2. Agenda
Brief history
Happiness
3 C’s
Company culture
Core values
Application process
Cost of recruitment and training
Customer Service
Fulfillment center
Distribution Center
Clothing
Service delivery model
Actual sales
Requirement for merger
3. Tony Hsieh
• 1994-1995: Pizza business in
college
• 1996-1998: LinkExchange
(online advertising)
Sold to Microsoft for $265
million
• 1999: Venture Frogs (investment
fund) - Invested in Zappos.com,
Inc.
• 1999: Zappos.com, Inc.
• Nov 2009: Amazon acquires
4. Company History
Year Milestones
2000 Nick Swinmurn and Tony Hsieh function as co-CEOs of Zappos.
Zappos records $1.6 million in gross sales.
2001 Sustained effort produces $8.6 million in gross sales for Zappos.
2002 Zappos leases the Fulfillment Centers in Shepherdsville, Kentucky.
The brand elevates gross sales to $32 million.
2003 Gross sales at Zappos rise to $70 million.
2004 Sequoia Capital infuses a significant amount of cash into Zappos.
Zappos moves its Headquarters and call-center operations to Henderson,
Nevada.
Zappos opens its first outlet store in Kentucky.
Employee input is solicited for the publication of the first “Culture Book.”
Gross sales at Zappos more than double to $184 million.
2005 Sequoia increases its investment in Zappos to a total of $35 million.
Alfred Lin, cofounder of Venture Frogs, joins Zappos as CFO.
A quit-now bonus of $100 is offered to new hires so that they will consider
leaving the company after training if they think they aren’t a fit with the
culture at Zappos.
Zappos is named E-tailor of the Year by Footwear News.
Gross Zappos sales double again, to $370 million.
5. Company History
2006 Nick Swinmurn leaves Zappos to follow a passion for creating other
successful start-up businesses.
Zappos expands and moves into larger Fulfillment Centers in Shepherdsville,
Kentucky.
Gross sales at Zappos climb to $597 million.
2007 Zappos launches a Canadian site.
Ebags.com’s footwear and accessories e-tailor 6pm.com is acquired by
Zappos.
Zappos expands its product categories to include eyewear, handbags,
clothing, watches, and kids' merchandise.
Gross sales at Zappos hit $840 million
2008 Zappos lays off 8 percent of its workforce after investor Sequoia Capital,
anticipating a sluggish economy, sends the message to its portfolio
companies (including Zappos) that they need to cut expenses as much as
possible and get to both profitability and positive cash flow.
Zappos Insights is launched to help leaders, managers, and employees from
other businesses benchmark Zappos.
Gross sales at Zappos hit $1 billion.
6. What is your goal in life?
Grow Get a Boyfriend /
Company Be Healthy
Great Job Girlfriend
why? why? why? why?
Retire Make Find Soul
Early Run Faster
Money Mate
why? why? why? why?
Spend
Buy A Get Run A
Time w/
Home Married Marathon
Family
why? why? why? why?
HAPPINESS
Tony Hsieh – CEO (Zappos.com)
7. Three Cs
Company
Culture
Clothing Customer
Service
8. Company Culture
Differentiator that gave them competitive advantage
2005 they debuted their core values
Value # 7 – employees are encouraged to spend 10-20% of
their free time socializing outside of work
2008 created culture book
Started a pipeline
225 hours of core training
160 initial/new hire training
Additional courses: effective communication, coaching, overcoming
conflict, & managing stress
39 Opt hours: Inspiring Great Teams, Leadership Zappos Style, &
Cultivating Culture
9. Core Values
Deliver WOW through customer service
Embrace & drive change
Create fun & a little weirdness
Be adventurous, creative, & open- minded
Pursue growth & learning
Build open & honest relationships
Build a positive team & family spirit
Do more with less
Be passionate & determined
Be humble
10. Application Process
Personal theme song
Rate themselves on a weirdness scale
Assess how lucky they consider themselves
Two interviews: skill based & culture based
10-15 questions based on core values
4 weeks paid training focused on call center training, offered
$2000 to leave
11. Recruitment cost Training hours
Recruitment and training
let the cost of initial process per person x
cost of recruitment (at Zappos) 100x
success rate of initial training y
Compensation for those who return (pg 6) 2000 (1 -y)
Cost of recruitment (at Zappos) after 4 weeks 100x / y
if 'n' employees are needed
Total cost n(100x / y + 2000 (1 -y))
Retention percentage (given for call center) 20% (if generalized)
Total cost .8n(100x / y + 2000 (1 -y))
Training course Training hours
Core level training 255
Leadership training 39
Also grooming with other employees 10% - 20%
12. Customer Service
Believe rapid growth was due to customers’ loyalty
CLT team receives an average of 5,100 calls
Goal is to wow customers & establish personal connection
Calls times are not measured
Call center turnover in 2009 was only 7% whereas industry
average was 150%
Help customers find shoes regardless if Zappos carries them or
not
Strive to beat customer expectations
13. Fulfillment Center
Located in foreign trade zone so vendors can ship directly, bypassing
customs
License Plate Codes & 100% Random
Three storage areas
Static racks – Freestanding shelving units
Carousels – Ferris wheel type shelving system
Kiva – Automated storage & retrieval system using inventory pods
Do not implement a pay-per-performance or reward system
Computers set up in internet café
Karaoke, Wii guitar hero & rock band, free drinks, lunch & vending machines
Employees know the job itself isn’t great but all the perks really make a
difference
15. Distribution
Originally conducted drop shipping
Brought inventory in house in 2000
Purchased shoe store in Willows, Ca
Purchase abandoned building across the street & used as
distribution center
Tried third party fulfillment center
Within 6-8 weeks, developed their own fulfillment center
2003-75% of orders shipped from fulfillment center
Cut 25% of its business in short term, but provided to be the
best decision
16. Clothing
2006 – pursued additional lines of business
U.S. clothing market was four times larger than footwear
market
Within 1 year Zappos had 130 different apparel brands
2007 clothing reached 5% of Zappos sales
2008 Zappos sold $31 Million in apparel
Challenge was to get customers to see Zappos as more than just
a shoe retailer
17. Service delivery system
Clothing
Fill in volumes
Service
delivery
Provided the basis for employee
Repeat purchase
Corporate Customer
culture Service
Creating ‘y’ type employees
18. Sales figures
1400.0
Gross sales ($ millions)
1200.0
1000.0
800.0
600.0
400.0
200.0
0.0
2000 2002 2004 2006 2008
Year
Gross Sales Old sales New sales
