CASE 8
Zappos: Stepping Forward in Stakeholder
Satisfaction
CASE NOTE FOR INSTRUCTORS
This case discusses the unique management style of Zappos with its focus upon employee happiness as
the key to the firm’s success. According to Tony Hsieh, CEO of Zappos, the company’s emphasis on
employee happiness translates into high quality service for customers. The care that Zappos shows to its
employees, customers, and other stakeholders has earned it praise for its ethics as well as its fun work
environment.
Zappos takes a customer-centric approach to make the shoe shopping experience fun and easy. It
maintains a live inventory web system, a 100% Satisfaction Guaranteed Return Policy, and instructs its
call center employees to maintain non-scripted conversations with employees until customer issues are
addressed fully (some calls have lasted hours). Zappos maintains a relaxing and fun work environment
Despite its strong reputation for ethics, this doesn’t mean that Zappos does not face ethical issues. It is
important for students to realize that even the most ethical companies will encounter ethical challenges
and make mistakes. For instance, Zappos was criticized for disconnecting its call center due to fears of a
system overload after hackers had stolen customer data from Zappos’s computer system. Students must
realize that while a firm might experience ethical issues, how it responds to these issues can tarnish or
QUESTIONS AND DISCUSSION
1. Does Zappos effectively focus on stakeholder happiness, and how does this approach affect the
ethical culture?
There is no right or wrong answer, as long as the students defend it. Most students will likely answer
in the affirmative. Zappos’s benefits and emphasis on fun helps contribute to a zany corporate culture
that allows employees to enjoy themselves. However, Zappos also stresses the fact that employees
2. Has Zappos developed long-term relationships with customers and employees that provide a
competitive advantage in the purchase of shoes and other products?
Students’ answers will vary and should be supported by reasoning. Some may say Zappos has
developed long-term relationships with customers with its return policy. Because making purchases
on the Internet is seen as a risk, especially when it comes to purchasing shoes, Zappos eliminates that
risk for the customer by offering free shipping on returns. Real time inventory listings is also an
3. Has Zappos effectively managed ethical risk, and what are potential ethical risks in the future?
Most students will likely agree that Zappos has managed its ethical risks fairly well. For instance,
when an ethical issue does arise—such as laying off employees, mispricing products on its website, or
merging with Amazon—the company tries to be as transparent as possible with stakeholders. By
ADDITIONAL RESOURCES