The following email was sent to our employees by Chris Nielsen (our CFO)

Thanks everyone for your patience!

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Hello Zappos Family and loyal Zappos customers,

 You deserve an update on where we are with the WMS project and how things are going today.  The project officially went live last Monday, and despite
everyone’s best efforts we have faced some challenges since then.

 Those challenges come in two forms:

1)      Going through the backlog of customer orders that were built while we had the previous system offline and were transitioning to the new system. Over the cutover weekend, we were accepting orders from Thursday through Monday but not able to process them until Sunday night.  During this time, we
were doing the work necessary to change from the previous system to the new one.  That timeline meant that we needed to start quickly shipping orders with the new system.  Shipping began slower than we expected as we ran into some unanticipated mechanical, systems, process and training issues.

2)      Fixing pieces of functionality and processes that are not working as we expected them to.  As with any system transition, we are finding errors that need to be corrected, enhancements that need to be made and process changes required to maximize volume through the FC.

 The backlog challenge has been greater than fixing pieces of functionality. Our KY team has been working incredibly hard (including extremely long hours
with little or no sleep, herculean recruiting efforts to staff up, making
drastic headcount realignment decisions and creatively working past every
obstacle in their way) to make progress here, and we turned a corner over the
weekend and Monday.  We will have over 500 temporary workers in the building
this week to help us.  We are now at an outbound run rate where we are
churning through the backlog.  If we continue this progress, the customer
order backlog will be down to a manageable level by this weekend and cleared
within days after that.

 Our tech teams are focused daily on making the changes necessary to make the system perform as we need it to and delivering efficiencies to the FC to help
clear the backlog.  That process will continue indefinitely, and we are
prioritizing the most important aspects for our customers and teams.

 We know that some customers have been inconvenienced as part of this transition.  Frankly, nothing disappoints us more than this.  We are
addressing those individual customers and will be reassuring them that we will
quickly be reverting to our previous high standards.  Our CLT team has been
great at working with our customers to the best of their ability to address
customer concerns.

 Over the last week, we have been inspired by your ability to Drive and Embrace Change.  Change is sometimes difficult and painful, and this
transition has been both of those things at times.  Together we will work
though this and come out the other side with better long-term capabilities to
serve our customers as our business continues to grow. This is the biggest and
most complex systems and operational transition (you might think of this as
the equivalent of a heart transplant or changing the engines of a plane while
in flight) in Zappos history.  Thank you for your part in making it happen!

Chris, Craig and Arun