| Type | Subsidiary of Amazon.com[1] |
|---|---|
| Industry | Retail |
| Founded | 1999 |
| Headquarters | Current Headquarters: Henderson, Nevada, United States Warehouse: Shepherdsville, Kentucky, United States Future Headquarters: Las Vegas, Nevada, United States |
| Key people | Nick Swinmurn, founder Tony Hsieh, CEO Chris Nielsen, CFO |
| Products | Shoes, handbags, eyewear, accessories, apparel |
| Revenue | USD$1 billion (2009) |
| Owner(s) | Amazon.com[2] |
| Employees | 1500+ |
| Website | zappos.com |
Zappos.com is an online shoe and apparel shop currently based in Henderson, Nevada.[3]
In July 2009, the company announced it would be acquired by Amazon.com in an all-stock deal worth about $1.2 billion.[4][5][6] Since its founding in 1999, Zappos has grown to be the largest online shoe store.[7]
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Zappos was founded by Nick Swinmurn in 1999. The initial inspiration came when he couldn’t find a pair of brown Airwalks at his local mall.[6] That same year, Swinmurn approached Tony Hsieh and Alfred Lin with the idea of selling shoes online.[8] Hsieh was initially skeptical, and almost deleted Swinmurn’s voice mail.[9] After Swinmurn mentioned that "footwear in the US is a 40 billion dollar market and 5% of that is already being sold by paper mail order catalogs," Hsieh and Lin decided to invest $500,000 through their investment firm Venture Frogs.[9] The company was officially launched in June 1999, under the original domain name "ShoeSite.com."[10]
A few months after their launch, the company's name was changed from ShoeSite to Zappos (a variation of "zapatos," the Spanish word for "shoes") so as not to limit itself to selling only footwear.[10] In January 2000, Venture Frogs invested additional capital, and allowed Zappos to move into their office space.[11] During this time, Hsieh found that he "had the most fun with Zappos" and came on board as co-CEO with Nick Swinmurn.[12] After minimal gross sales in 1999, Zappos brought in $1.6 million in revenue in 2000.[12][13]
In 2001, Zappos more than quadrupled their yearly sales, bringing in $8.6 million.[12] In 2002, they opened their own fulfillment center in Shepherdsville, Kentucky.[12] Advertising costs were minimal, and the company grew mostly by word of mouth.[14] It was around this time that Hsieh and Zappos executives set long-term goals for 2010: achieve $1 billion in sales and receive inclusion on Fortune’s list of The Best Companies to Work For.[15]
In 2003, Zappos reached $70 million in growth sales and abandoned drop shipping, which accounted for 25% of their revenue base.[12] The decision was based on supplying superior customer service, as Hsieh says "I wanted us to have a whole company built around [customer service] and we couldn’t control the customer experience when a quarter of the inventory was out of our control."[16] In 2004, Zappos did $184 million in gross sales, and received their first round of venture capital, a $35 million dollar investment from Sequoia Capital.[12][17] That same year, they moved their headquarters from San Francisco to Las Vegas.[9]
Over the next three years, Zappos doubled their annual revenues, hitting $840 million in gross sales by 2007. They expanded their inventory to include handbags, eyewear, clothing, watches, and kids’ merchandise.[18][19] Hsieh summarized this transition, saying "back in 2003, we thought of ourselves as a shoe company that offered great service. Today, we really think of the Zappos brand as about great service, and we just happen to sell shoes."[18]
In 2008, Zappos hit $1 billion in annual sales, two years earlier than expected (one year later, they fulfilled their other long-term goal, debuting at #23 on Fortune’s Top 100 Companies to Work For).[20][21]
In 2009, Zappos started exploring an acquisition to Amazon.[22] Within Zappos’ board of directors, two of the five—Hsieh and Alfred Lin—were primarily concerned with maintaining Zappos company culture, whereas the other three wanted to maximize profits in a down economy.[9] Initially, Hsieh and Lin planned to buy out their board of directors, which they estimated would cost $200 million. In the midst of this, Amazon executives approached Zappos with the proposition of buying Zappos outright. After an hour-long meeting with Amazon CEO Jeff Bezos, Hsieh and Lin sensed that Amazon would be open to letting Zappos continue to operate as an independent entity, and started negotiations.[9] On July 22, 2009, Amazon announced that it would buy Zappos for $940 million in a stock and cash deal.[23][24][25] Owners of shares of Zappos were set to receive approximately 10 million Amazon.com shares, and employees would receive a separate $40 million in cash and restricted stock units.[25] The deal was eventually closed in November 2009 for a reported $1.2 billion.[23]
In 2013, Zappos will move their headquarters from Henderson, Nevada to the old city hall in Downtown Las Vegas.[26][27][28] According to Hsieh, "I want to be in an area where everyone feels like they can hang out all the time and where there’s not a huge distinction between working and playing."[29] The move was lauded by Las Vegas mayor Oscar Goodman who said "this will be a game changer for Southern Nevada. This move will bring about a critical mass of creative persons to the inner core of Las Vegas in addition to causing a significant shot in the arm for the economy and for new jobs."[29][30]
Zappos’ primary selling base is shoes, which accounts for about 80% of its business.[31] There are currently about 50,000 varieties of shoes sold in the Zappos store, from brands like Nike, Ugg boots, and Steve Madden heels. They also serve the niche shoe markets, including narrow and wide widths, hard-to-find sizes, American-made shoes, and vegan shoes. In 2004, they launched a second line of high-end shoes called Zappos Couture.[32]
In 2007, Zappos expanded their inventory to include clothing (including petite, big and tall, and plus sizes), handbags, eyewear, watches, and kids’ merchandise, which currently account for 20% of annual revenues. Zappos expects that clothing and apparel will bring in $1 billion worth of revenue by 2015, as the apparel market is four times the size of the footwear market.[31][33][34] Hsieh states that "our whole goal is we want to build the best brand of customer service. Hopefully, 10 years from now, people won’t even realize that we started selling shoes."[33]
Zappos uses a loyalty business model and relationship marketing. The primary sources of the company's rapid growth have been repeat customers and numerous word of mouth recommendations.[35] Of its customers, 75% are repeat buyers.[36]
The company's customer service reputation has been augmented through viral spreading as well, as customer service expert Micah Solomon noted in 2010: "Shoe merchant Zappos has benefited from Internet wildfire. When Zappos offered special return shipping assistance, beyond their company policies...the good word about the company spread quickly throughout the blogosphere."[37]
Zappos has a stated goal to offer "best service in the industry."[38] Their service promotes such benefits as:
Zappos places great emphasis on company culture and core values. Hsieh's belief is that "if we get the culture right, then everything else, including the customer service, will fall into place."[33] The company publishes an annual 480-page "Culture Book," which is composed of two to three paragraph entries from employees describing Zappos' company culture.[39] The entries are unedited, and a copy of the Culture Book is given to all employees (although anyone can receive a copy of the book upon request).[40]
Zappos applicants must go through two interviews: one for their professional aptitude and one for their personality, both equally important.[33] In the personality interview, they are asked questions to see if they would fit in with Zappos culturally, like "how weird are you on a scale from 1-10" and "what is your theme song?"[18] All newly hired employees except those at the Kentucky Fulfillment Center, even executives, are required to undergo a 4-week customer loyalty training course, which includes at least 2 weeks of talking on the phone with customers in the call center.[41] After training, the new employees are offered $2,000 to quit, which weeds out people who would jump ship anyway and allows those who remain to make a public statement of commitment to their new employer.[41][42] Over 97% turn down the offer.[43]
Employees enjoy free lunches, no-charge vending machines, a company library, a nap room, and free health care.[9][44] Each department has its own decor, ranging from rainforest themed to Elvis themed, and employees are encouraged to decorate their work spaces (for example, Hsieh’s desk, which is in the middle of a cluster of cubicles, features jungle vines and an inflatable monkey).[8][45] Employees often lead spontaneous office parades, occasionally accompanied with cowbells, and managers are required to spend 10-20% of their working hours "goofing off" with employees outside of the office.[9][46][47][48]
Zappos has ten core values, which define their culture, brand, and business strategies.[49] They are:
The Zappos website states that "we've been asked by a lot of people how we’ve grown so quickly, and the answer is actually really simple... We've aligned the entire organization around one mission: to provide the best customer service possible."[13] On average, Zappos employees answer 5,000 calls a day, and 1,200 e-mails a week (except in the holiday season, when call frequency increases significantly).[10] Call center employees don't have scripts, and there are no limit on call times.[50] The longest call recorded was over five hours long.[6][51]
Zappos employees are encouraged to go above and beyond traditional customer service.[52][53] In particular, after a late night of barhopping and closed room service, Hsieh bet a Skechers rep that if he called the Zappos hotline, the employee would be able to locate the nearest late-night pizza delivery.[54] The call center employee, although initially confused, returned two minutes later with a list of the five closest late night pizza restaurants. Inc. Magazine notes another example when a woman called Zappos to return a pair of boots for her husband because he died in a car accident. The next day, she received a flower delivery, which the call center rep had billed to the company without checking with her supervisor.[42]
Even though their website states that delivery will take between 2-5 business days, Zappos gives "surprise" free upgrades to overnight shipping for most customers.[43][55][56]
In 2009, Zappos was awarded for the "best use of social media" by Abrams Research [57]. CEO Tony Hsieh indeed encourages his employees to use social media networks to put a human face on the company and engage with customers, which especially coincides with core value #6: "Build Open and Honest Relationships With Communication."[58]. Zappos employees maintain an active presence on:
All the social networks are complementary for Zappos; none of them can be avoided. However, the "real" social media remains the telephone and the email, which are essential to get the best customer service.
In 2008, Zappos launched Zappos Insights, which aims to help other businesspeople refine their company culture and customer service.[62] For $40/month, participants are offered access to a subscription video service that lets companies ask questions to Zappos employees.[63][64] Zappos Insights also offers a two-day bootcamp where participants visit the headquarters and have meetings with Zappos executives.[65][66]
In 2007, Zappos acquired 6pm.com, which has bargain shoes, clothing, and accessories.[67][68][69] In May 2010, 6pm accidentally priced all their merchandise at $49.95, including items like GPS navigators.[70] They honored the pricing glitch, taking a $1.6 million loss.[71]
Zappos sponsors the "Zappos Rock 'n' Roll Las Vegas Marathon and ½ Marathon," which draw 28,000 runners each year.[72][73] They also sponsor the Zappos WCC basketball championships.[74] During the tournament, Zappos hosts "Kidz Day," which outfits local Las Vegas kids with a new pair of shoes and an event t-shirt.[75]
Zappos has been featured in many US based publications, including The New Yorker, USA Today, CNN, The New York Times, Inc. Magazine, The Washington Post, CBS News, The Los Angeles Times, The Chicago Tribune, and Forbes.[9][6][7][20][34][76][77][78][79][80][81] They were named #23 to Fortune’s list of “Best Companies to Work For” in 2009, #15 in 2010, and #6 in 2011.[21][44][82]
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