Why Zappos Would Fail in China

There are many ways to deal with the punishing air pollution that sometimes falls upon the big cities of China. When outside you can wear a mask and when inside an air cleaner can be used to scrub the pollutants.  When we first shopped for our first air cleaner in Shanghai it was still common practice to choose foreign brands over those that were locally designed and manufactured. A quick comparison of Japanese models and we settled on a Sharp model. A long 2 hours later we were back at home, deboxed the unit and proceeded to get on with the cleaning of our apartment air. Unfortunately that was just to be the start of our woes as a rattling noise emanated from the unit.  My first reaction was “great…another 2 hour commute to return the thing and get another one”. Fortunately this is where my assumptions went wrong. With a quick dial on the mobile phone, my wife called the manufacturer and proceeded to discuss a way to remedy the situation. And this is where I discovered that service and support takes on a very distinct meaning in China compared to the USA.  Within the next day a service person showed up to do the first level fixing and within the next week another 2nd level team had arrived to remove the unit, give us a temporary replacement and take it to their repair shop. Within a day of that the unit was returned and all was well.

This pattern of servicing defective products rather than replacing them was a pattern that I experienced repeated over and over during the next years in China.  Whereas in the USA returns are a commonplace occurrence, this is rarely the case in China. Many factors have led to this unique practice including low labor cost (it is cheaper to pay someone in China to repair something rather than return it).  Structurally there is also financial reporting friction for most manufacturers in tracking returns because of the paper based accounting methods still demanded by Chinese government tax  requirements. Finally because of the frequent fraudulent schemes that are pursued by some consumers, manufacturers are reluctant to give money back after a product is purchased.  What that means for most hard-good companies coming into China is that having a robust service team or partner that can deploy people for repair and servicing is going to be expected by the Chinese consumer. Whereas Zappos would just say “go ahead and return the product no questions asked” with any product problems in the USA, the model would definitely need to be a lot more hands-on and personal in China.

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