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Sometime in the next few weeks, online shoe seller Zappos.com will launch a new user interface that could soon let consumers buy lipstick and MP3 players along with Birkenstocks and Nikes.

The company is preparing to do a soft launch of the new, cleaner look to around 1,000 customers before deciding on a formal rollout plan, CEO Tony Hsieh said.

"Frankly I'm kind of surprised that what we put on sells, how our customers find it," Hsieh said. "The new site is built for easier navigation and searching, with multiple categories in mind."

Zappos.com's new user interface

(Credit: Zappos.com)

The rollout of the user interface, and the expansion into categories including small electronics and cookware, highlight the core of the company's mind-set: find out what the customer wants, and find the best way to deliver it.

"Customers will say, 'I wish you would start an airline.' Well, we're not going to do that. But if they say, 'I wish you would sell this because I just had a horrible experience somewhere else,' we'll look into it," Hsieh said. "We're experimenting with a lot of other categories. That's how we got into sunglasses. We're taking the same approach--not going out and buying 10 warehouses full of pots and pans, just trying it out."

Zappos prides itself on attention to customer service--an 800 number is plastered on every page, along with notes promoting the company's 24/7 customer service line and 365-day return policy. So far, this approach has been working: Zappos, which launched in 1999, had gross sales of $840 million in 2007, up from $1.6 million in 2000. As of the beginning of April, the company had a customer base of 7.7 million people.

The privately held company reported an operating profit in 2007, and "we exceeded (our goal) a little bit," Hsieh said. In fact, things are going so well that the company recently told its 1,600 employees they would each receive a bonus equal to 10 percent of their 2007 salary.

The company's two warehouses in Kentucky hold around 4 million items, but at just under a million square feet, Hsieh says Zappos has plenty of room to grow. And that's just what he's planning on; by the end of 2008 the company hopes to be selling footwear, apparel, sunglasses, watches, bags, bedding/linens, cosmetics, luggage, and electronics, according to his blog.

Zappos' current look

(Credit: Zappos.com)

So, is Zappos ready to take on big players like Amazon.com? Hsieh says that's not the company's goal, but it'll certainly be going up against some strong competitors.

One challenge will be convincing customers who are happy to buy shoes from Zappos that they should also turn to the company for other items.

"Getting a customer to buy from different categories from you is difficult," said Patty Freeman Evans, an analyst at Jupiter Research. "We've talked to a lot of retailers about that. What we've also seen...is that over time consumers have not increased number of categories across online shopping."

According to Jupiter's data, consumers on average purchased items from 4.1 categories online in 2001, out of a possible 32. By 2007, that number had grown to just 4.7.

"When you redefine who you are it's critical that you make the connection with the customer," said Ted Vaughan, a partner in the retail and consumer product practice at consulting service DO Seidman. "What's going to distinguish them from other companies where (they're not as well-known), especially as they move into other areas?"

Meanwhile, Zappos is facing challenges on its home turf. Big names like Gap and Amazon have jumped into the online shoe sale business with their Piperlime and Endless stores, respectively.

And as Zappos tries to distinguish itself through its customer-service mantra, it's had to cut back a bit on bargains. The main Zappos store recently changed its policy regarding price guarantees and free overnight shipping. To that end, the company recently acquired 6PM.com from eBags.com, and has designated the 6PM brand as its home for bargains.

"Long term, our plan is to not have any sale items on Zappos," Hsieh said. "We want it to be more of a premium brand for customers who value service over anything else."

That message appears to have sunk in with customers. Zappos came in second in a recent National Retail Federation survey regarding customer service, beating out online and offline brands including Amazon, Land's End, and customer service legend Nordstrom.

"For some things the technical and customer service supporting a sale is very important to the customer. Whereas maybe a GPS device is less dependent upon that and is more dependent upon pricing," Vaughan said. "Two clicks away at another Web site they may have the devices, but do they have the convenience? And in the end if you have problems and have returns customer service is critical. Price is always an issue and always going to be an issue but it's not the only issue."

Zappos is hoping the service that keeps customers coming back will have them looking at new categories. On any given day, 75 percent of orders are repeat customers, Hsieh said. The free shipping and customer service department stand in for advertising as well; Zappos does relatively little traditional advertising, spending about 85 percent of its marketing budget on online buys. Besides print ads in magazines, Zappos' offline buys include ads in airport security trays where passengers place their shoes.

"The closest analogy to a brand we might use as a model is Virgin. They're involved in CDs and airlines and whatever, but the Virgin brand is about being cool and hip," Hsieh said. "For us it's about the very best customer service. Hopefully, 10 years from now people won't even realize we started out selling shoes online."

Concerned about what your customers say about you online? Well, you should be.

You probably think you have your bases covered by allowing product reviews and client testimonials through your Web site, but the truth is that the blogosphere can make (or break) you as a company if Google includes a customer's blog post in the SERPs (search engine results pages).

Prominently positioned customer blog posts in the SERPs that either love you or hate you can be more powerful than product reviews for several reasons, the most obvious one being that many blogs act as word-of-mouth advertising when things go right--and when they go wrong.

While some bloggers may have a reputation for always pointing out things that are wrong with the world, make no mistake about it: "acts of kindness" do get talked about, in a big way! You may have already overheard some of the positive buzz about Zappos, a fashion retailer of shoes and handbags, probably due in part to its free overnight shipping, very liberal return policy, and enthusiastic customer reviews. Here's a blog post you may not have heard about, "I Heart Zappos."

We all understand that sometimes bad things happen to good people, and Zaz LaMarr (the writer of the post) could be any one of us. In her post, she described how she purchased several pairs of shoes for her ill mother. Some didn't fit, but she didn't get around to returning them. Shortly afterward, her mom passed away and LaMarr still hadn't gotten around to mailing them.

When Zappos followed up on the shoes, LaMarr wrote back and explained the situation, ending with: "I'd send the shoes as soon as I could." Not only did Zappos arrange for UPS to pick up the shoes, but the company also sent a floral arrangement with condolences.

The result of Zappos' kindness? The customer that it treated like gold also happened to be a blogger with readership. Word of this good deed is spreading around the Web faster than the speed of a T-1 line, and her post is currently in position No. 12 in Google for "Zappos," and in position No. 9 in Yahoo.

Still not a believer that blogs are powerful? One commenter to her post declared, "I am going to go buy something from them and refer them to this post as the reason for my purchase. If only more companies acted this human."

What better way to build your reputation than to get back to basics and be nice to people?

On the flip side, some companies are earning their reputation as unfeeling, corporate giants. I can't think of another industry that has more problems with that image than the airlines. Search Google for "Spirit Airlines" and the No. 3 ranked result is a blog post headline that reads, "Do Not Fly Spirit Airlines."

What started out as a complaint over a $5 fee attracted a blogstorm; not only were several other horror stories relayed in the blog post's comments, but other posts like this one about the "Spirit Airlines Story" have attracted attention outside of the blogosphere in places like The Chicago Tribune, consumer complaint groups and more.

What was so bad?

Spirit CEO Ben Baldanza reacted to a well-written customer complaint letter by saying "Please respond, Pasquale, but we owe him nothing as far as I'm concerned. Let him tell the world how bad we are. He's never flown us before anyway and will be back when we save him a penny." The customer got ahold of the comment because Baldanza hit the "Reply to All" button.

Instead of apologizing or trying to deal with the situation in a better manner, Spirit Airlines blew off its customers and people reacted. While airline execs could have done something to resolve the issue, blogs don't seem to be important to them. Company spokeswoman Alison Russell was quoted as saying, "We wouldn't respond to a blog post. She goes on to say: "This goes back to the larger question of the veracity of everything you read on Internet blogs. Our customer service is great."

I'm sure you've heard the saying, "De Nile is a river in Egypt." How many travelers do you think are going to steer clear of Spirit Airlines after they read that damning post (in a No. 3 Google position)?

The lesson here, folks, is that the cliches you've heard about being kind to one another holds true--even (or especially) on the Internet.