Zappos began as an online shoe retailer in 1999 and grew significantly through focus on customer service and positive company culture. It developed core values like delivering "WOW" through service and adopted unique hiring and training practices. By 2008, Zappos had over $1 billion in annual sales across multiple product categories through its fulfillment centers and emphasis on happiness for employees and customers.

1. Clothing, Customer Survive and
Company Culture
Submitted by Group 8

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

14. Fulfillment Center

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