Zappos: Delivering Shoes, Profits, and Happiness

31 07 2011

I’ve done it. You probably have too…bought a pair of shoes from Zappos.com. In 1999 buying a pair of shoes online seemed like a C-RAZY idea. Really? Internet entrepreneur Tony Hsieh and a few of his friends (and to-be colleagues), thought it would work, came up with the name Zappos, and started forming the company. Ten years later Amazon bought Zappos “in a deal valued at over $1.2 billion on the day of closing,” per Zappos CEO Tony Hsieh in his excellent book Delivering Happiness: A Path to Profits, Passion, and Purpose. Just how do you go from zero to over $1 billion in annual gross merchandise sales…and of SHOES (not big ticket items)…in just ten years?

Tony’s journey was not for the lazy, weak-willed, doubting, or uncommitted. Many times the company came to the brink of collapse and he kept it afloat by infusing it with some of the considerable money he got from the sale of his previous company…banner ad network LinkExchange…when it was sold to Microsoft in 1998 for $265 million. And as that money ran out, he sold his own personal real estate.

Tony and his colleagues made the decision in 2003 to make the Zappos brand be about the very best customer service possible. This meant some big, bold decisions like carrying their own inventory so they could ship shoes faster and more accurately. They decided not to outsource customer service overseas, even though that would’ve been cheaper, and they relocated their headquarters to Las Vegas. Tony emailed all employees in 2004 to ask them to contribute 100-500 words about what the Zappos culture meant to them and since then, every year a new Zappos Culture Book is produced, which is given to prospective employees, vendors, and customers. They encouraged employees to anonymously submit questions and the answers are posted in their monthly employee newsletter Ask Anything.

Oh…and they got a $100 million credit line from Wells Fargo and two other banks. All of these changes meant they went from the brink of collapse to $1 billion in gross sales in 2008…two years ahead of their original (and seemingly impossible) goal of 2010.

Zappos succeeds by delivering happiness…to employees, vendors, and customers. They offer free shipping both ways…if a pair of shoes doesn’t fit or you don’t like it, ship it back for free. And oh, by the way, you have 365 days to return them. Their call center and warehouse are staffed and running 24 hours a day every day. Sometimes they surprise (i.e., delight) customers and ship shoes overnight (sometimes 8 hours after they order them) at no charge. I’ve actually experienced this…so cool!

The company culture and the brand are intertwined…one feeds the other and leads to a lot of really happy people. They are thoroughly committed to the ten company core values:

  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

The Zappos mission became “To live and deliver WOW.” As a result of these values, the WOW mission, and the incredible results that Zappos was achieving, Tony Hsieh started to be in demand as a speaker. In 2007 he started studying the science of happiness. He found that happiness is evolutionary.

Tony Hsieh - Credit: DeliveringHappiness.com

The lowest level of happiness is all about chasing pleasure. The more evolved level of happiness is passion, which comes through flow and engagement. And the most evolved type of happiness is higher purpose, which is about being part of something bigger than yourself. The Zappos mission evolved to “Zappos is about delivering happiness to the world.

Tony wrote the Delivering Happiness book in 2009. It debuted in 2010 at #1 on the New York Times Bestseller List and stayed on that list for 27 consecutive weeks. There is now a Delivering Happiness movement, with information at www.deliveringhappiness.com. A Delivering Happiness bus has toured the nation and the CEO of Delivering Happiness Jenn Lim is also called the Chief Happiness Officer. In January 2010, a couple of months after the deal with Amazon closed, Zappos was ranked #15 in Fortune magazine’s annual “Best Companies to Work For” list.

Tony Shieh in action is an incredible example of conscious capitalism, which seeks to enhance corporate profits and also (and perhaps through the) advance the quality of life for people. He leaves you with these thoughts, which are his guiding principles in life:

What would happen if everyone in the world acted in the same way? What would the world look like? What would the net effect be on the overall happiness in the world?

He challenges us all to choose to “…be a part of a movement to help make the world a happier and better place.” WILL YOU MAKE THAT CHOICE?



Here’s Tony talking about his journey: