. The off-pricers developed long-term partnerships with the same vendors. Looking at the relative performance/growth of the two formats over the last 20 years shows the relative merits of each approach.
Not only is developing partnerships with vendors a good idea, it will, in my opinion, be one of the prime determinants of who’s still around in the future.
Most systems–make that ALL systems–involving human beings die or fade into irrelevancy because of self-inflicted wounds. Our whole economic mess is due 100% to self-inflicted wounds.
The greatest and most prevalent of such woundings is our insistence of silos, secrecy and selfishness. The irony is that once we open up and move away from our fear-driven mindsets we reap rewards beyond imagination. Think about it; all of nature exists on the basis of collaboration. Life requires collaboration. Business requires collaboration.
What I find puzzling is that every once in a while some company wakes up to this truism like they’ve just discovered air. Now do we actually know how to “collaborate?” No we don’t. We still think collaboration is a competition or that it’s a “compromise,” Collaboration is a way of helping all parties reach their highest possibilities.
The book is sitting next to me, but I have yet to start it.
It’s very important for vendors and retailers to work together. CPFR made it harder and more complicated–just too many steps. Private label makes it a little dicier, since there is competition going on at the same time. But the reality is, the era of win-lose is behind us. Win-win is a much better approach.
Transparency with vendors is a powerful merchandising, supply chain management, and negotiating tool.
The power comes when vendors are able to see in the aggregate how their products are performing against their competitors. The secret to arrive a balanced series of metrics that relate to both the merchants and the vendors. Along side the traditional metrics of sales against last year, margin, and sell through, there are several others than relate better to the routine blocking and tackling. These are return rate, average consumer traction, Weekly Average GMROI, in service rate, and fill rate.
I applaud Zappos for creating a deeper relationship with their vendors.
I also think the same could be said for how vendors treat their customers. More vendors need to create more of a true partnership with their customers, and play a more active role in helping the retailer be successful. I believe vendors aren’t as good at this as they think they are.
I highly recommend the book “Delivering Happiness” that digs deeper into Zappos’ history and practices.
CPFR is getting mentioned here quite a bit. I have to agree with the comment by Paula that CPFR is too complicated. It is the wrong execution of a great idea. Sure has made a lot of folks rich though.
What Zappos has done goes way beyond just sharing sales data though. Their overall philosophy of transparency, vendors as friends, and a willingness to negotiate really stand out in an industry that is typically cutthroat.
I have had the pleasure to meet and listen to Tony Hsieh. His book is one I am embarrassed to say I have, but have not read yet. I will begin tonight.
Tony Hsieh is a modern-day business genius who has surrounded himself with some of the best business minds. That is why he has accomplished so much at a young age.
Zappo’s is doing something positive to accept the knowledge and ability of it’s Vendor network. The norm has and still is to beat up the vendors; and never acknowledge how capable and intelligent that network can be for them. Zappo’s efforts in this program is but a forerunner to what Amazon will be doing after analyzing the pros and cons.
I can see only good coming from this. My concern is why other retailers have and will continue to drag their feet starting a similar program. Could it be that they think theirs are the only intelligent minds in the industry?
As pointed out in previous posts, vendor managed and collaborative planning aren’t new. What continues to jump out at me though, is the power of soft touches in retailer/vendor partnerships even as the “rap” on retail is that it’s no longer a relationship business and/or it’s all about price.
So many aspects of retail are still subjective on both sides of the table–who gets the inventory, the granular data, shipped on time. Once again, Zappos gets the power of simple.
Collaboration has numerous, obvious benefits for both the retailer and the vendor and all retailers should be moving towards a collaborative program that achieves practical goals. Having modern computer systems that support a complete collaboration process between one retailer and many vendors is a bit more of a challenge. Retailers should keep this in mind as they replace disparate, multi-platform solutions and make sure their road map includes the tools needed to bring on collaboration solutions.