I Am CNBC Tony Hsieh Transcript

CNBC: What are some of the things you do to create this corporate culture?
TONY HSIEH: We have nametags for every employee.  If you walk around the office, you’ll see that some of them have decorated their names in different ways.  Our network administrators have put in place a project to actually have electronic displays because they’re more technical, but really, we think it’s important to have a family atmosphere at the company, and so we require everyone to wear their name badge so that you can know who someone is if they happen to be coming across the hallway and you haven’t seen them before.  We really encourage a lot of interaction outside of the outside, so we have employees that organize golf tournaments or hiking trips or happy hours.  Pretty much anything that any employee has a passion for we highly encourage them to share that passion with other employees.

CNBC: If you were going give an aspiring entrepreneur a pep talk, what would you say?
TONY HSIEH: I would say two things.  One, is if you’re passionate about your idea, then don’t give up.  Your passion will fuel you through the hard times.  And kind of related to that is to not do something for the money, because there are going be hard times, and if you’re not doing it because you love it, then you’re not going be successful because you’ll give up way too early.

CNBC: Can you talk about the risk you had to take shortly after starting Zappos and what led the company to take that risk?
TONY HSIEH: Well, we decided pretty early on that we wanted the Zappos brand to not be about shoes, but to be about the very best service and the very best online shopping experience.  So about four or five years ago, we were actually doing a combination of shipping out of our own warehouse and having manufacturers drop ship for us.  At the time, the drop ship part of the business was making up about twenty-five percent of our revenue.  And we just woke up one day and decided to give that all up.  This was still pretty early in the company’s growth, so while we knew it was the right thing to do, it was very difficult for us financially.  But if we wanted to be true to our brand about being all about customer service, we knew we had to give it up.  So it was actually both the easiest and the hardest decision to make for the company.

CNBC: Were you personally scared?
TONY HSIEH: I think we were all a little nervous.  It kind of felt like we were all about to jump off a diving board, but we knew we were doing it together, so looking back, it was the best decision we made for the company.

CNBC: And how did that help you to give the level of service you wanted?
TONY HSIEH: We turned off drop shipping because we couldn’t control the entire customer experience.  Sometimes, one of our drop ship partners might tell us something was in stock, and then we’d find out three days later that it wasn’t.  In the meantime, the customer is already expecting it.  None of our drop ship partners were running their warehouses around the clock like we were and we are today.  It's actually not the most efficient way to run a warehouse, but it allows us to get our orders out to our customers as quickly as possible.

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