Is The Recession Zappos’s Achilles Heel?

zappos-logo1Zappos.com loves selling all kinds of heels, and with two way free shipping customers love buying them.  But two way shipping is only free for the customer, for Zappos it means they lose money every time a return is made.  And it hurts.  Somewhere within Zappos’s corporate office there exists a black book and in this book there are two columns.  On the left are customers that actually buy more because of the free shipping carrot.  On the right are the habitual returners.  So far it’s all good because the money making column is significantly longer.  So far.

With the reality of slowing consumer spending it’s obvious the left hand column is shrinking but my hunch is recession has little affect on habitual returners because they have no disincentive.  I would argue the habitual returner list has not contracted much.  This recession is hurting Zappos more than it’s hurting retailers that charge for shipping.  The question is how long can Zappos hold its breath under water.  Zappos is one of the smartest retailers in the world so if anyone can come out of this it’s them.

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