Zappos-SIMA-05-15-08

Slide 1: BUILDING A BRAND THAT MATTERS S U R F S U M M IT 1 1 TONY HSIEH C AB O S AN CEO, ZAPPOS.COM LU C AS

Slide 2: A LITTLE HISTORY PRIOR TO ME JOINING ZAPPOS C O -FO U N D ED L IN K E X C H A N G J O IN E D E W IT H ZAP P O S S AN J AY 2 0 0 0 T Investor and advisor to 19 9 6 Zappos via Venture Frogs T Cooperative advertising network T Joined full time in 2000 T Sold to Microsoft in 1998 for $265 million P R ES EN T 2 0 0 8 19 9 4 C O -F O U N D E D VE N TU R E F R O G S 19 9 9 T $27 million investment fund and T Ran pizza business with college roommate (Sanjay) incubator T Met Alfred T Co-founded with Alfred T Invested in over 20 startups including: Ask Jeeves, OpenTable.com, Tellme Networks, Z a p p o s . c o m 2

Slide 3: ZAP P O S B AC KG R O UND V IT A L S Founded in 1999 1600 employees (half in Las Vegas headquarters, half in Kentucky) Zappos is powered by service T Providing the best online shopping experience possible. T F a s t , F r e e S h ip p in g . Free return shipping. 365-day return policy. T Fast fulfillment. Expedited delivery. Fast, friendly & expert customer service. Best Selection T Over 1200 brands, over 200,000 styles, over 900,000 unique UPCs. T 4 million items in warehouse T Photography in multiple angles. T 100% of products inventoried (no drop ship). Zappos is a service company that happens to sell shoes, clothing, handbags, eyewear, watches (and eventually a bunch of other stuff).

Slide 4: O U R C U S TO M E R V A L U E P R O P O S IT IO N IN A C T IO N … ZAPPOS IS COMMITTED TO WO W ING EACH AND EVERY CUSTOMER. 4

Slide 5: O U R C U S TO M E R V A L U E P R O P O S IT IO N IN A C T IO N … CUSTOMERS COME… 7.9M total purchasing customers (2.6% of US population) 3.5M have purchased in the last 12 months CUSTOMERS COME BACK… On any given day, about 75% of purchases from returning customers Repeat customers order >2.5x in the next 12 months CUSTOMERS COME BACK, ORDER MORE AND ORDER MORE OFTEN… Repeat customers have higher average order size $111.98 – first time customers in Q406 $143.22 – returning customer in Q406 5

Slide 6: TH E P O WE R O F R E P E A T C U S TO M E R S A N D WO R D O F M O U TH $1000 $900 $800 $700 GROSS MERCHANDISE $MM $600 SALES $500 $400 $300 $200 $100 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 GROSS MERCHANDISE 1.6 8.6 32 70 184 370 597 840 1000 SALES $MM 6

Slide 7: C U S TO M E R S E R V IC E IN A C T IO N

Slide 8: C U S T O M E R S E R V IC E : WHAT CUSTOMERS FIRST SEE h 24/7 1-800 number on every page h FREE SHIPPING h FREE RETURN SHIPPING h 365-DAY RETURN POLICY

Slide 9: C U S T O M E R S E R V IC E : WHAT CUSTOMERS EXPERIENCE FAST, ACCURATE FULFILLMENT MOST CUSTOMERS ARE “SURPRISE”-UPGRADED TO OVERNIGHT SHIPPING FRIENDLY, HELPFUL “ABOVE AND BEYOND” CUSTOMER SERVICE OCCASIONALLY DIRECT CUSTOMERS TO COMPETITORS’ WEB SITES 9

Slide 10: C U S T O M E R S E R V IC E : WHAT WE DO INTERNALLY NO CALL TIMES NO SALES-BASED PERFORMANCE GOALS FOR REPS 5 WEEKS OF CULTURE, CORE VALUES, CUSTOMER SERVICE, AND WAREHOUSE TRAINING FOR EVERYONE IN LAS VEGAS INTERVIEWS AND PERFORMANCE REVIEWS ARE 50% BASED ON CORE VALUES AND CULTURE FIT C U LTU R E B O O K

Slide 11: C U S T O M E R S E R V IC E : WHAT WE DO INTERNALLY WAREHOUSE RUNS 24/7 INVENTORY ALL PRODUCT (NO DROP-SHIP)

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Slide 13: 4 T H IN G S YO U N EED T O B U IL D A B R AN D TH AT M ATTE R S

Slide 14: 1 V IS I ON W H A TE VE R YO U ’ R E T H IN K IN G , T H IN K B IG G E R . D O E S TH E V IS IO N H A V E M E A N IN G ? 14

Slide 15: 2 R EP EAT C U S TO M E R S G R EAT P RODUCT G R E A T S E R V IC E L O W P R IC E S F O C U S O N 2 O F TH E 3 15

Slide 16: R E P E A T C U S TO M E R D A TA FO R ZAP P O S .C O M % c u s to m e rs a vg # % re p e a t w ho buy p u rc h a s e s b y c u s to m e rs a g a in w it h in re p e a t m u lt ip le d b y n e x t 12 c u s to m e rs a vg # m o n th s o v e r n e x t 12 p u rc h a s e s m o n th s Ma rc h 2 0 0 1 20.4% 1.50 0.31 (re p e a t Ma rc h 2 0 0 2 27.0% c u s to m e rs ) 1.74 0.47 Ma rc h 2 0 0 3 33.5% 1.96 0.66 Ma rc h 2 0 0 4 44.6% 2.36 1.05 Ma rc h 2 0 0 5 51.0% 2.53 1.29 Ma rc h 2 0 0 6 52.5% 2.60 1.37 Ma rc h 2 0 0 7 54.9% 2.68 1.47 16

Slide 17: 3 TR AN S P AR E N C Y B E R E A L , A N D YO U H AVE N O T H IN G T O F E A R 17

Slide 18: 4 C U LTU RE COMMITTABLE CORE VALUES

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Slide 22: Q&A E M A IL ME • tony [at] zappos.com for: • A COPY OF THIS PRESENTATION • ANSWERS TO ANY ADDITIONAL QUESTIONS NOT ANSWERED TODAY • A COPY OF OUR CULTURE BOOK • A TOUR OF OUR OFFICES WHEN YOU’RE IN VEGAS • JOB OPPORTUNITIES F O LLO W M E FOLLOW ME ON TWITTER! http://twitter.com/z a p p o s 22

Slide 24: L e g a l a n d F in a n c ia l D is c la im e r 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. If you enjoy fine print, look for openings on our legal and finance team at jobs.zappos.com. 24