Zappos.com Update - July 24, 2008

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.

——-

I Never Thought This Would Happen to Me!

There are lots of rumors flying around about the recent photos taken of me wearing thigh high boots . 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.

NCOF 2008 Conference

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.

An Employee WOW

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.

Underground 4 Conference

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:

Awareness Test

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?

Alfred the Easter Bunny

I’m at the Zappos outlet store in Las Vegas right now (Dean Martin location) and Alfred (COO/CFO of Zappos) is dressed up as an Easter bunny, handing out candy to the kids!

SXSW 2008 Presentation - Top 10 Lessons Learned in E-Commerce

I gave a presentation at SXSW earlier today titled “Top 10 Lessons Learned in E-Commerce.” The powerpoint of the presentation is here:

I had set up an account on Twitter (username: zappos), and I had used the track feature (“track zappos”). It was interesting seeing the comments about the presentation afterwards for people that were twittering and using the word “zappos”. Most of the comments were positive (people seemed to enjoy hearing about the Zappos philosophy on company culture), but there were also a couple of negative comments, including one twitterer that said he left the room early.

Speaking of which, someone just sent me this link from Valleywag that said Jeff Bezos (CEO and founder of Amazon.com) was in the room.

Seeing all the Twitter comments about Zappos during the presentation, I thought for future presentations, it might be interesting to display all the Twitter comments in real-time, even asking audience members to vote on which topics to talk more about… It would be a way to make future presentations relevant to what each audience actually wants to hear.