Our very own Tony Hsieh was recently featured on the "Pivot" series on A TOTAL DISRUPTION, two-time Sundance-winning director Ondi Timoner's YouTube channel that provides business and tech insights from the innovators defining our future.
In this video, Tony discusses how Zappos' pivot to focus on customer service and company culture has paid off—for both customers AND employees.
Today is the 1 year anniversary of when we announced the marriage between Zappos and Amazon. It's hard to believe it's already been a year!
I thought it'd be interesting to read through the original email that I sent out a year ago (Read it HERE) and comment on it to see whether things happened as planned and promised. The original email is below, along with my comments ***[in brackets and asterisks].
Date: Wed, 22 Jul 2009 From: Tony Hsieh (CEO - Zappos.com) To: All Zappos Employees Subject: Zappos and Amazon
Please set aside 20 minutes to carefully read this entire email. (My apologies for the occasional use of formal-sounding language, as parts of it are written in a particular way for legal reasons.)
Today is a big day in Zappos history.
This morning, our board approved and we signed whats known as a definitive agreement, in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock. Once the exchange is done, Amazon will become the only shareholder of Zappos stock.
Over the next few days, you will probably read headlines that say "Amazon acquires Zappos" or "Zappos sells to Amazon". While those headlines are technically correct, they don't really properly convey the spirit of the transaction. (I personally would prefer the headline "Zappos and Amazon sitting in a tree.")
We plan to continue to run Zappos the way we have always run Zappos -- continuing to do what we believe is best for our brand, our culture, and our business. From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.
***[This has gone according to plan. Instead of flying to San Francisco once a quarter for board meetings, we now fly to Seattle once a quarter for the equivalent of a board meeting.]
We think that now is the right time to join forces with Amazon because there is a huge opportunity to leverage each other's strengths and move even faster towards our long term vision. For Zappos, our vision remains the same: delivering happiness to customers, employees, and vendors. We just want to get there faster.
We are excited about doing this for 3 main reasons:
1) We think that there is a huge opportunity for us to really accelerate the growth of the Zappos brand and culture, and we believe that Amazon is the best partner to help us get there faster.
***[The growth rate of our business has accelerated since the acquisition announcement.]
2) Amazon supports us in continuing to grow our vision as an independent entity, under the Zappos brand and with our unique culture.
***[The Zappos Family has remained independent.]
3) We want to align ourselves with a shareholder and partner that thinks really long term (like we do at Zappos), as well as do whats in the best interest of our existing shareholders and investors.
***[Zappos shareholders and investors were happy with the transaction, and we continue to build the Zappos businesses for the long term.]
I will go through each of the above points in more detail below, but first, let me get to the top 3 burning questions that I'm guessing many of you will have.
TOP 3 BURNING QUESTIONS
Q: Will I still have a job?
As mentioned above, we plan to continue to run Zappos as an independent entity. In legal terminology, Zappos will be a "wholly-owned subsidiary" of Amazon. Your job is just as secure as it was a month ago.
***[This has remained true.]
Q: Will the Zappos culture change?
Our culture at Zappos is unique and always evolving and changing, because one of our core values is to Embrace and Drive Change. What happens to our culture is up to us, which has always been true. Just like before, we are in control of our destiny and how our culture evolves.
A big part of the reason why Amazon is interested in us is because they recognize the value of our culture, our people, and our brand. Their desire is for us to continue to grow and develop our culture (and perhaps even a little bit of our culture may rub off on them).
They are not looking to have their folks come in and run Zappos unless we ask them to. That being said, they have a lot of experience and expertise in a lot of areas, so we're very excited about the opportunities to tap into their knowledge, expertise, and resources, especially on the technology side. This is about making the Zappos brand, culture, and business even stronger than it is today.
***[There are a lot of different areas of Amazon that we've been able to learn from, but we've continued to run Zappos independently with our own unique culture.]
Q: Are Tony, Alfred, or Fred leaving?
No, we have no plans to leave. We believe that we are at the very beginning of what's possible for Zappos and are very excited about the future and what we can accomplish for Zappos with Amazon as our new partner. Part of the reason for doing this is so that we can get a lot more done more quickly.
***[A year ago, Alfred had no plans to leave. Since then, his wife is now pregnant with their first child and they are planning on moving to the San Francisco Bay Area to raise their family. Alfred will be joining Sequoia Capital to fulfill his life long dream of investing in and helping other startups.]
There is an additional Q&A section at the end of this email, but I wanted to make sure we got the top 3 burning questions out of the way first. Now that we've covered those questions, I wanted to share in more detail our thinking behind the scenes that led us to this decision.
First, I want to apologize for the suddenness of this announcement. As you know, one of our core values is to Build Open and Honest Relationships With Communication, and if I could have it my way, I would have shared much earlier that we were in discussions with Amazon so that all employees could be involved in the decision process that we went through along the way. Unfortunately, because Amazon is a public company, there are securities laws that prevented us from talking about this to most of our employees until today.
We've been on friendly terms with Amazon for many years, as they have always been interested in Zappos and have always had a great respect for our brand.
Several months ago, they reached out to us and said they wanted to join forces with us so that we could accelerate the growth of our business, our brand, and our culture. When they said they wanted us to continue to build the Zappos brand (as opposed to folding us into Amazon), we decided it was worth exploring what a partnership would look like.
We learned that they truly wanted us to continue to build the Zappos brand and continue to build the Zappos culture in our own unique way. I think "unique" was their way of saying "fun and a little weird." :)
Over the past several months, as we got to know each other better, both sides became more and more excited about the possibilities for leveraging each other's strengths. We realized that we are both very customer-focused companies -- we just focus on different ways of making our customers happy.
Amazon focuses on low prices, vast selection and convenience to make their customers happy, while Zappos does it through developing relationships, creating personal emotional connections, and delivering high touch ("WOW") customer service.
We realized that Amazon's resources, technology, and operational experience had the potential to greatly accelerate our growth so that we could grow the Zappos brand and culture even faster. On the flip side, through the process Amazon realized that it really was the case that our culture is the platform that enables us to deliver the Zappos experience to our customers. Jeff Bezos (CEO of Amazon) made it clear that he had a great deal of respect for our culture and that Amazon would look to protect it.
We asked our board members what they thought of the opportunity. Michael Moritz, who represents Sequoia Capital (one of our investors and board members), wrote the following: "You now have the opportunity to accelerate Zappos' progress and to make the name and the brand and everything associated with it an enduring, permanent part of peoples' lives... You are now free to let your imagination roam - and to contemplate initiatives and undertakings that today, in our more constrained setting, we could not take on."
One of the great things about Amazon is that they are very long term thinkers, just like we are at Zappos. Alignment in very long term thinking is hard to find in a partner or investor, and we felt very lucky and excited to learn that both Amazon and Zappos shared this same philosophy.
All this being said, this was not an easy decision. Over the past several months, we had to weigh all the pros and cons along with all the potential benefits and risks. At the end of the day, we realized that, once it was determined that this was in the best interests of our shareholders, it basically all boiled down to asking ourselves 2 questions:
1) Do we believe that this will accelerate the growth of the Zappos brand and help us fulfill our mission of delivering happiness faster?
***[We've accelerated the growth of our business since the announcement.]
2) Do we believe that we will continue to be in control of our own destiny so that we can continue to grow our unique culture?
***[We've continued to control our own destiny and grow our culture.]
After spending a lot of time with Amazon and getting to know them and understanding their intentions better, we reached the conclusion that the answers to these 2 questions are YES and YES.
The Zappos brand will continue to be separate from the Amazon brand. Although we'll have access to many of Amazons resources, we need to continue to build our brand and our culture just as we always have. Our mission remains the same: delivering happiness to all of our stakeholders, including our employees, our customers, and our vendors. (As a side note, we plan to continue to maintain the relationships that we have with our vendors ourselves, and Amazon will continue to maintain the relationships that they have with their vendors.)
We will be holding an all hands meeting soon to go over all of this in more detail. Please email me any questions that you may have so that we can cover as many as possible during the all hands meeting and/or a follow-up email.
We signed what's known as the "definitive agreement" today, but we still need to go through the process of getting government approval, so we are anticipating that this transaction actually won't officially close for at least a few months. We are legally required by the SEC to be in what's known as a "quiet period", so if you get any questions related to the transaction from anyone including customers, vendors, or the media, please let them know that we are in a quiet period mandated by law and have them email email@example.com, which is a special email account that Alfred and I will be monitoring.
Alfred and I would like to say thanks to the small group of folks on our finance and legal teams and from our advisors at Morgan Stanley, Fenwick & West, and PricewaterhouseCoopers who have been working really hard, around the clock, and behind the scenes over the last several months to help make all this possible.
Before getting to the Q&A section, I'd also like to thank everyone for taking the time to read this long email and for helping us get to where we are today.
Its definitely an emotional day for me. The feelings I'm experiencing are similar to what I felt in college on graduation day: excitement about the future mixed with fond memories of the past. The last 10 years were an incredible ride, and I'm excited about what we will accomplish together over the next 10 years as we continue to grow Zappos!
CEO - Zappos.com
Q: Will we still continue to grow our headquarters out of Vegas?
Yes! Just like before, we plan to continue to grow our Las Vegas operations as long as we can continue to attract the right talent for each of our departments. We do not have any plans to move any departments, nor does Amazon want us to because they recognize that our culture is what makes the Zappos brand special.
***[This has happened as planned. No departments have moved.]
Q: What will happen to our warehouse in Kentucky?
As many of you know, we were strategic in choosing our warehouse location due to its proximity to the UPS Worldport hub in Louisville. Amazon does not have any warehouse locations that are closer to the Worldport hub. There is the possibility that they may want to store some of their inventory in our warehouse or vice-versa. Right now, both Zappos and Amazon believe that the best customer experience is to continue running our warehouse in Kentucky at its current location.
***[We are continuing to run our own warehouse in Kentucky, and plans are currently underway for us to eventually fulfill some of Amazon's shoe orders from our warehouse.]
Q: Will we be reducing staff in order to gain operational efficiency?
There are no plans to do so at this time. Both Zappos and Amazon are focused on growth, which means we will need to hire more people to help us grow.
***[We've actually increased the total Zappos Family staff by over 30% from when the announcement was made a year ago. Headcount on 7/22/09 was 1297 employees, and today we have 1942 employees.]
Q: Will we get a discount at Amazon?
No, because we are planning on continuing to run Zappos as a separate company with our own culture and core values. And we're not going to be giving the Zappos discount to Amazon employees either, unless they bake us cookies and deliver them in person.
***[Only 1 Amazon employee has brought us cookies. Thanks Jeff Wilke.]
Q: Will our benefits change?
No, we are not planning on making any changes (outside of the normal course of business) to our benefit packages.
***[The benefits for the Zappos Family have actually gotten better. We now offer $4000/$8000 medical HRAs and adoption benefits for employees, in addition to keeping every benefit we had at this time last year.]
Q: Do we keep our core values?
Yes, we will keep our core values, and Amazon will keep their core values.
***[Our core values have not changed.]
Q: Will our training/pipeline programs or progression plans change? Will there still be more growth opportunities?
We will continue building out our pipeline and progression as planned. The whole point of this combination is to accelerate our growth, so if anything, we are actually anticipating more growth opportunities for everyone.
***[We now offer even more training/pipeline classes than before! In Q3 2009 we offered 20 different classes. Today we offer 36 Pipeline classes, 29 Merchandising Training classes, and 20 Pipeline-For-Hire classes. And, we are continuing to add to the list!]
Q: Will we continue to do the special things we do for our customers? Are our customer service policies going to change?
Just like before, that's completely up to us to decide.
***[We continue to focus on WOWing our customers to deliver the very best customer service. There haven't been any significant changes to our customer service policies over the past year except now we are able to process refunds for returned products even faster than before thanks to Amazon!]
Q: Can you tell me a bit more about Jeff Bezos (Amazon CEO)? What is he like?
We'd like to show an 8-minute video of Jeff Bezos that will give you some insight into his personality and way of thinking. He shares some of what he's learned as an entrepreneur, as well as some of the mistakes he's made.
Q: I'm a business/financial reporter. Can you talk like a banker and use fancy-sounding language that we can print in a business publication?
Zappos is an online footwear category leader and Amazon believes Zappos is the right team with a unique culture, proven track record, and the experience to become a leading soft goods company; Zappos' customer service obsession reinforces Amazons mission to be the earth's most customer-centric company; Great brand, strong vendor relationships, broad selection, large active and repeat customer base; Amazon believes Zappos is a great business -- growing, profitable and positive cash flow; Accelerate combined companies' scale and growth trajectory in the shoe, apparel and accessories space; Significant synergy opportunities, including technology, marketing, and possible international expansion.
***[We're continuing to grow at a rapid pace! Zappos Q1 2010 net sales were up almost 50% compared to Q1 2009 net sales.]
Q: What is the purchase price?
This is not a cash transaction. This is a stock exchange. Our shareholders and option holders will be issued approximately 10 million Amazon shares on a fully converted basis. The details of the deal terms and how the shares will be distributed will be filed with the SEC on Form S-4 and will be publicly available when it is filed.
***[The deal was valued at about $1.2 billion on the day of closing on November 1, 2009.]
Q: Can you talk like a lawyer now?
This email was sent on July 22, 2009. In connection with the proposed merger, Amazon.com will file a registration statement on Form S-4 with the Securities and Exchange Commission that will contain a consent solicitation/prospectus. Zappos' shareholders and investors are urged to carefully read the consent solicitation/prospectus when it becomes available and other relevant documents filed with the Securities and Exchange Commission regarding the proposed merger because they contain important information about Amazon.com, Zappos and the proposed merger. Shareholders and investors will be able to obtain the consent solicitation/prospectus when it becomes available at www.sec.gov or www.amazon.com/ir.
Certain statements contained in this email are not statements of historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current expectations, are inherently uncertain and are subject to known and unknown risks, uncertainties and other factors. Factors that could cause future results to differ materially from expected results include those set forth in Amazon.com's Current Report on Form 8-K, dated July 22, 2009.
The transaction officially closed on November 1, 2009. True to their word, Amazon has continued to allow us to run Zappos independently, with our own unique culture, brand, and way of doing business. From our point of view, it's been as if we swapped out our previous board of directors with a new one, but we now have access to a lot more resources so we can continue to build the Zappos business even faster. In fact, over the past few months, we've actually seen our growth rate accelerate compared to the prior year.
In January, we were excited to learn that we made Fortune magazine's "Best Companies to Work For" list again, moving up 8 places to the #15 spot!
A few weeks ago, I had the opportunity to present to about 2000 people at Amazon's "All Hands" meeting in Seattle, in which I talked about our focus on the 3 C's at Zappos:
As many of you know, we're making a big push into apparel (which is 4 times the size of the footwear market) as well as other product categories including bags, accessories, and housewares. We think we're just at the tip of the iceberg of what's possible as we continue to build the Zappos brand to be about the very best customer service and the very best customer experience.
The slides from my talk at Amazon are available here:
Our sister web site, 6pm.com, has been growing even faster than Zappos.com. From a business perspective, it's been a great way to clear out the older and discontinued inventory that we didn't sell through on Zappos.com.
Over the past year, we've made many, many improvements to the Zappos.com web site. If you haven't visited us recently, I would definitely encourage you to play around with the latest incarnation of our web site:http://www.zappos.com In addition to better navigation and a new look and feel, in 2009 we added over 10,000 video product descriptions to the site, and we plan on adding over 50,000 more this year.
Probably the biggest question I've gotten lately has been "How's the Amazon acquisition been? How have things changed?"
The truth is, there have been a couple of minor annoyances. We're now part of a public company, so moving forward, we aren't able to disclose our financial numbers as freely as we were able to do before (but that would have happened anyway had we gone public on our own). We also have more travel restrictions for various legal and tax reasons.
On the flip side though, we've retained our independence and our culture is as strong as before the acquisition. We've been learning a lot from each other and the new partnership has enabled us to move even faster towards the Zappos vision of delivering happiness to the world.
Over the next several months, I'll be focusing a lot on a personal project of mine: the launch of my first book, "DELIVERING HAPPINESS: A Path to Profits, Passion, and Purpose". The official launch date is June 7, 2010, but I'll be traveling around the country to promote the book both before and after the launch date.
The goal of the book is to inspire other companies to think about how to they can use happiness as a guiding principle to make customers happier (by focusing more on customer service) and employees happier (by focusing more on company culture), which ultimately can lead to sustainable profits and long-term financial performance.
It's hard to believe that Zappos will turn 11 years old this year. Going through the process of writing the book made me realize how much we've been through, yet things are as exciting as ever because there's so much growth and opportunity ahead.
Thank you everyone for all your support through the years. We couldn't have gotten this far without you -- there's a lot more to come!