Dana GobaBUS 550 - The Contemporary FirmMay 21, 2012

Nick Swinmurn• 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

Tony Hsieh & Alfred Lin• 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

Let’s Go Shopping!• www.zappos.com• Photos• Videos• Tags• Reviews• Recommendations

Company Information• 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.”

Company Information con’t• 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

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

Warehouse Upgrade• 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

Warehouse Conveyor• 9,200 feet of conveyor!

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

Annual Revenue

19992000

20012002

20032004

20052006

20072008

20092010

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Mill

ions

Path to the Culture• 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

Employee Culture Input• 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

Core Values

1. Deliver WOW Through Service2. Embrace and Drive Change3. Create Fun and a Little Weirdness4. Be Adventurous, Creative and Open-minded5. Pursue Growth and Learning6. Build Open and Honest Relationships with Communication7. Build a Positive Team and Family Spirit8. Do More with Less9. Be Passionate and Determined10. Be Humble

Finding the Right Employees

• 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

Hire slowly,

Fire quickly

Call Center• 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

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

Customer Demographics

38

62

Gender

MaleFemale

12

11

21

24

18

104

Age<18 18-2425-34 35-4445-54 55-6465+

5347

Childen in Household

No kidsHas kids

12

23

30

35

Household Income<$50k$50-100k$100-150k$150k+

39

44

18

Education

No collegeCollegeGrad school

72

11

510 1

EthnicityCaucasionAfrican AmericanAsianHispanicOther

Courtesy of Quantcast

Repeat Customers• 75% of orders• Higher average orders• $156.27 versus $123.86

• Rely on word of mouth instead of traditional advertising

CRM Software• 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

Social Media• 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

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

Zappos Insights• 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

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

Hacked• 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

Questions?