Zappos.com /

This article appeared in Contagous issue Eighteen.

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birth of a brand / zappos.com /

In the late ‘90s, all types of different internet companies were being started. At the time, I had formed a small investment fund called Venture Frogs with Zappos’ current COO/CFO, Alfred. We invested in 20 or so different internet companies and Zappos happened to be one of them.

To tell the truth, the idea of selling shoes online didn’t have me jumping for joy. I’ve never been a shoe person myself. But after some due diligence, I learned that in the US alone, it was a $40 billion market and 5% (or $2 billion) was being done by paper mail-order catalogues. Knowing the untapped possibilities of targeting that

market on the web, it seemed like a good bet to make from an investment point of view.

Over time, it became evident that out of all the companies we invested in, Zappos was the most promising and the most fun. Within a year, I ended up spending more time with the company and joined full time. It was an exciting period for me. After selling LinkExchange (the previous company I co-founded) to Microsoft, I realised how important culture was to building a business for the long-term, so Zappos became another chance to grow a company based on that.

Zappos.com / Boasing an impressive blend of brand advocacy and ‘wow facor’ is US online retailer Zappos, famed for delivering a dose of happiness wih every pair of size 5 Dolce & Gabbana’s / CEO Tony Hsieh explains how they built a brand from the fet up /

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The brand of culture and customer experience

So what does company culture have to do with servicing our customers? Our goal is to build the Zappos brand to be about the very best customer service and the very best customer experience. To do this, our #1 priority is company culture. Our belief is that if you get the culture right, most of the other stuff, like delivering great customer service and building an enduring brand, will happen naturally on its own.

In a world where most companies are looking to reduce the number of customer contacts they have in order to reduce expenses, we take the opposite approach and view each contact as an investment towards building a long-term relationship with the customer.

We hadn’t planned all of those things from the beginning. However, we found that investing more into the customer experience and customer service fueled our growth of repeat purchases and word-of-mouth.

We started with zero sales in 1999, and now almost ten years later, we have close to 10 million customers. On any given day, about 75% of our orders are from repeat customers.

When times are tough, the tough give good service

Over the last ten years, we’ve seen the market fluctuate between good times and bad. In boom times, it’s easy to make spur of the moment decisions and see their short-term benefits. But it’s in unpredictable times when long-term investments (like customer service and company culture) seem to pay off. Usually, those budgets are often the first to be cut during an economic crunch. We

take the opposite approach and focus on them even more. It may take several years down the line to see the return on investment, but the long term rewards tend to speak for themselves.

Some might argue that a model that considers customer service and culture as investments (rather than expenses) can’t be sustainable. But over the last few months, we’ve achieved a couple of the most important goals we set for ourselves during the early days of Zappos.

At the end of 2008, we hit $1 billion in gross merchandise sales, a goal that was originally set for 2010. And in January 2009, we made FORTUNE Magazine’s ‘100 Best Companies To Work For’ list, debuting at #23. It made us the highest ranking newcomer for the year.

Hello, how can I wow you today?

Over the years we have tried to come up with new ways to ensure that culture and customer service remain top priorities at Zappos. We believe the process has to start from the very beginning, including recruiting and training.

Every one of our employees in our headquarters – from our CFO to an assistant buyer in merchandising – is required to answer phone calls and graduate from a four week course in Customer Loyalty training. Afterwards, there is also a week of working at our fulfillment warehouse in Kentucky.

During the training course, all employees are offered $2000 to leave the company, one of the ways to see if they’ve begun to understand the mindset of our culture, or if they’re just here to collect a paycheck. When we

The Zappos culture is defined by our 10 core values:

1 / Deliver WOW Through Service

2 / Embrace and Drive Change

3 / Create Fun and a Little Weirdness

4 / Be Adventurous, Creative, and Open-Minded

5 / Pursue Growth and Learning

6 / Build Open and Honest Relationships With Communication

7 / Build a Positive Team and Family Spirit

8 / Do More With Less

9 / Be Passionate and Determined

10 / Be Humble

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birth of a brand / zappos.com /

recruit, we see a lot of talented people that would immediately make an impact on our top or bottom line, but we will pass on hiring them if they don’t fit our culture.

When customers call our Customer Loyalty Reps, we actually encourage our staff to stay on the phone to deliver the best service possible, even if this means going to an alternative website to look for a product that we might not have in stock and directing the customer there. Our employees are empowered to do whatever they think is right for the customer, including sending out free replacement shoes, ordering flowers for a customer that just had a loss in the family, or helping find the phone number of a local pizza joint.

These all point to our goal: to WOW the customer at every point of the Zappos experience. Policies like free returns, free shipping upgrades and a 365-day return policy are all very expensive, but we view those expenses as marketing dollars, because they drive word of mouth.

Traditional retailers may put a significant amount of their marketing budget towards advertising (especially offline), but we’ve chosen to keep that as lean as possible. Zappos may run an occasional print or TV ad, but it’s mostly to get our name out rather than directly drive sales. Advertising can help drive sales, but it doesn’t really help improve the customer experience, and that’s what we care much more about.

It’s the personal connections that count

I’ve been asked what I like best, and least, about the internet. To me, the answers to both are the same: it’s always there. But one of the things that excites me most about the internet is that it provides so many new ways to form personal connections with our customers.

Even though a large part of our communications with customers happens over the phone, we continue to develop new ways to interact with people. Through

our blogs, we keep our customers up-to-date with everything going on with Zappos and in turn, we get to engage in interesting exchanges with them too. Our blogs actually reveal a lot about the Zappos brand so I invite you to visit them at http://blogs.zappos.com.

A couple of years ago at the SXSW Interactive conference, I started using Twitter. I found that it was a great way to find out what was going on during the day at the conference as well as figuring out what parties to go to at night.

After the conference, I introduced it to my friends in Vegas (where I now live) as well as my friends in San Francisco (where I used to live). I found it was a great way to find out what was happening and for meeting up with friends in Vegas. I also felt more connected with my friends in San Francisco, because I got to hear about their lives every day.

After using it with just my close friends for about a year, I realized how much Twitter had allowed me to form more personal connections with everyone, so we decided to introduce it to Zappos as a way of growing our company culture. We’ve found that it’s been great for building more intimate bonds with both employees and customers, essentially an opportunity to learn about each other in a way they otherwise couldn’t have.

Another way we get to share what the Zappos culture is like is through our employee Twitter page, which we make publicly accessible to the world:http://twitter.zappos.com/employee_tweets

‘Policies like fre returns, fre shipping upgrades and a 365-day return policy are all very expensive, but we view those expenses as marketing dollars, because they drive word of mouth...’

ZAPPOS CULTURE BOOK /

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Open and honest relationships

One thing we’ve always believed in at Zappos is transparency. Many years ago, we created a series of online tools for our partners and vendors to gain visibility to sales and inventory data. This was at a time when such practices were considered risky, but it was done with the intention of creating an atmosphere of openness and honesty. Over time, the strong relationships we’ve developed have validated transparency as part of our core values.

We also take the same approach with our customers, who are encouraged to post reviews of products they’ve bought for public display on our website. We don’t care whether the reviews are positive or negative, as long as they are honest.

Extending this practice to other parts of our business, last year we launched our ‘Zappos Insights’ subscription service that offers inside access to articles, videos and discussions on how we manage our culture, customer service, marketing, training, hiring and business in general: www.zapposinsights.com

Through initiatives like this, we’ve found that the more open and honest we are, the more we get to learn from our partners, vendors and competitors. It not only helps to build the individual businesses involved, but it also helps to build relationships that create opportunities we might not have seen otherwise. For example, we now provide backend fulfillment services for several of our vendor partners. This would never have happened if we hadn’t offered for them to tour our warehouse operations.

Welcome to Zappos Air, have a safe flight

We hope, ten years from now, people won’t even realise we started out selling shoes online. In the last few years, we’ve expanded into other product categories that include clothing, accessories, electronics, and home goods. We’re really not a retailer that sells things, but a service company that happens to sell things.

We’ve even had customers ask if we would start an airline. Based on what we’ve set our core values and long term vision to be, 30 years from now, I wouldn’t rule out a Zappos Airlines that’s just about delivering the very best customer service in the industry.

Ultimately, Zappos is about delivering happiness, whether to customers (through great customer service) or to employees (by building a great company culture). We think we’re at the very beginning of what’s possible.

The past ten years have been an amazing ride, and we’re excited to see what the next ten will bring!

Tony Hsieh is CEO of Zappos.comwww.zappos.com

‘We’re really not a retailer that sells things, but a service company that happens to sell things.’

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