BUS 550 - The Contemporary Firm
May 21, 2012

• Graduated from UCSB in 1996
• Unable to find brown Airwalks in his size
• Thought the internet could solve the issue
• No experience in retail or shoe industry
• Founded Zappos in 1999
• Hired Fred Mossler from Nordstrom
• Left Zappos in 2006
• Formed Dethrone Royalty in 2009

• Harvard classmates
• Sold LinkExchange to Microsoft for $265 million
• Founded venture capital fund, Venture Frogs
• Invested in Zappos
• Hsieh became Zappos advisor, then co-CEO
• Lin joined as COO/CFO

• www.zappos.com
• Photos
• Videos
• Tags
• Reviews
• Recommendations

• Sell shoes, clothing, beauty products, accessories, and housewares
• Free shipping both ways
• 365 days to return
• 24/7 customer service
• “Customer services is what we do.”

• Headquarters in Las Vegas
• Warehouse in
Shepherdsville, Kentucky
• 1,500 employees
• 1,200 brands
• 200,000 styles
• 900,000 unique UPCs
• 4 million items in warehouse
• Fortune’s 100 Best
Companies to Work For from 2009 to today

• In the beginning, manufacturers would deliver to customers
• Then tried outsourcing warehouse
• Realized had to open own warehouse

• Moved to larger facility
• Located near UPS hub in
Louisville, KY
• 800,000 square feet
• Custom built automation
• Able to ship twice as many packages
• Decreased cycle time
• No one lost their job

• 9,200 feet of conveyor!

• Photo studio and full-service photo lab in fulfillment center
• Take photos as new products arrive
• HQ writes description
• On website in 48 hours

$1 800
$1 600
$1 400
$1 200
$1 000
$800
$600
$400
$200
$0

• Swinmurn – desire to build internet powerhouse
• Hsieh – focus on culture and employee happiness
• Very best customer service
• Burst of internet bubble
• Moved headquarters to Las Vegas

• Culture book
• Began in 2004
• Compiled and published annually
• Employees building the culture
• Core values
• Live them, don’t just stare at them on a wall

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

• Qualities
• Weirdness
• Humor
• Humility
• Luck
• Training
• 4 weeks of Customer Loyalty Team training
• 1 week at warehouse
• $3,000 offered for people to quit after training
• You’re hired
• Employees are encouraged to spend time together outside of work
• Managers are required to spend 10-20% of their time hanging out with team members

• Most call centers have 300% turnover
• Zappos saw call center as an opportunity
• Customer Loyalty Team (CLT)
• No script
• Conversations help build the brand
• Personal Emotional Connection (PEC)
• Not compensated based on the number of calls
• Track longest customer call
• Hseih is adverse to typical retailing techniques

• Need to hire the right staff
• Was difficult to have customer service career in San Francisco
• Looked into outsourcing

Gender
62
38 Male
Female
Age
18
10
4
12
11
21
24
<18
18-24
25-34
35-44
Education Childen in Household
18
47
53
No kids
Has kids
44
39
No college
College
Grad school
35
Household Income
30
12
23
<$50k
$50-100k
$100-150k
$150k+
11
5
10 1
Ethnicity
72
Caucasion
African American
Asian
Hispanic
Other
Courtesy of Quantcast

• 75% of orders
• Higher average orders
• $156.27 versus $123.86
• Rely on word of mouth instead of traditional advertising

• Created custom Customer Relationship Management software
• Not many CRM in 1999
• Want control over process and systems
• CRM needed to be driven by customer service

• Building open and honest relationships
• The good, bad, and ugly are posted
• The true brand is what your customers say you are
• Telephone
• Twitter
• Blogging
• Facebook
• Video

• Considered the best social media
• 5,000 to 6,000 calls per day
• If interaction is done right, people remember and tell others

• Other companies seeking insight regarding management practices
• Began business to business consulting
• Offer seminars
• 1 day Gold Package
• 2 day Boot Camp
• 5 day Innovation Series

• Announced in July 2009
• Stock deal worth $1.2 billion
• Honest and open communication with employees
• Email from Hsieh to all employees

• On January 16, 2012
• Personal information of 24 million people had been hacked
• Names, email, billing/shipping address, phone, last 4 digits of credit card
• Full credit card information stored separately
• Required customers to change passwords
• Shut down call center due to high volume