Zappos Pricing Strategies

Zappos uses fixed pricing. This means everyone pays the same price and must take it or leave it. A pair of women’s sneakers or dress shoes is the same price for a woman in Massachusetts as it is for a woman in Colorado. There is no room for bidding or negotiation. The price remains the same. The price level also remains the same for all wholesalers, manufacturers and businesses, as long as they buy the required amount. This means that even savings from buying a specific amount is the same for everyone. Zappos also uses promotional pricing. This strategy allows them to offer free shipping and free returns. It encourages many consumers to buy without worrying about the consequences of being unsatisfied. Customers are often happy with this incentive and become repeat customers.

Zappos has many different shoes all in one place with free shipping and free returns. When looking at the prices, it is easy to tell why. For example, on the Uggs Australia website, a pair of classic short Uggs sell for $140.00. On Zappos, the same Uggs sell for $144.00. This shows that Zappos might add in the shipping with the price of the sale, and then tell consumers that there is free shipping. The word “free” can often blind people. Another type of shoe offered on Zappos is a pump from the Donald J. Pilner line. It is marked in red with the word “SALE.” It may actually be on “sale” because this shoe is an older model and not even featured on its designer’s web site. It can be seen though that consumers love sales. When a product goes out of style or season, it is immediately marked in red with the word “sale.” This winter, Zappos offered a Salomon boot for $165.00 with free shipping and returns. The same boot was found in stores for $155.00. The extra $10 may cover the cost of shipping and returns for Zappos, but offers the customer the ease and convenience of ordering online.

Zappos pricing strategy has done nothing but increase loyalty with customers. The free shipping and free returns have created a loyal relationship with 65% of their customers. Zappos revenue has doubled every year since 1999. In 2006, they reached $600 million in revenue. I believe that the hassle free approach of free shipping has been a large part of its success. Although in some cases the price of the shipping is already figured into the price of the shoe, people are not bothered by adding in the extra amount or calculating how much they would spend sending it back. Zappos approach leaves less to the consumer and focuses on satisfying their needs. The less the hassle, the more the sales. There is also less risk when shopping on Zappos. Consumers know that they can send things back, free of charge. There is no reason to stress or debate about buying. Zappos has taken the weight off of consumers’ shoulders, and for that they have been rewarded.