Amazon-Zappos Highlights Customer Service

SEATTLE (TheStreet) -- It's Business 101: Happy customers become regular customers. And maintaining a core of regulars can be less time-consuming and expensive than constantly marketing to attract new business.

But can a company thrive by making customer service the centerpiece of its mission? Yes, in the case of online shoe retailer Zappos.com, which was recently acquired by Amazon ( AMZN). Selling shoes isn't exactly a game-changing or particularly high-margin business. What sets Zappos apart, and attracted Amazon, is its customer-focused culture and buyer loyalty.

Could above-and-beyond customer service make your business stand out, too?

For many companies, catering to customers is seen as just another expense. Training employees to be effective and empathetic costs money. Perks like free shipping or no-questions-asked returns cost more money. Even setting out free coffee for office visitors adds up over the course of a year.

In these cost-conscious times, cutting back on those extras seems like an easy call. But companies like Zappos are taking the opposite tack. They still offer free shipping not only on every order, but for returns as well. And those returns are accepted for a full year after the date of purchase.

In a letter to employees announcing the Amazon deal, Zappos Chief Executive Officer Tony Hsieh wrote: "Our vision remains the same: delivering happiness to customers, employees and vendors. We just want to get there faster."

Delivering happiness? (I thought the mission was to deliver shoes.) Whether you find Hsieh's goal inspiring or hokey, there's no denying that his company's focus on the customer has given it a clear identity in the marketplace. Zappos estimates that 75% of its sales go to repeat customers. As those customers request new items, from sunglasses to hats, the company has gradually expanded its retail reach.

Cynics may point to Zappos' broadening product lines as the reason for the Amazon deal. Founder and CEO Jeff Bezos, worried that his online empire is threatened by a major new player, is buying Zappos as a way to co-opt the enemy.

Whatever his motivations, Bezos listed Zappos' customer-service expertise as the main reason for the deal. "Zappos is a customer-focused company," Bezos said in a statement. "We see great opportunities for both companies to learn from each other and create even better experiences for our customers."

While customer service often suffers when companies try to pare down their spending, some businesses have concentrated on using existing resources more effectively. Financial-services firms such as T. Rowe Price ( TROW) and Charles Schwab ( SCH) have trained employees from other departments to answer customer-service calls during busy periods. Ace Hardware used the money it saved consolidating call centers to offer longer evening and weekend hours to callers.

Will the Zappos-Amazon partnership boost Amazon's customer-service rankings? Or could being part of a retail behemoth suffocate the creative thinking that's made Zappos so successful?

It's hard to tell. Mergers in general can create havoc for customers. With management changes and computer-system overhauls, it's easy for orders to get lost in the shuffle. Take an example from the customer-service-challenged world of cell phones. In 2003, J.D. Power & Associates ranked Nextel as one of two best carriers for customer service (along with Verizon ( VZ)). Fast-forward five years, after Nextel merged with Sprint, and J.D. Power & Associates now ranks Sprint Nextel ( S) last among major carriers.

Mega-companies can afford to alienate some customers, because they have a large enough user base to stay profitable. Small businesses need to keep every client they've got. But smaller companies actually have the advantage here. An owner who keeps tabs on day-to-day operations is more attuned to customer needs. A business with only a handful of employees can adapt to changing tastes more quickly than corporations hampered by chains of command.

So while loyal Zappos users may be apprehensive about what the future with Amazon holds, the underlying lesson is a hopeful one: Customer service can truly put your business on the map.

Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook, and writes for the Wall Street Journal, Chicago, and other national magazines.

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