1. Building a Brand that Matters with Clothing, Customer Service and Culture Aaron Magness Sr. Director - Brand Marketing & Business Development amagness@zappos.com twitter.com/macknuttie BAI Retail Delivery October 21, 2010

2. Who is this Aaron character? Work Play Sold trade show space Family/Friends Business Development for Williams- Athletics Sonoma, Inc Music Business Development & Marketing for Marathons (completed 8 so far) Zappos.com Triathlon (Escape from Alcatraz) Poker 2

3. Corporate Background at a Glance Zappos.com, Inc. is a service Best selection company that Over 1,000 happens to sell Zappos.com is brands, over clothing, Powered by 200,000 styles, handbags, Service over 900,000 shoes, unique UPCs. accessories, Providing the 1700 employees best online 5 million items in housewares, . (half in NV, half in shopping warehouse KY) experience 100% of products #23 in FORTUNE possible. inventoried (no MAGAZINEs 100 Fast, Free drop ship). Best Companies Shipping. Free To Work For 2009 return shipping. Founded in 365-day return Highest debut 1999 policy. for a newcomer in 2009 Fast fulfillment. #15 in FORTUNE Expedited MAGAZINEs 100 delivery. Fast, Best Companies friendly & expert To Work For customer service. 2010 3

4. Customer service value proposition in action Committed to WOWing every customer Customers come Customers come Customers come back, order more and back order more often On any given day, Repeat customers Over 10 million total about 75% of have higher average purchasing customers purchases from order size returning customers $123.86 first time customers in Q407 Over 4 million have Repeat customers purchased in the last order >2.5x in the $156.27 returning 12 months next 12 months customer in Q407 4

5. Power of repeat customers and word of mouth... $1,000 $800Gross Sales $Ms $600 $400 $200 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Gross Sales 1.6 8.6 32 70 184 370 597 841 1014 5

6. Recent Recognition: Nice, but we pay more attention to our customers TV Stories Oprah ABC Nightline 60 Minutes Fortune 100 Best Companies to Work For #23 (2009) Highest ranking newcomer to list #15 (2010) Moved up 8 spots! Fast Company 50 Most Innovative Companies #20 (2009) BusinessWeek Top 25 Customer Service Champs #7 (2009) STELLAService #1 (2010) NRF Customer Choice Awareds #3 (2008) #3 (2009)

7. 3 fundamental things weve learned are necessary for WOW service online: What What What We Customers Customers Do See First Experience Internally 7

8. Customer Service: What customers see first 24/7 1-800 number on every page Free shipping Free return shipping 365-day return policy 8

9. Customer Service: What customers experience Fast, accurate fulfillment Most customers are surprise-upgraded to overnight shipping Create WOW Friendly, helpful above and beyond customer service Occasionally direct customers to competitors web sites 9

10. Customer Service: What is done internally No call times The telephone is one of the best branding devices available No sales-based performance goals for reps Run warehouse 24/7 Inventory all product (no drop-shipping) 5 weeks of culture, core values, customer service, and warehouse training for everyone in Las Vegas office Well pay you $2000 to quit Culture Book Interviews & performance reviews are 50% based on core values & culture fit Twitter/Facebook/YouTube/Blogs help build company culture 10

11. Owning the 3 Cs ClothingCustomer Service Culture

12. Clothing

13. Customer Service

14. Culture

15. Owning the 3 Cs:Clothing, Customer Service, Culture Culture Customer Service Clothing

16. Delivering Happiness (customers, employees and shareholders)People will forget what you said, people will forgetwhat you did, but people will never forget how youmade them feel. --Maya Angelou

17. CULTURECommittable Core Values

18. Zappos.com, Incs Core Values1. Deliver WOW Through Service2. Embrace and Drive Change3. Create Fun and a Little Weirdness4. Be Adventurous, Creative, and Open-Minded5. Pursue Growth and Learning6. Build Open and Honest Relationships With Communication7. Build a Positive Team and Family Spirit8. Do More with Less9. Be Passionate and Determined10. Be Humble

19. Thats great for YOU but it would never work at my company

20. It doesnt matter what your core values areas long as you commit to them. ALIGNMENT

21. How does one do that?1. DECIDE what kind of brand you want to build2. Figure out VALUES & CULTURE3. Commit to TRANSPARENCY4. Have a VISION5. Build real RELATIONSHIPS6. Build your TEAM7. Think LONG Term 21

22. Step #1 DECIDE Decide if youre trying to build a long term sustainable brand Requires more patience with revenues & profits in order to lay the foundation Decide sooner rather than later 22

23. Step #2 FIGURE OUTVALUES & CULTURE 23

24. VALUES & CULTURE Figure out values & culture sooner rather than later What are your PERSONAL core values? What are the COMPANYS core values? Start EARLY. It is surprisingly HARDER than you think. It doesnt MATTER what the values are. The most important thing is ALIGNMENT. LIVE the BRAND 24

25. Step #3COMMIT TO Be real and you have nothing to fear Your culture is your brand Dont try to be someone you are not 25

26. Commitment to Transparency: Examples twitter.zappos.com Ask Anything newsletter Extranet for vendors Tours & reporter visits ZapposInsights.com 26

27. Transparency Tools twitter.zappos.com 27

28. Get your partners involved! 28

29. Transparency Tools Zappos.TV 29

30. Transparency Tools Facebook Page 30

31. Transparency Tools Facebook Page 31

32. What does a Snuggie have to do with Zappos.com?Absolutely nothing, but it has everything to do with an engagement opportunity! 32

33. Step #4 VISIONWhatever youre thinking, think bigger. Does the vision have meaning? Chase the vision, not the money 33

34. ENTREPRENEURS: What would you bepassionate about doing for10 years even if you never made a dime? 34

35. EMPLOYEES:Whats the larger vision and greater purpose in their work beyond money or profits? 35

36. VISIONMOTIVATION vs.INSPIRATION 36

37. Step #5 BUILD RELATIONSHIPS (not networking or marketing)Be INTERESTED rather than trying to be INTERESTING 37

38. Step #6BUILD YOUR TEAMIf you want to go quickly, go alone. If you want to go far, go together. (African proverb) Hire slowly Fire quickly 38

39. Step #7 THINK LONG TERM Repeat customers Customer service There is no get rich quick formulaOvernight successes are years in the making (both personally and in business) 39

40. some links to check out http://twitter.zappos.com (public mentions, employees) http://bit.ly/twitterbetter How Twitter Can Make You a Better (And Happier) Person http://blogs.zappos.com (photos & videos of culture) http://about.zappos.com (more information about us & core values) http://jobs.zappos.com (job opportunities) 40

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42. Thank you for allowing me to be here! Email amagness@zappos.com for a copy of this presentation or a copy of the Culture Book (its a physical book, so I need a physical address). 43

43. Legal and Financial Disclaimer P.S. You might be wondering why we need to have a legal and financial disclaimer in this presentation, but you are still reading, so our lawyers, auditors and accountants would really like to make sure we make the following clarifications. Although an audit was underway and almost done, the financial information presented in this slide show was unaudited. We made every effort to present the best information we had at the time. Gross merchandise sales is a non-GAAP metric. We use it to express the total demand across all of our web sites and stores. This number measures the dollar value of the orders placed in the year before accruing for certain items such as returns, and it ignores certain timing cut-offs that are required by GAAP for revenue recognition purposes. If we were a public company, we would have to reconcile gross merchandise sales to the nearest GAAP metric (net sales), but we are currently a private company so the gross merchandise sales number should be viewed just as an interesting number that we want to share with our friends. This presentation contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they ever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by the forward-looking statements and assumptions. These risks and uncertainties include, but are not limited to, the risk of economic slowdown, the risk of over or underbuying, the risk of consumers not shopping online or at our web site at the rate we expected, the risk of supplier shortages, the risk of new or growing competition, the risk of a natural or some other type of disaster affecting our fulfillment operations or web servers, and the risk of the world generally coming to an end. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements of expectation or belief; and any statement of assumptions underlying any of the foregoing. Zappos.com assumes no obligation and does not intend to update these forward-looking statements. Congratulations on making it through all the fine print. 44