Photo: Zappos
Should Zappos take steps into the hospitality world?
Zappos is known for experimentation. But the initiative the popular online shoe retailer is now mulling goes beyond an experimental take on shoe sales — it’s a move that would take the company far from the world of footwear.
At a summit in Austria, Zappos CEO Tony Hsieh announced that the company was considering moving into the hospitality industry, although stopping short of announcing a Zappos hotel brand, according to Skift. The company has toyed with the idea of opening hotels in the past. Mr. Hsieh tweeted in 2014 that a 2019 incarnation of Zappos could include a hotel focused on service, culture and community, or a Zappos airline.
Zappos is not the only retailer to plan a move into hotels. Williams & Sonoma-owned home furnishings retailer West Elm recently announced the launch of a line of its own boutique hotels, designed, promoted and furnished by the retailer. Restoration Hardware recently opened a hotel and high-end gym. Equinox has announced plans to open a fitness-themed hotel chain, as well.
The appeal of hotels for a home furnishings retailer is obvious. The hotels, while filling a need for the traveler, can also act as a showroom for the furniture and other items that the retailer sells. But the connection between Zappos’ core business and the hospitality space is not immediately apparent.
The prospect of hotel ownership seems like an especially gutsy move for Zappos, a pure-play e-tailer with no physical storefronts. But some retailers have been successful lately with concepts that have gone outside of their core areas of business.
Apparel retailer Urban Outfitters, for instance, plans to open more restaurants (including in-store restaurants) according to Bloomberg, after its purchase of a pizza chain last year, which some found perplexing.
While not a great deal of information is forthcoming, a Zappos hotel concept may present the opportunity to create the type of experiential selling environment that is growing popular with Millennials.
Discussion Questions
DISCUSSION QUESTIONS: In what creative ways might Zappos successfully tie their core brand and culture into a hotel? Do you see other product or service categories in which the Zappos’ culture might succeed?
Poll
BrainTrust
Shawn Harris
Board Advisor, Light Line Delivery
Martin Mehalchin
Managing Director, Retail and Consumer, PK
The Zappos culture of putting customers first by empowering employees can work in any industry, but running a hotel is very different from running a shoe company. Zappos management should proceed cautiously.
Zappos’ core strength is legendary customer service and “personalization.” These key customer experience components seem to be sorely lacking in many hotel chains. It should be very possible to recruit expertise for the mechanics of running a hotel. The Zappos flare for customer engagement could be a real differentiator. After all, a key reason Amazon purchased Zappos was for their unique culture that creates the diehard loyalty of returning customers.
It’s worthwhile to read how Zappos CEO Tony Hsieh has committed up to $350 million to rebuild and revitalize old downtown Las Vegas. A key focus of that effort is on making this a hub for startups and a destination for events for entrepreneurs. Imagine if this is the focus of his hotel effort: the hippest place for fans of entrepreneurs (VCs, corp innovation folks, etc.) to hang out near go-to places where startups are inventing the next Zappos.
When people talk about Zappos, it’s not just about the great pair of shoes they scored, but the awesome customer service they received. It truly has become a tangible asset that is synonymous with the Zappos brand. In extending the brand to hotels and beyond, the customer satisfaction bar will be set high. Execution will be key to protecting the brand’s equity. Also I could see some Amazon (the parent company) products and services being a part of this.
Seems like a great idea to leverage the amazing customer-first culture and reputation that Zappos has developed with tenacity, to Max’s point. However, it might make more sense for Zappos to continue to broaden and expand its product offering and evolve more aggressively into omnichannel retail. It would be exciting to see them expand their premium service in omnichannel as a first step.
If Virgin (Records) can operate a successful airline, I don’t see why Zappos can’t do the same with hotels. Especially given its headquarters in Las Vegas, one of the top worldwide hospitality destinations.
This raises all sorts of interesting questions and I’d love to watch this experiment unfold: Is Tony Hsieh the next Richard Branson and Zappos the next Virgin? Will holocracy work in running a hotel? I’m skeptical on holocracy and think it will be even less of a fit for a hotel than it is for the online shoe business.
As a speaker at conferences, I’ve asked my audiences to imagine what it would be like if companies recognized for being at the top of their customer service game, such as Zappos or Nordstrom, ran your business. I never dreamed that any of these über-customer-focused businesses would actually stray from their core business and move into something that is so far outside of their lane. It’s a big risk. That said, if anyone can do it, it would be a forward thinker like Zappos CEO Tony Hsieh to pull it off.
Measured investment to support the core business makes sense. A cafe in a department store or a bar near the menswear department at Nordstrom (Toronto store), makes sense. Shoes and hotel rooms sounds like ice cream and pickles. The yin and yang or mutual benefit are not too apparent.
We did not think an airline giving away peanuts would ever get to this point, did we? So maybe we better give Zappos credit for going outside the box on this. They built a business on customer service. I don’t know any company that can match their commitment to the customer. Let’s wait to see if this gets past the idea stage.
If I was on the board I would vote against this idea unless the hotel was going to be in downtown Vegas. Otherwise it is way too far off course. What has made Zappos famous is its focus on, and flexibility in, its space.
Too much, too fast, non-core competency. Zappos needs to focus on getting better with the things and core competencies they are good at. They have a great space in shoes, they should migrate to other hard goods, not hospitality.
Product diversification is always tempting when you become great at what you do. But here we’re not just talking about a completely different product but a complex industry. Just because Zappos are great at experimentation in their own market doesn’t mean they’ll be any good at replicating this is the hospitality sector. However with the right people on board from the sector it might just work — because consumers love their ethos as a company. If they can afford to try it, why not? It might just work.