Zappos, a company known for its lean startup model, originally had no shoe inventory and instead purchased shoes from retail stores after receiving customer orders. What was the key benefit of this strategy?

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BlackTom AI · Accepted Answer

In this question, we’re evaluating the strategic benefit Zappos gained from starting with no shoe inventory and sourcing footwear from retailers only after receiving customer orders.
Option 1: 'It let the market determine inventory needs before making large purchases.' This is the core idea behind the approach: by waiting to purchase until there is confirmed demand, the company minimizes the risk of overstock, learns real customer preferences, and can adjust later purchases to match actual demand, which aligns with lean startup principles.
Option 2: 'It eliminated the need for customer service.' This claim is inaccurate. Even without holding inventory, the company still needed customer service to handle orders, returns, sizing questions, and general inquiries. The model actually increases the complexity of fulfillment and support rather than eliminating it.
Option 3: 'It created a premium brand identity.' While a lean, demand-driven model can influence brand perception, the primary stated benefit of not holding inventory is not about branding prestige but about reducing risk and learning market demand. The benefit here is more operational and strategic than about premium branding.
Option 4: 'It allowed Zappos to sell shoes at a higher markup.' This would generally require scarcity or added value, which the model of buying after orders does not inherently create. In fact, holding inventory and negotiating bulk terms could enable better margins, so this option misstates the typical financial trade-off of a no-inventory approach.
Overall, the strongest justification aligns with using market-driven demand to guide purchases and minimize unnecessary stocking costs, rather than relying on assumptions about demand or pursuing other benefits that are not directly tied to the lean inventory strategy.

8(A) - Entrepreneurship ENT C7 REVIEW Q'S

Zappos, a company known for its lean startup model, originally had no shoe inventory and instead purchased shoes from retail stores after receiving customer orders. What was the key benefit of this strategy?

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