"We are a service company that happens to sell."

Zappos wants you to call their 800 number. They want you to order too many shoes. They want you to return (at their expense) the shoes that don’t fit.

As a service company, the more they service you, the better they do. They don’t buy (an enormous number of) ads, they don’t pay rent. Instead, they carry inventory that serves the long tail, they answer their phone and they pay for a lot of fedex shipping.

The more you ask for, the better they do.

Simple, but not so easy.

[Judging from my mail, some readers see this as a blanket endorsement of Zappos. Of course, that’s not my intent (though I do buy shoes from Zappos now and then). My point is that just as Sears used its guarantee 100 years ago to usher in an era of catalog selling, Zappos changed the fundamental business model of a small-time retailer. Instead of real estate, big ads, limited selection and grumpy salespeople, they figured out how to turn the internet to their advantage by reversing every one of those rules. If it can work for shoes, one wonders what it won’t work for… and I think the only reason what they do is unusual is that most entrepreneurs/investors don’t have the discipline and guts to go as close to the edge.]