From Upstart to $1 Billion Behemoth, Zappos Marks 10 years
Las Vegas Sun- Tuesday, June 16, 2009
From upstart to $1 billion behemoth, Zappos marks 10 years
Company hoping for similar growth in the next decade
By Jeremy Twitchell
In the lobby of Zappos.com’s corporate office in Henderson, amid plaques, awards and framed magazine articles about the company on display, are a pair of nondescript brown Airwalk shoes and a photo of small San Francisco home.
They look out of place, but they represent the company’s humble beginnings.
The shoes are the type that founder Nick Swinmurn couldn’t find after a day of shoe shopping in San Francisco in 1999, and the small home is where he hatched the idea for an online shoe retailer.
At the time, California was at the forefront of the dotcom boom, and Swinmurn’s site was one of hundreds of upstarts.
What is unique is that 10 years later, after the dotcom boom went bust and a vast majority of online startups went the way of the dodo, Zappos has experienced a meteoric rise to success and recognition.
It reached $1 billion in annual sales last year, cracking Fortune Magazine’s list of best companies to work for and, on June 1, marked its 10th anniversary.
Sitting in the corporate offices in Henderson, where the company relocated in 2004, CEO Tony Hsieh said Zappos has grown because it chose to define itself not as a shoe retailer but as the king of customer service.
“Our whole goal is we want to build the best brand of customer service,” Hsieh said. “Hopefully, 10 years from now, people won’t even realize that we started selling shoes.”
Yet for all the success and growth, Zappos was at one point just one phone call away from becoming another casualty.
In December 1999, Swinmurn and the small group of workers who started the company had used up their investor seed money and were still nowhere near profitability. Convinced they had failed, a group went out to get drinks, commiserate and figure out what to do next.
Matt Burchard, who now directs Zappos’ online marketing team, was the fifth employee to join the company and remembers that day well.
While the group was out, he said, Hsieh, who had been the primary investor — he became a millionaire the year before, at age 24, when he sold an online advertising company to Microsoft for $265 million — called Swinmurn and said he would give the company enough money for one more month of operation.
But it had to show serious improvement. And it did.
“I never thought we’d be here,” Burchard said. “It’s amazing. … If Tony hadn’t made that phone call, my life would be very different.”
Hsieh admits that at the time, Zappos was just another investment — one of 20 or so sites he helped launch.
“Initially, there wasn’t really anything special about it,” he said. “People were selling dog food and furniture online, so why not shoes?”
But as the venture grew, it caught Hsieh’s attention.
He invested more in it, became more involved in its day-to-day operations and, before long, he was on board as CEO.
So why would a multimillionaire who never needed to work again take a day job?
“I think part of it is that there is no daily routine,” he said. “Things are always changing, and it’s an adventure. It’s kind of like asking why do you hang out with your friends when you don’t even have to? You do it because you want to.”
As Zappos has grown, it has become known as much for its relaxed working atmosphere as for customer service.
Call center employees don’t have scripts and are encouraged to have fun with customers; each department has its own decor and theme; every employee gets a free lunch each day, and you’re just as likely to see an employee parade making its way through the company’s headquarters as you are a mail cart.
Zappos.com CEO Tony Hsieh listens during a meeting at the company's corporate offices in Henderson. Hsieh became a millionaire in 1998 at 24 when he sold his online advertising company to Microsoft. He founded Zappos.com in 1999.
Hsieh said a tight-knit company culture and quality customer service are synonymous. To that end, corporate culture is every bit as important as the bottom line at Zappos, and the company has an annually published Culture Book that has grown to 480 pages to prove it.
Applicants go through two sets of interviews: one for their professional capability, and one for their personality.
Both processes are treated with equal importance. Failure to fit with the culture is treated just as seriously as failure to do one’s job and is grounds for dismissal. Annual evaluations are equal parts work performance and cultural adaptation.
For the company to achieve its stated goal — to “deliver WOW through service” — the culture must be carefully crafted and vigilantly maintained, Hsieh said.
“Our No. 1 priority is the company culture. Our whole belief is that if we get the culture right, then everything else, including the customer service, will fall into place,” he said.
Employees said beneath all the fun, the company is still about business. The parades, breaks and light atmosphere make work fun, they said, but the expectations are no less than they would be anywhere else.
“People think that all we do is goof around and have parades,” Burchard said. “But at the end of the day, it falls on you to do your job. You are accountable. If you’re just here for the parades, that’s not part of the culture.”
Given that kind of workplace and freedom, Zappos employees have responded with fierce loyalty.
When Facilities Manager Keith Glynn was asked to oversee the launch of Zappos’ distribution center in Kentucky in 2004, he left on three days’ notice with the understanding that he would be there for two weeks.
By the time Glynn’s job was done and the center was fully up and running, it had been three years. He lived in hotels the entire time.
“I guess I just enjoyed what I was doing,” Glynn said. “I just had a drive and a will to do whatever I could to make (Zappos) succeed.”
Other employees say they are impressed by way the company allows employees to take on different projects, even those outside their job description, or the way they feel their comments and ideas play a tangible role in the company’s development.
“It makes you feel useful,” systems administrator Charles Anderson said. “You can go through the day and do what you’re told, but you don’t really get that feeling of usefulness. You feel like you’re being used, but those are two different feelings.”
As Zappos passes its 10-year anniversary, Hsieh said he is planning on similar growth in the next decade as the company continues to branch out from its roots as a shoe retailer.
In recent years, Zappos has grown to offer clothing, accessories, luggage, housewares and sporting goods. It has added a second site, 6pm.com, that serves as a discount outlet for items left at the end of each season.
Hsieh said the company began with two goals for its first 10 years — reach $1 billion in annual sales and to crack the list of best companies to work for.
With those goals achieved, he has set similarly bold goals for the future — for 6pm.com and the clothing section of Zappos.com to each reach $1 billion in annual sales within the next five years.
After witnessing what Zappos has accomplished in her eight years there, company help desk manager Dory Dyer shrugs at such aggressive goals.
“I think the possibilities are endless,” she said. “We haven’t begun to scratch the surface, in my opinion.”