Text Size 
CNBC: How would you define the company culture?
TONY HSIEH: At Zappos, the company culture means a lot of things. I think a lot of people are surprised when they visit the office to see that we really foster a family atmosphere, and we try not to take ourselves too seriously. We like to have fun, but at the same time also work hard in growing the business.
CNBC: You have an absolutely remarkable record of sales growth. Can you take us through where the company was when you joined and how far it’s come?
TONY HSIEH: I joined Zappos about two months after it was started in 1999, and during that year, there were almost no sales. In 2000, we did 1.6 million in gross merchandise sales. In the next year, it was 8.6 million. Then it jumped to 32 million. And then, the year after that was 70 million. The year after that to 184 million and then, the year after that to 370 million. Last year, we did 597 million, and this year we're on track to do about 850 million. So last year, in August, we actually hit a big milestone where we had sold a billion dollars worth of gross merchandise for the lifetime of the company, so we were pretty happy about that.
CNBC: How many years did it take before you became profitable, and what is your theory about how long it takes to become profitable in any business?
TONY HSIEH: For us, I guess we’ve always taken the philosophy that any money that we could make, we wanted to instead invest into the growth of the business. And so we were slightly profitable last year, but for the three years before that, we were running the company at close to break even. And while we could have been profitable, we decided instead to spend those profits on things to improve the customer experience because we want the Zappos brand to be about the very best online shopping experience and the very best customer service. So we would do things such as instead of shipping ground, upgrade customers to three-day air. Or, once we could afford it, upgrade them to two-day air. And actually today, we offer free overnight shipping to all of our customers, and it’s free shipping both ways with a 365-day return policy. It wasn’t always like that. We started out with just a thirty-day return policy, and as we could afford it, we wanted to offer more and more to the customer because when you go to a brick and mortar shoe store, typically the sales person will bring out a few pairs of shoes and some might look good in the box, but then when you actually try it on, it’s either uncomfortable or it doesn’t look good on you. You may need to try the next half size up or down. Online, it’s a lot more challenging, which is why in the very beginning, we decided that we really should offer free shipping both ways to our customer to kind of get over that perceived difficulty in shopping online. I think we were the first company to pioneer the idea of free shipping both ways.
CNBC: Have you heard back from customers how they feel about your shipping policy and your return policy?
TONY HSIEH: Yes, customers love it! We hear from the all the time. They say that they never thought they would buy shoes online until they learned about our policy and tried it out and see how easy it was to return something. It’s not a long, complicated process. It’s self-serve. You just go online to the website and print out a pre-paid return label, and the rest is taken care of for you.
CNBC: Can you tell the story of how you became involved with Zappos?
TONY HSIEH: The founder of the company, his name is Nick Swinmurn, was the one that originally came up with the idea of selling shoes online. And at the time, Alfred, who is now the CFO and COO of Zappos, and I were making investments in a number of different internet companies. I think we invested in about twenty or so different companies. And Zappos just happened to be one of them. But Zappos almost didn’t happen because back in 1999 Nick said he had this idea of selling shoes on the internet, and to us, that just seemed like the "poster child" of bad internet ideas. We thought, "No one would ever buy shoes online." We actually almost deleted his voice mail. And right as we were about to do so, he threw in a little number at the end which was that footwear in the US was a forty billion dollar market and five percent, or two billion, was already being sold by paper mail order catalogues. So in our mind, the internet was going to be at least as big as that. So that’s what caused us to take that initial leap of faith.
Print
Email
Data is a real-time snapshot *Data is delayed at least 15 minutes