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