In Rethinking Vendors, the eBook I wrote back in 2012, I called out companies for treating their vendors as costs rather strategic resources. I said then – and say even louder today – that when organizations surround themselves with the right vendors, and establish the necessary systems and culture to support those vendor relationships, they realize operational and competitive advantages that they simply can’t achieve on their own. Period.
One of the best examples of a company that gets the value of vendor relationships is Zappos. The online shoe and clothing retailer was founded in 1999 and then sold to Amazon 10 years later in a deal worth roughly $1.2 billion at the time. Zappos has been hugely successful. If you’ve bought a pair of shoes online in the last few years, chances are at least one pair was from them.
Tony Hsieh, the CEO of Zappos since it was founded, talks a lot about the company’s approach to vendors in his book Delivering Happiness: A Path to Profits, Passion and Purpose. In the book, he talks explicitly about the value of vendor relationships, how Zappos works tirelessly to make them true partners in the business, and how these partnerships have been a significant contributor to Zappos’ success.
Here is a great quote from the book from Fred Mossler, Zappos former VP of Merchandising (and one of the original Zappos employees), on how the company views their vendor relationships:
“The typical industry approach is to treat vendors like the enemy. Show them no respect, don’t return their phone calls, make them wait for scheduled appointments, and make them buy meals. Scream at them, blame them, abuse them…anything to get as much as possible and squeeze out every last dime.
It’s a wonder people don’t realize that business doesn’t have to be done this way. Ultimately, each party is out for the same thing: to take care of the customers, grow the business, and be profitable. In the long run, it doesn’t behoove either party if there’s only one winner.
If vendors can’t make a profit, they don’t have the money to invest in research and development, which in turn means that the products they bring to the market are less inspiring to customers, which in turn detriments the retailer’s business because customers aren’t inspired to buy.
We wanted Zappos to be different by creating collaborative relationships in which both parties share the risks, as well as the rewards. We found it much easier to create alliances when partners align themselves to the same vision and commit to accountability, knowing we’ll all benefit from achieving our goals.
Not only does this approach get both sides pulling in the same direction, it creates an environment and culture where people are inspired to get up every day, passionate for what they do. It creates empowerment and control of the business, as well as a sense of pride and ownership. It makes people want to do more because they know their contributions mean something.”
Zappos has harnessed the power of a more deliberate, strategic approach to its vendor relationships, and its results have been nothing less than phenomenal. With the right people, processes and systems in place, you can too!
This blog is mostly an excerpt from our eBook, Rethinking Vendors. Click here to download your own free copy.
Author: Tom Rogers
Job Title: CEO
Organization: Vendor Centric
Tom is the founder and CEO of Vendor Centric, he has been a trusted advisor to nonprofit organizations for 30 years, with a focus on helping them align the right people, processes and systems to mitigate third-party risk and drive more value from third-party contracts and relationships.