You can read and post comments here! (Read the email I sent to employees first.)

I was in Washington, DC last week and spent several days participating in inauguration-related events with various people including Evan Williams, the CEO of Twitter. So I thought this would be an opportune time to write about a topic that I've been thinking a lot about over the past few months: how Twitter has contributed to my own personal growth and made me a better person, and how you can take the same principles and apply them to yourself if you'd like.

I've talked a lot in the past about how we've used Twitter at Zappos for building more personal connections with both our employees and our customers. In fact, we recently debuted on FORTUNE MAGAZINE's annual "100 BEST COMPANIES TO WORK FOR" list, and they began and ended the article talking about our use of Twitter to build more personal connections with people. That in itself is its own reward that has both personal and business benefits, but for this blog post, I wanted to share my stories and thoughts on how Twitter has helped me grow personally.

For me, it comes down to these 4 things:

1. Transparency & Values: Twitter constantly reminds me of who I want to be, and what I want Zappos to stand for
2. Reframing Reality: Twitter encourages me to search for ways to view reality in a funnier and/or more positive way
3. Helping Others: Twitter makes me think about how to make a positive impact on other people's lives
4. Gratitude: Twitter helps me notice and appreciate the little things in life

The great thing about all 4 of these things is that not only have they helped me grow as a person, but they've also led to me being generally happier in life. And the benefits aren't just personal -- they also spill over into what we want the Zappos brand and business to be about: Zappos is about delivering happiness, whether for customers (through customer service) or for employees (through company culture). It's been interesting thinking about how all of my personal learnings about happiness can be applied to delivering happiness in the business world as well.

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#1 - TRANSPARENCY & VALUES

What would you do differently if you were always on camera? I'm not talking about being on a reality TV show, but what if there were a permanent public record of everything you do or say from now on that anyone in the world could view at anytime? How would you act differently in certain situations? Would you be friendlier to people? Would you be less negative and less judgmental?

If you were always on camera, then everything you did would go towards shaping your personal brand, whether positive or negative. What are your personal values, and what values do you aspire to?

At Zappos, we have 10 core values that act as a formalized definition of our company culture. Our core values weren't formed by a few people from senior management that sat around in a room at a company offsite. Instead, we invited every employee at Zappos to participate in the process, and here's the final list we collectively came up with:

1) Deliver WOW Through Service
2) Embrace and Drive Change
3) Create Fun and A Little Weirdness
4) Be Adventurous, Creative, and Open-Minded
5) Pursue Growth and Learning
6) Build Open and Honest Relationships With Communication
7) Build a Positive Team and Family Spirit
8) Do More With Less
9) Be Passionate and Determined
10) Be Humble

The cool thing about the Zappos core values is that I've used them as my own personal values as well. So it makes tweeting really easy for me... Whether I tweet about something personal or something related to Zappos, if I'm living my life through these 10 core values, it all goes towards building the Zappos brand while shaping me personally as well.

A lot of marketers are initially mystified by how Twitter, in which you're limited to 140 characters or less per tweet, can actually help a company build a brand when you're so restricted in the length of your tweet. Here's the analogy I like to use:

Think of each tweet as a dot on a piece of paper. Any single tweet, just like any single dot, by itself can be insignificant and meaningless. But, if over time, you end up with a lot of tweets, it's like having a lot of dots drawn on a piece of paper. Eventually there are enough dots for your followers to connect them together. And if you connect the dots, in the aggregate it paints a picture of you and/or your company, and it's that total picture that is your brand.

I have to admit, like probably most other people, when I first joined Twitter I felt a bit uncomfortable publicly announcing what I was doing and what I was thinking. But because radical transparence was part of the culture of tweeting, I decided to give it a try and be as transparent as possible, both for myself personally and for Zappos. It was also consistent with Zappos Core Value #6: "Build Open and Honest Relationships With Communication".

What I found was that people really appreciated the openness and honesty, and that led people to feel more of a personal connection with Zappos and me compared to other corporations and business people that were on Twitter.

By embracing transparency and tweeting regularly, Twitter became my equivalent of being always on camera. Because I knew that I was going to be tweeting regularly about whatever I was doing or thinking, I was more conscious of and made more of an effort to live up to our 10 core values.

A lot of people use Twitter to complain or vent, but I generally try to avoid doing so because it's not in line with our core values. What I've noticed is that it's also caused me to complain a lot less in real life, and because of that, I've found that my own personal happiness level has gone up.

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#2 - REFRAMING REALITY

That's not to say that I don't get into situations that I'm not initially happy about. But now anytime something that used to get me upset or frustrated happens, I try to find the humor in the situation and think about how the situation can be reframed. I've found that almost every "bad" situation is actually an opportunity that can be entertaining to my followers on Twitter, which also forces myself to see things in a different light.

For example, last year I was staying at a hotel in Mexico and somehow managed to lock myself out on the balcony of my hotel room. I was stuck there for 45 minutes before I was finally rescued. This would haven normally been a very frustrating experience, but because I had my cell phone with me, I was able to tweet about it and it actually ended up being a very enjoyable 45 minutes as I tweeted about the progress of my situation and read all of my followers' responses to it:

Went 2 my room after my speech, came out 2 balcony. Balcony door somehow locked behind me so now I am trapped outside. @ zappos_fred 2 rescue [http://twitter.com/zappos/status/812279213]

Hotel front desk is telling @zappos_fred it's not possible for me to be locked out on balcony. I assure you it is, I am not pretending. [http://twitter.com/zappos/status/812287969]

Hotel security finally believed @zappos_fred, rescued me after 45 mins. Asked 4 ID so I could come in from balcony. No ID = stay on balcony [http://twitter.com/zappos/status/812292469]

in fact, I now almost looked forward to situations that would normally be frustrating, because I've learned that almost any situation can be reframed to be funny as a tweet, which then makes the situation in real life funny as well. For example:

Airport bathroom: guy tries washing hands - auto faucet motion sensor broken. He tries voice recognition instead by yelling "Wash!" at sink [http://twitter.com/zappos/statuses/806944443]

If it weren't for Twitter, I would have instead probably been a bit annoyed waiting in line behind this man who was unfamiliar with motion-activated sink faucets. But instead, Twitter forced me to search for and find the humor in the situation by taking a step back and realizing that it actually was a pretty funny situation.

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#3 - HELPING OTHERS

One of the great things about Twitter is the instant feedback loop. Within 5 minutes of sending out a tweet, you can find out whether people enjoyed or appreciated your tweet. When I first started using Twitter, I used to just tweet about what I was doing. Most of my tweets were very "me-focused", because the guideline Twitter gives is to answer the question "What are you doing right now?"

Every once in awhile I might share an inspirational quote or funny story or link to an interesting article. What I found was that those types of tweets also garnered the most responses. So today, with most of my tweets I try to do at least one of the following:

• Cause my followers to smile with something funny
• Inspire my followers (for example, with an inspirational quote)
• Enrich my followers' perspectives (such as with a link to an interesting article)

In other words, I've become a lot less "me-focused" and instead do a lot more thinking and asking myself, "What can I tweet about that would brighten the day for my followers or enrich their lives somehow?"

And by regularly putting myself into the mindset of asking what I can do for others, it inevitably ends up spilling over to my regular life outside of Twitter. And somewhat ironically, becoming less "me-focused" has actually increased my overall level of happiness for myself personally.

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#4 - GRATITUDE

In my research into the science of happiness, many studies have shown that gratitude activities (such as keeping a gratitude journal) helps people increase their overall happiness level in life. There are many ways to be thankful, and many things to be thankful for, but one technique is to make a more conscious effort to notice and appreciate the little things in life.

For me, because I try to tweet every day, I've found that I'm always looking for opportunities to have something to tweet about. So I end up noticing and appreciating things that I would normally not even give a second thought to. Here are examples of some tweets I've sent about things I've noticed that I would have normally ignored or forgotten about:

http://twitpic.com/rcli - Guy in New York with a cat on his head. Apparently this is normal. [http://twitter.com/zappos/status/1046534414]

http://twitpic.com/13fn1 - It's so cold that the NY street food vendors' tomatoes & lettuce are frozen [http://twitter.com/zappos/status/1124243255]

At Vegas airport. While in bathroom, I had an AMAZING revelation: Toilet seat covers are shaped exactly the same as life vests! [http://twitter.com/zappos/status/1109483429]

Enjoying just hanging out at home for my birthday. Looking at the full moon which is closest to earth today, happens once every 15 years. [http://twitter.com/zappos/status/1054918866]

So now, anytime I notice something that would normally be inconsequential, the very act of tweeting forces me to spend some time appreciating what would have otherwise been ignored or forgotten. And because of that, I've learned that every day, there are many, many opportunities to notice and appreciate the little things in life.

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So for all of the reasons I've outlined above -- Transparency & Values, Reframing Reality, Helping Others, and Gratitude -- I'd like to say thank you to Twitter for helping me grow as a person.

Tony Hsieh - CEO, Zappos.com

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SOME QUESTIONS FOR YOU

Some questions for you to consider thinking about: What are your personal values? What do you want your personal brand and values to be? How can you use Twitter as a tool to help you grow as a person and be happier? If you've ever vented on Twitter, do you think you would be happier if you thought of Twitter as a tool for you to reframe your perspective? I'd love to hear people's thoughts and comments below!

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Follow me on Twitter: @zappos

Want to learn how to get started on Twitter? Take a look at the beginner's guide I wrote!

It's official! Zappos.com made FORTUNE MAGAZINE's "100 Best Companies To Work For" list for 2009 - and we're actually mentioned on the cover!

To give a little bit of history, FORTUNE puts out this high profile list every year. Making this list was one of the most important goals that we set for ourselves during the early days of Zappos, and we're all super excited to show up on the list for the first time in our company's history! To qualify, a company has to be at least 7 years old and have at least 1000 employees. We came in at #23 this year, making us the highest ranking newcomer for 2009.

Here's a link to the actual article (it's 2 pages, you need to hit the non-obvious "2" button to get to the second page, or just use the second link):

http://money.cnn.com/2009/01/15/news/companies/Zappos_best_companies_obrien.fortune/index.htm
http://money.cnn.com/2009/01/15/news/companies/Zappos_best_companies_obrien.fortune/index2.htm

Here's a link to a video FORTUNE also put up:

http://money.cnn.com/video/ft/#/video/fortune/2009/01/21/fortune.bctwf.zappos.fortune

Here's a link to another article FORTUNE put up about our core values at Zappos:
http://money.cnn.com/2009/01/21/news/companies/obrien_zappos10.fortune/

And here's a link to our official press release:
http://www.earthtimes.org/articles/show/zapposcom-debuts-on-fortune-magazinersquos,688804.shtml

More background information about Zappos:
http://about.zappos.com

Zappos Blogs:
http://blogs.zappos.com

Or follow me on Twitter!
http://twitter.com/zappos

Thank you EVERYONE for helping shape the Zappos culture into what it is today. It's hard to believe that within a 30 day period, we hit $1 billion in gross merchandise sales AND finally made FORTUNE's list of "100 Best Companies To Work For"! We'll be coming up with a special commemorative t-shirt celebrating both over the next few weeks!

Tony Hsieh, CEO

The following was sent to all Zappos employees this past Monday:

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Team,

Happy New Year! To kick off the year, I sent this on Jan. 2nd to a smaller group, but a few folks suggested that it should be sent to all Zappos employees. Here is a slightly cleaned up and better version of what was sent.

--

"It was the best of times and it was the worst of times." – A Tale of Two Cities, by Charles Dickens

On CNBC Reports 2008, Maria Bartiromo quoted Charles Dickens, noting that, while Dickens was referring to the French Revolution, he could have easily been talking about 2008.

No doubt, 2008 was a very challenging year, starting out with a weak economic and retail environment that degraded slowly in the first half of the year and then fell off a cliff in the second half of the year. Depending on what reports you read, online ecommerce was down 3-5% this holiday season, marking the first time ecommerce didn't grow. Reading about these not-so-positive reports just goes to show how very lucky we are at Zappos, because we were able to ride through these rocky times and produce pretty incredible results. No, things weren't perfect, but 2008 was still a great year for us! Official results have to wait until our finance team closes the books and releases the audited financials in early March, but we managed to grow our business over last year and during the holiday season (when ecommerce was down), exceeded $1B in gross merchandise sales, and by Doing More with Less, kept ourselves profitable and cash positive – all the while having a lot of fun serving our customers!

We can reminisce about 2008, but now that 2009 is here and we are back from some much needed downtime, it's time to get our A-game back on. We'll be going over our goals and our "official" plans as soon as our board approves them, but even before that "officially" happens, we already know what we need to do.

One thing I encourage you to do is to refer back to our Core Values document and specifically the challenge in there: make at least one improvement every week that makes Zappos better. Ideally, we would do this every single day. It sounds daunting, but remember improvements don't have to be dramatic. Think about what it means to improve just 1% per day and build upon that every single day. Doing so has a dramatic effect and will make us 37x better, not 365% (3.65x) better at the end of the year. Wake up every day and ask yourself not only what is the 1% improvement I can change to make Zappos better, but also what is the 1% improvement I can change to make myself better personally and professionally – because we, Zappos, can't grow unless we as individual people grow too.

Imagine yourself making 1% changes every day that compounds and will make you and Zappos 37x better by the end of the year. Imagine if every employee at Zappos was doing the same. Imagine how much better you, Zappos and the
world will be next year.

It won't be easy and 2009 will no doubt present its own set of challenges, but we positively will get through it. Have a great and happy 2009!

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P.S. Also check out Tony's blog entry, Your Culture Is Your Brand.

P.P.S. This is for the math geeks. If you start out with $100 at the beginning of the year and you were able to increase what you have by 1% every single day, at the end of the year, you would have $3,778.34 = $100 * (1 + 1%) ^ 365. That is 37.78x what you had at the beginning of the year. Get that 1% every single day!

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Do you have a story about how small changes every single day made a huge difference in the long-run? If so, leave us a comment below or email me: alfred (at) zappos.com.

Follow me on Twitter: @zappos_alfred

Building a brand today is very different from building a brand 50 years ago. It used to be that a few people got together in a room, decided what the brand positioning was going to be, and then spent a lot of money buying advertising telling people what their brand was. And if you were able to spend enough money, then you were able to build your brand.

It's a very different world today. With the Internet connecting everyone together, companies are becoming more and more transparent whether they like it or not. An unhappy customer or a disgruntled employee can blog about bad experience with a company, and the story can spread like wildfire by email or with tools like Twitter.

The good news is that the reverse is true as well. A great experience with a company can be read by millions of people almost instantaneously as well.

The fundamental problem is that you can't possibly anticipate every possible touchpoint that could influence the perception of your company's brand.

For example, if you happen to meet an employee of Company X at a bar, even if the employee isn't working, how you perceive your interaction with that employee will affect how you perceive Company X, and therefore Company X's brand. It can be a positive influence, or a negative influence. Every employee can affect your company's brand, not just the front line employees that are paid to talk to your customers.

At Zappos.com, we decided a long time ago that we didn't want our brand to be just about shoes, or clothing, or even online retailing. We decided that we wanted to build our brand to be about the very best customer service and the very best customer experience. We believe that customer service shouldn't be just a department, it should be the entire company.

Advertising can only get your brand so far. If you ask most people what the "brand" of the airline industry as a whole is (not any specific airline, but the entire industry), they will usually say something about bad customer service or bad customer experience. If you ask people what their perception of the US auto industry is today, chances are the responses you get won't be in line with what the automakers project in their advertising.

So what's a company to do if you can't just buy your way into building the brand you want? What's the best way to build a brand for the long term?

In a word: culture.

At Zappos, our belief is that if you get the culture right, most of the other stuff -- like great customer service, or building a great long-term brand, or passionate employees and customers -- will happen naturally on its own.

We believe that your company's culture and your company's brand are really just two sides of the same coin. The brand may lag the culture at first, but eventually it will catch up.

Your culture is your brand.

So how do you build and maintain the culture that you want?

It starts with the hiring process. At Zappos, we actually do two different sets of interviews. The hiring manager and his/her team will do the standard set of interviews looking for relevant experience, technical ability, fit within the team, etc. But then our HR department does a separate set of interviews, looking purely for culture fit. Candidates have to pass both sets of interviews in order to be hired.

We've actually said no to a lot of very talented people that we know can make an immediate impact on our top or bottom line. But because we felt they weren't culture fits, we were willing to sacrifice the short term benefits in order to protect our culture (and therefore our brand) for the long term.

After hiring, the next step to building the culture is training. Everyone that is hired into our headquarters goes through the same training that our Customer Loyalty Team (call center) reps go through, regardless of department or title. You might be an accountant, or a lawyer, or a software developer -- you go through the exact same training program.

It's a 4-week training program, in which we go over company history, the importance of customer service, the long term vision of the company, our philosophy about company culture -- and then you're actually on the phone for 2 weeks, taking calls from customers. Again, this goes back to our belief that customer service shouldn't just be a department, it should be the entire company.

At the end of the first week of training, we make an offer to the entire class. We offer everyone $2000 to quit (in addition to paying them for the time they've already worked), and it's a standing offer until the end of the fourth week of training. We want to make sure that employees are here for more than just a paycheck. We want employees that believe in our long term vision and want to be a part of our culture. As it turns out, on average, less than 1% of people end up taking the offer.

One of the great advantages of focusing on culture is when reporters come and visit our offices. Unlike most companies, we don't give reporters a small list of people they're allowed to talk to. Instead, we encourage them to wander around and talk to whoever they want. It's our way of being as transparent as possible, which is part of our culture.

We've formally defined our the Zappos culture in terms of 10 core values:

1) Deliver WOW Through Service
2) Embrace and Drive Change
3) Create Fun and A Little Weirdness
4) Be Adventurous, Creative, and Open-Minded
5) Pursue Growth and Learning
6) Build Open and Honest Relationships With Communication
7) Build a Positive Team and Family Spirit
8) Do More With Less
9) Be Passionate and Determined
10) Be Humble

Many companies have core values, but they don't really commit to them. They usually sound more like something you'd read in a press release. Maybe you learn about them on day 1 of orientation, but after that it's just a meaningless plaque on the wall of the lobby.

We believe that it's really important to come up with core values that you can commit to. And by commit, we mean that you're willing to hire and fire based on them. If you're willing to do that, then you're well on your way to building a company culture that is in line with the brand you want to build. You can let all of your employees be your brand ambassadors, not just the marketing or PR department. And they can be brand ambassadors both inside and outside the office.

At the end of the day, just remember that if you get the culture right, most of the other stuff -- including building a great brand -- will fall into place on its own.

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Do you have a story about how your company's culture has positively or negatively impacted your company's brand? if so, leave a comment below!

You can also find more information about how we manage our company culture at Zappos at: www.zapposinsights.com

Follow me on Twitter: @zappos

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(This is a follow up to my previous blog post Everything I Know About Business I Learned From Poker.)

In poker, people spend a lot of time learning the best strategy to play once you're sitting down at a table. One of my biggest "ah-ha!" moments came when I learned from a poker book a long time ago that the game starts even before you sit down.

When you're in a poker room, usually there are many different choices of tables that you can sit down at. Each table has different stakes, different players, and different dynamics that change as the players come and go, and as players get excited, upset, or tired.

As a poker player, the most important decision you can make is which table to sit at. This includes knowing when to change tables. An experienced player can make 10 times as much money sitting at a table with 9 mediocre players who are tired and have a lot of chips compared to sitting at a table with 9 really good players who are focused and don't have that many chips in front of them.

In business, one of the most important decisions you'll make is what business to be in. It doesn't matter how flawlessly you execute your business if you're in the wrong business or you're playing in a small market.

You could be the most efficient manufacturer of 7-fingered gloves and offer the best selection, the best service, and the best prices for 7-fingered gloves. But if there isn't a big enough market for what you sell, you're not going to get very far.

Or, if you decide to start a business that competes directly against really experienced competitors such as Walmart by playing the same game they play (for example, trying to sell the same goods at lower prices), then chances are that you will go out of business.

In a poker room, you can only choose which table you want to sit at. But in business, you don't have to sit at an existing table. You can define your own, or make the one you're already at even bigger. (Or, just like in a poker room, you can always choose to change tables.)

Whatever vision you have for your business, there is a bigger vision that makes the table bigger. When Southwest Airlines first started, they didn't see their target market as limited to just existing airline travellers, which is what all the other airlines did. Instead, they imagined their service as something that could potentially serve all the people that travelled by Greyhouse bus or by train, and they designed their business around that. They offered short flights at cheap prices, instead of going with the more prevalent "hub and spoke" model that other airlines were using. They made it easy for customers to change flights without paying huge penalties. And they turned their planes around at airports as fast as possible.

At Zappos.com, our original vision was to just to try to sell some shoes online. But after a few years, we realized that we wanted and needed a bigger vision. We decided to make our table bigger by envisioning the Zappos brand to be about the very best customer service and the very best customer experience. The customer service vision enabled us to expand beyond just selling shoes. In fact, today we also sell clothing, bags, housewares, electronics, and even kitchenware.

But because our vision is about building a brand around the best customer service, the future of our company isn't even limited to just e-commerce. We've even had customers ask us if we would start an airline. We're not going to do that anytime soon, but maybe 30 years from now, there will be a Zappos Airlines that's just about delivering the very best customer service.

For your business, have you thought about what you can do to make your table bigger?

Have you thought about whether you should be changing tables?

Whether in poker, in business, or even in life, it's easy to be so engrossed in what you're doing right now that you forget that you always have the option to change tables. Psychologically, it's hard because there's a lot of inertia to overcome.

If your business isn't growing, or you're not passionate about your job or what you're doing in life in general, don't be afraid to ask yourself: "Should I be sitting at a different table?"

Just remember, it's never to late to change tables, and it's never too late to ask yourself whether you're playing the right game.

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I'm working on writing a poker/business book titled Everything I Know About Business I Learned From Poker.

I'd love to hear your comments as well as any real-life stories about poker, business, or life as it relates to this post! Please share your story by commenting below or emailing me at tony(at)zappos.com.

Thanks!

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12/30/08 Update: Wrote follow up post: Poker, Business, Life: It's Never Too Late to Change Tables

EVALUATING MARKET OPPORTUNITIES

• Table selection is the most important decision you can make.
• It's okay to switch tables if you discover it's too hard to win at your table.
• If there are too many competitors (some irrational or inexperienced), even if you're the best it's a lot harder to win.

MARKETING AND BRANDING

• Act weak when strong, act strong when weak. Know when to bluff.
• Your "brand" is important.
• Help shape the stories that people are telling about you.

FINANCIALS

• Always be prepared for the worst possible scenario.
• The guy who wins the most hands is not the guy who makes the most money in the long run.
• The guy who never loses a hand is not the guy who makes the most money in the long run.
• Go for positive expected value, not what's least risky.
• Make sure your bankroll is large enough for the game you're playing and the risks you're taking.
• Play only with what you can afford to lose.
• Remember it's a long term game. You will win or lose individual sessions, but it's what happens in the long term that matters.

STRATEGY

• Don't play games that you don't understand, even if you see lots of other people making money from them.
• Figure out the game when the stakes aren't high.
• Don't cheat. Cheaters never win in the long run.
• Stick to your principles.
• You need to adjust your style of play throughout the night as the dynamics of the game change. Be flexible.
• Be patient and think long term.
• The players with the most stamina and focus usually win.
• Differentiate yourself. Do the opposite of what the rest of the table is doing.
• Hope is not a good plan.
• Don't let yourself go "on tilt". It's much more cost effective to take a break, walk around, or leave the game for the night.

CONTINUAL LEARNING

• Educate yourself. Read books and learn from others who have done it before.
• Learn by doing. Theory is nice, but nothing replaces actual experience.
• Learn by surrounding yourself with talented players.
• Just because you win a hand doesn't mean you're good and you don't have more learning to do. You might have just gotten lucky.
• Don't be afraid to ask for advice.

CULTURE

• You've gotta love the game. To become really good, you need to live it and sleep it.
• Don't be cocky. Don't be flashy. There's always someone better than you.
• Be nice and make friends. It's a small community.
• Share what you've learned with others.
• Look for opportunities beyond just the game you sat down to play. You never know who you're going to meet, including new friends for life or new business contacts.
• Have fun. The game is a lot more enjoyable when you're trying to do more than just make money.

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I'm working on writing a fun poker/business book titled Everything I Know About Business I Learned From Poker. It's meant to be a short, fun, light-hearted book.

Please let me know what you think of the outline above and if you have any suggestions for other points I should include!

Also, I'd really like to include in the book real-life poker stories and business stories as they relate to the bullet points above. If you have any fun or interesting stories you'd like to be considered for inclusion in the book, please share your story by commenting below or emailing me at tony(at)zappos.com.

Thanks!

Tony Hsieh
CEO - Zappos.com

12/30/08 Update: Wrote follow up post: Poker, Business, Life: It's Never Too Late to Change Tables

The following email was sent to our employees yesterday:

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To: All Zappos Employees
Subject: Moving forward

Last week was a tough week for everyone, as we went through the process of
laying off 8% of the Zappos family. At the same time, it was also
heartwarming hearing all the stories of Zappos employees and ex-employees
getting together for drinks Thursday night after the layoffs as well as
over the weekend.

The economic environment we're in right now is unlike any we've ever
witnessed in our lifetime. These are extraordinary times, and America is
not out of the woods yet. Many people expect 2-3 million Americans to lose
their jobs before we hit the bottom of our current economic cycle.

As difficult as times may be, if there's one thing I've learned in life,
it's that things are never as bad as they seem or as good as they seem. In
most cases, this perspective usually comes long after a "bad" or "good"
event has occurred.

This is actually the second time we've had to do layoffs across the board
at Zappos. We've been around for 9.5 years, and the first time we had to
do layoffs was during the early years of the company, when we laid off
about half our staff due to a bad economy and our inability to raise
funding. At the time, we still were not profitable.

However, the layoffs we did in the early days forced the team that
remained to become much stronger, and because we did not have a lot of
money at the time, it forced us to focus on servicing our existing
customers instead of trying to acquire a lot of new customers. Ultimately,
it was the catalyst for transforming Zappos from being just about shoes to
a company focused on customer service and company culture. It started a
domino effect that ultimately made us who we are today.

Moving forward, we have a similar opportunity. We have the opportunity to
make our culture stronger than ever before. It's something that will
require everyone's involvement and effort, but based on our history, I
know it can be done.

We also have the opportunity to make the company healthier than ever
before. As we come up with innovative and creative ways of generating
more revenue, profits, and cash flow, we will be prioritizing them based
on what will be most beneficial to our company.

One question that has come up is whether we will be doing another round of
layoffs after the new year. There are currently no plans to do so. When we
laid off 8% of our employees last week, we chose that number because we
felt that it would cut our expenses enough to get us through all of 2009,
based on our current financial forecasts. As mentioned in my previous email, our layoffs were done proactively to ensure that we would be
profitable and cash flow positive in 2009.

As part of reducing our 2009 expenses, and to bring us all closer
together, we are in the process of moving people so that everyone in our
Las Vegas offices will be either in the 2280 or 2290 building, which are
next door to each other. The moving should be completed over the next
couple of weeks.

We've got a busy holiday season ahead, and while everyone will be busy and
working hard with their individual jobs, let's also make a conscious
effort to think about how we can help each other out even more than usual,
not just within your department, but cross-departmentally and throughout
the entire company as well.

Remember, this is not my company, and this is not our investors' company.
This company is all of ours, and it's up to all of us where we go from
here. The power lies in each and every one of us to move forward and come
out as a team stronger than we've ever been in the history of the company.

Let's show the world what Zappos is capable of.

• Tony Hsieh, CEO

The following email was sent to our employees today:

---

To all Zappos employees:

Today has been a tough, emotional day for everyone at Zappos. We made the
hard choice of laying off about 8% of our employees. The layoffs will
affect almost every single department at Zappos. In addition, we are also
looking at closing some of our brick and mortar outlet stores in Nevada
and Kentucky.

This is one of the hardest decisions we've had to make over the past 9.5
years, but we believe that it is the right decision for the long term
health of the company. The rest of this email will explain why...

We feel fortunate that we have Sequoia Capital as an investor who had the
foresight to see the ramifications of the tough economic times that lie
ahead for all of us. On October 7, Sequoia held a meeting for all of their
portfolio companies (including Zappos), with one very clear message: Cut
expenses as much as possible and get to profitability and cash flow
positive as soon as possible.

Here is a link to an article that talks about the Sequoia meeting:

http://gigaom.com/2008/10/08/sequoia-rings-the-alarm-bell-silicon-valley-in-trouble/

Jason Calacanis also has a well-written email that talks about avoiding
the "death spiral", which I highly recommend reading:

http://calacanis.com/2008/10/28/good-news-for-people-who-hate-bad-news/

Fortunately for Zappos, we're in a much better position than many other
companies. Unlike many other companies, we are still growing and already
profitable and cash flow positive.

And we are also fortunate that we have a revolving line of credit from
Wells Fargo, US Bank, and Keybank. This line of credit has given us a lot
of financial flexibility. However, given the current economic uncertainty,
we believe it's prudent to reduce our reliance on debt financing.

We've decided the right thing to do for the company is to be proactive
instead of reactive. We are proactively cutting back some of our expenses
today so that we can take care of our employees properly, instead of being
reactive and waiting until we are forced to cut expenses.

Because we are still growing and are already profitable, we do not have to
take as drastic of a step as most other companies of our size. Last year,
we did $840 mm in gross merchandise sales, and this year we are
forecasting to do about $1 billion in gross merchandise sales. However,
when we first put together our 2008 plan at the end of 2007, we were
expecting our gross merchandise sales to be even higher than $1 billion.

Because of all this, we are reducing our staff by 8%, but because we are
being proactive instead of reactive about it, we are able to take care of
our employees and offer them more than the standard 2 weeks severance (or
no severance) that most other companies are giving.

We are offering to pay each laid-off employee through the end of the year
(about 2 months), and offering an additional amount for employees that
have been with us for 3 or more years.

In addition, because our regular health benefits cover 100% medical,
dental, and vision for employees and 50% for spouses and dependents, we
decided to offer to reimburse laid-off employees for up to 6 months of
COBRA payments.

In doing all of this to take care of laid-off employees, we expect that it
will actually increase, not decrease, our costs for 2008, but we feel this
is the right thing to do for our employees. It will put us in the position
of having a lot more financial flexibility in being able to respond to
potential changes in the economy in 2009.

Ecommerce growth has slowed compared to its growth rate a year ago, but
the good news is that even in this tough economic environment, ecommerce
overall is still growing.

Within the footwear category, we are the online market leader. When times
are tough, the strongest players in any market have an opportunity to gain
even more market share, even if overall growth may be slower.
Historically, we have actually grown faster than the overall ecommerce
market, and we anticipate for that to continue in 2009.

For the rest of 2008 as well as for 2009, we anticipate continuing to grow
year over year. Our current forecasts are that we will continue to be
profitable and cash flow positive, as long as we are proactive instead of
reactive in managing our business and financials.

I know that many tears were shed today, both by laid-off and non-laid-off
employees alike. Given our family culture, our layoffs are much tougher
emotionally than they would be at many other companies.

I've been asked by some employees whether it's okay to twitter about
what's going on. Our Twitter policy remains the same as it's always been:
just be real, and use your best judgement.

These are tough times for everyone, and I'm sure there will be many follow
up questions to this email. If you have any questions about your specific
job or department, please talk to your department manager. For all other
questions, comments, or thoughts, please feel free to email me.

• Tony Hsieh, CEO

Dear Investors, Employees, Partners, and Friends of Zappos:

With the WSA shoe show coming up next week, I thought it would be
a good time to send out another company update.

As I mentioned in the last update at the beginning of this year,
our goal is to break $1 billion in gross merchandise sales for
2008. The economy has been tough, but so far we are still on track
to hit that number. Back in 2003, we had set a the goal of hitting
$1 billion by 2010, so we're very excited that we're on track to
hit the $1 billion milestone ahead of our original goal!

For those who don't know, here are our historical gross
merchandise sales numbers:

1999: Almost nothing
2000: $ 1.6 mm
2001: $ 8.6 mm
2002: $ 32 mm
2003: $ 70 mm
2004: $184 mm
2005: $370 mm
2006: $597 mm
2007: $840 mm
2008: Over $1 billion (goal)

Here are some of the highlights so far for 2008:

• We grew our customer base to a total of over 8.2 million paying

customers, meaning that almost 3% of the US population has
bought from Zappos.

• With our focus on customer service, our customers continue to be

extremely loyal to us. On any given day, approximately 75% of
our sales are from repeat customers.

• We now carry more than 4 million items in our warehouse!

• We began our partnership with Merrell, and are now selling them

on our site.

• We completed our magalog for fall, and will be dropping 1

million copies of it in a few weeks. We're very excited about
this because the quality is a big step above our previous
magalogs. Special thanks to our vendor partners who
helped support our magalog project!

• We continued to grow sales in all of our categories, especially

our non-footwear categories, including apparel, handbags,
sunglasses, watches -- even cookware and electronics! Our
apparel category is up 250% from last year, making us a "head to
toe" destination for many of our partners and customers.

• We've continued investing in our warehouse operations to handle

other product categories, including the implementation of
technology from Kiva Systems.

• We ran a television ad campaign in the spring which has helped

with our branding efforts. You can see the commercial here:

http://www.youtube.com/watch?v=uxBWfqDAQkg

• We've been doing a lot of work behind the scenes for our new

technology platform which we are internally calling "Zeta".
Among many other things, Zeta offers better search and browsing,
and you can take a sneak peak at Zeta here:

http://zeta.zappos.com

• Our "Powered by Zappos" program continues to grow and will soon

be moved over to our new Zeta platform, which will enable us to
help power more of our vendors' ecommerce operations.

• Our company blogs have taken a life of their own and have turned

out to be a great way for us to share our unique company culture
with the rest of the world:

http://blogs.zappos.com

• The 2008 edition of our culture book has just arrived. Every

year, we ask all of our employees to write a few paragraphs
about what the Zappos culture means to them, and except for
typos, it's unedited. This year's edition is bigger and better
than ever before! Be sure to pick up a copy if you ever stop by
our offices!

• We continued and improved our unique training program for new

hires in Las Vegas. All new hires in our Las Vegas office,
regardless of what department they were actually hired for, must
first go through 4 weeks of Customer Loyalty training (answering
phone calls from customers) upon joining the company.

• We officially turned 9 years old as a company!

• We were recently featured as the lead story on ABC Nightline:

http://abcnews.go.com/video/playerIndex?id=5328179

Our focus continues to be on building our brand and our culture
around providing the very best customer service and experience.
Our hope is that 10 years from now, people won't even realize that
we started out selling shoes online. In fact, our business doesn't
even have to be limited to just the online world.

If we can build Zappos so that our brand is simply about the very
best customer service and the very best customer experience, the
sky's the limit as to what we can eventually accomplish. Right
now, we are just scratching the surface of what's possible. In the
ABC Nightline story, there's even a mention of the possibility of
a Zappos Airlines later down the road:

http://abcnews.go.com/video/playerIndex?id=5328179

Thank you everyone for all of your support and getting us to where
we are today! I'll be sending out another update after the year is
over, and look forward to reporting on our progress!

---

Tony Hsieh
CEO - Zappos.com

---

Our lawyers want us to put in the following disclaimer, so here it
is:

This email 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.

---

There are lots of rumors flying around about the p-1603. So I just want to post my version of what really happened. Now that the photo shoot is over, I'm trying to think back on how I was conned by the photographer into posing in them.

The photo shoot started out innocently enough. The photographer chose one of the conference rooms at Zappos headquarters and told me to just relax and be comfortable, and he took normal shots of myself and Brent sitting or standing casually in our normal clothes and shoes. We did various shots in the conference room for about half an hour, and a couple of them were pretty fun poses. There were a few shots of Brent wearing a Viking hat and me wearing a Burger King-like crown.

When it looked like the whole photo shoot was over, the photographer said "Oh, and just one more thing... I want to do a quick shot outside if you don't mind." Sounded innocent enough, so I agreed.

And then he said, "But outside, I'd like you to wear different shoes, do you mind wearing something more colorful or bright?"

And I said, "I don't think I have colorful or bright shoes that fit me here at the office."

And then he said, "That's okay, anything is fine... you could just have something like these high heels near you."

I'm not quite sure what happened after that. I think I blacked out. There's a 15-minute period of my life that just disappeared. The next thing I knew, I was sitting on a bench with Brent gingerly removing the thigh high boots off of my legs and the photographer telling me that those were great shots and I looked really good.

And next thing I know, my photo was uploaded by a passing employee on our company blog.

So that's my story and I'm sticking with it.

Yesterday, I had the privilege to give the luncheon keynote at the National Conference on Operations and Fulfillment (NCOF) held in Orlando, FL. The audience mostly runs call center, distribution, and fulfillment operations for a wide range of companies, some small, some large, and some very large. My talk was about "Delivering the WOW Customer Experience" and I basically amended (ripped off) Tony's "Top Ten Lessons" presentation. Given the audience, I presented more metrics and gave more examples and stories relating to the operations and fulfillment side of Zappos. The core message was still about the importance of company culture and the impact of customer service. There were a number of questions during the Q&A and then a number of people came up after the presentation to thank me for giving them so much insight into the inner workings of Zappos. What was good to hear was how many organizations were learning similar lessons or facing similar issues, no matter how large they are or how long they have been in existence.

In business, we are judged by our ability to delivering great long-term results. What we sometimes forget is that great long-term results are delivered by engaged employees. That is why at Zappos, we spend so much time, energy, and resources to continuously improve our company culture and keep our employees engaged.

For a copy of the presentation, please email: culturebook "at" zappos.com, or me directly: alfred "at" zappos.com.

P.S. I began my talk with something fun and a little weird. Right before my talk, over the PA system the conference organizers were nice enough to gently remind everyone to "please silence all cell phones and pagers". When I got to the podium, I told the audience that they should feel free to turn their cell phones back on because what their customers have to say is far more important than what I have to say. I was serious, but everyone laughed. That helped lighten the mood.

We talk a lot at Zappos about WOWing our customers, but I found this blog post by Stephen H who works in our creative services department that I wanted to share, because it really demonstrates how building a culture of WOW at Zappos applies not only to our customers, but to our employees as well. Here's Stephen's post:

Hawaii... or bust. \\ By Stephen H. \\ Wow, what a day. \\ On March 31st like an April Fools joke that was sent too early, Aloha Airlines ceased operations and entered bankrupcy protection, stranding people who had booked inter island and other misc flights with the carrier. When that happened I received a number of concerned calls and messages from friends and coworkers who knew that I was soon to be married this coming Sunday, and that the following evening I would be traveling with my bride to spend 5 nights in Honolulu, HI. \\ "No, I flew ATA, it's all good" \\ On April 2nd like an April Fools joke that was sent too late, ATA Airlines ceased operations and entered bankruptcy protection. \\ I woke up to those same messages repeating themselves, including the SMS, voice mail, and twitters of the ever diligent Kelly who is the sole member of my team at Zappos.com. To say I was numb was an understatement. I don't really wear my emotions on my sleeve, so I guess waking up and telling my fiance knowing that she probably is going to burst into tears out of frustration/anger/disbelief (pick 2) was a cathartic way of dealing with it. Given the messages in front of me, I did what all people in this day and age do... \\ I Googled it. \\ The results confirmed my fears, I hopped over to Expedia hoping to find something rearranged automagically, perhaps a notice saying ‘oh snap, here ya go, another flight'. Having looked at the seating assignments not 10 hours prior as I was on my way to bed, I briefly let myself wonder if we'd get the same seats, or be split up on our replacement flights. I found my itinerary unaltered so I read a couple more news articles hoping to find a quick and easy resolution. ATA does a lot of work with Southwest, so there was some hope, or maybe just confusion, that they might be of assistance on this seemingly dire occasion. \\ The Expedia hold music wasn't so bad. I say that because after the 2 calls I eventually made to them, I can't tell you what it is. Being not memorable and at the same time not aggrivate you into remembering a tune is certainly an accomplishment. Roughly 45 minutes of this music in my ear, and then Expedia picked up. They explained the various fees I would have to pay if I had to cancel the entire package, and gave me an 800 number for Southwest where they were offering assistance. I did no cancelling yet, as I wanted to know the solution before taking advantage of it. Southwest is a great company with great service, so surely they have an option for me given the connection with ATA all the articles mentioned. \\ So I called Southwest... \\ I hear great things about the service at Southwest. They've come and toured the Zappos facility here in Las Vegas, and we recently had our CEO Tony Hsieh and others go and visit their facility in Texas. Thankfully, I have never really needed their customer service, and have only been exposed to cheery flight attendants and those who tend to their gates at McCarran and Sky Harbor when I was in college. I had a lot of time to think of this stuff, because the hold time was nothing short of amazing. \\ Then, 1:31 (on hour and thirty-one minutes) into some evil hold music, it disconnected. \\ No way. There's no way this great company with great service has something on their system that just bumps people if they've been on hold too long, right? Surely there are backup teams, some extra call centers that can be leveraged, I don't know, something... but was this a fluke? At an hour and a half, disconnected? Without any real choice, I called the number again, hit speaker, and resumed browsing through message boards of distressed passengers. \\ I've been on the receiving end of this kind of stuff having worked in a DirecTV call center during Hurricane so all I could imagine was a flustered rep waiting to pick up the phone just seconds after a former ATA passanger cried on their shoulder or screamed in their ear. Maybe if ATA only served Pocatello, ID and La Junta, CO things would have been simpler, but no... it had to be a Hawaiian airline... the second in just days. These aren't people just visiting loved ones or on business trips (though there are plenty there too) but instead are families, lovers, and friends embarking on trips that will change their lives. Well, lives got changed a little earlier than expected I think. \\ So yeah, I'm still on hold... let's talk about this music. Just thinking about this music turns my world a shade of red, as I begin to go into a rage and at the same time want to build an elevator because that's what my mind is hearing, elevator music.... that subtle soothing but not nice enough for you to stick around tone. This was then accentuated by the overmodulated sound of a Blackberry speaker... not to mention the false hope you get every 8 or so minutes when the music ends... only to start again after 3-4 seconds of silence and an an almost imperceptible click. \\ An hour passes. \\ So at a total of 2 hours and 30 minutes I am beginning to wonder... do I call back on the other cell phone in case I get disconnected again? Was still in disbelief that I had been disconnected and was tending to some growing paranoia that it would happen again. \\ At 1:38 (one hour and thirty-eight minutes) of my second call, a nice woman answers the phone. Just over 3 hours of holding and I am finally talking to the savior of all things aviation. She explained that because I had no part of my flight involving Southwest (just a round trip, no stops, with ATA LAS to HNL) that all we could do was dispute the charges on our credit card, and rebook a flight with another carrier at full price. \\ Resigned to defeat, I poked around online for flights. I had been doing this for a while anyways, I mean I was on hold for so long I had to entertain myself somehow and what better way to do so than to stare at the flights you might have to now overpay for. Our tickets were purchased in January for about $440 each, and there were flights from $1000 to $1200 per person on the various travel sites. \\ Now there were none. \\ Even if I had unlimited funds, on our given days, the results were null. After having a wide selection of flights to choose from, even overpriced, there were now zero. Called mom and updated her. A conversation earlier in the day had sent her to a travel agent, where they'd found one flight that was equally as overpriced. Poked around for alternate dates, not much luck there either. Kara was leaving for work early so we decided to meet at my Mom's and make new honeymoon plans. My job was to cancel the existing plans now that we knew there were no fights. \\ 20 minutes later I was canceled and the nice guy at Expedia was able to cancel the package without any fees, including things previously declared nonrefundable like our full trip of the island. I knew I was in good hands when he said he was the manager of a McDonalds for 8 years, but he exceeded my expectations. He was a good guy and in good spirits and I appreciated the service he provided, kudos to him and Expedia. "I am going to cancel this part anyways, and if they get mad at me they know where to find me" was one memorable quote. \\ The objective once I was with Kara and my Mom was to decide on what to do from here. Mom had disputed the charges, and we'd canceled the trip. Back to square one. We decided to go ahead and shoot for something early next month, 5/3 or so.... \\ And then the phone rang. \\ Sari manages the design portion of my department at Zappos. She is on the phone.... and had found a flight and was offering to book it for us as a wedding gift. We took a look at our options given the time frame and the situation we'd been put in... and accepted. She effectively saved our honeymoon, and for that I'll forever be grateful. If she ever reads this (and sure, I'll send her a link, but really, who's going to get this far down the page....?) I just want to reiterate over and over: \\ THANK YOU! THANK YOU! THANK YOU! \\ Working at Zappos has provided me many memorable experiences, whether that be with our customers or my peers, this will go down as the biggest WOW I've ever had in my nearly three years there. Again, thank you Sari. \\ A big thanks also go to the people I was venting with, or who there there supporting me as I went through what seemed like the longest Thursday of my life. Now next week I can only hope will be the inverse... the best Thursday of my life... my first as a newlywed, in Hawaii.

I spoke at the Underground 4 conference in Los Angeles this past Friday... the audience seemed to be composed of mostly entrepreneurs, so I gave a slightly different presentation titled "Getting to $1 billion". The core of the presentation was still about the importance of company culture and customer service. After the presentation, I got to meet a lot of interesting people, and many of them told me that they were going to focus a lot more on company culture at their companies, so it was great to hear that!

Here's the presentation I gave:

This is an awesome 60-second video. It's an awareness test -- play it and follow the instructions before reading the rest of my blog post:

While the commercial is about bicycle safety, I think the message really applies to communications in the business world. On the marketing side, just because we buy an ad somewhere doesn't mean consumers will pay attention to it. Internally, just because all the factual information is emailed or said in a meeting doesn't mean that the message you care about has actually been communicated... The challenge for both is: How do you inspire people to pay attention to what matters to you?