Blog #186 I talked about when Zappos moves Warehouse to Kentucky 2002. In this blog I want to talk about when Zappos moves away from dropship model in 2003.

Starting the year in January 2003 Zappos opens its second retail store in Chico, CA. In the same month The Kentucky warehouse expands to 120,000 sq. feet. This would help considerably given the fact Zappos was carrying more of its own inventory. There was a big push to focus more on the service aspect and carrying its own inventory was a step in the right direction (pun intended).

March 2003, an announcement is made that Zappos would stop the dropship model and carry 100% of the inventory. This move would improve the service level greatly but at the expense of 25% of the gross sales. To take it one step further the return policy is improved to 365 days and free overnight shipping is advertised as a test. We currently advertised 3-5 day free shipping both ways.

We would upgrade the customers to 2nd day air as a “Wow” experience. Getting the product to the customer faster than advertised was brilliant. We eventually would switch to overnight shipping as a “wow” but that’s later down the road. Tony liked to experiment with things to test the waters first.

This is the part of the story where yours truly comes in. April 14, 2003 I officially started at Zappos. This month in 2021 I celebrated my 18^th Anniversary so its been quite the ride. Back then everything was done with Excel based programs. One little mistake in a formula could cause major problems with your open to buy. Even though we had numbers to hit and abide by our growth was so fast it was never a problem to keep up with. Of course you couldn’t go cowboy with it.

As you may have remembered I was asked in the interview how much I thought a particular shoe was. It was a brand I had never heard of before. This was because Zappos had plans to launch a Private label program. The first such brand was called RSVP and it launched in May. The minimums were high to make each style because Zappos used a brand to make the shoes instead of going through a factory direct. This caused markdowns on the product that had low sell throughs.

Through all of this Aaron was great at showing me the ropes. There were a lot of things that were very start up but improvements were being made every week. Aaron was great at explaining these things to me so the student was now the teacher. Funny how things work.