Culture June 5th, 2019

20 Years, 20 Milestones: How Zappos Grew Out Of Just Shoes

The year was 1999.

Doomsayers warned that the Y2K bug would end civilization as we know it. And although people were afraid their computers would fail them, a young team of entrepreneurs doubled down on the internet’s potential to sell — of all things — shoes.

It may be hard to believe that an upstart company purchasing shoes from brick and mortar stores, and then turning around to sell them online, has become a mainstay in online retail. But that’s exactly what Zappos has done.

When early investors turned away, money was borrowed from friends and family. Always believing in the vision, Tony Hsieh used millions of his own dollars to keep the company afloat.

Layoffs eventually occurred, and the remaining employees took innovative steps to save money, including taking pay cuts and living in dorm-like conditions. Zappos even opened up its very own storefront. These austerity measures courted potential investors (who didn’t quite believe the internet was going to be as big as it has become) to take a risk on the fledgling company.

Let’s look back at some milestones that helped mold Zappos into the company it is today.
 

Zappos' central plaza is decorated to celebrate two decades of business.

 

1. Shoes online became a thing – 1999

Nick Swinmurn wanted a pair of Airwalk Desert Chuka boots. Unable to find them at his local San Francisco mall, he had the idea to sell a wide variety of footwear online, under the name shoesite.com.

Swinmurn met with Fred Mossler, a men’s shoe buyer at Nordstrom, and asked him to join his start-up. Mossler, however, wanted Nick to have more capital before he committed. Nick then met with Venture Frogs, Tony Hsieh’s investment company. Seeing the vision and potential, Hsieh bought into the idea and eventually became co-CEO with Swinmurn.

Searching for a more unique name soon thereafter, Shoesite became Zappos, an adaptation of zapatos, the Spanish word for shoes.
 

2. The opening of a fulfillment center – 2002

Zappos formed a partnership with UPS to expedite the delivery of footwear. The 825,000-square-foot warehouse was located 17 miles from the UPS Worldport, their global air-freight hub at the Louisville, Kentucky airport.

At the time, approximately 40,000 units were processed per shift using the largest carousel system in the United States. It held a staggering 1.5 million pieces of merchandise.
 

Zappos' Kentucky fulfillment center prepares to pack and ship orders to excited customers.

 

3. 365-day returns – 2003

Zappos turned four years old and WOWed its customers by implementing a free 60-day returns policy. This no-hassle approach gave customers the opportunity to purchase several pairs of shoes in various sizes, returning those that didn’t fit at no cost.

“Buying shoes online can initially be a scary process for people,” Hsieh says. “But Zappos has withstood when other dot-coms have failed because we provide the best customer experience, such as free shipping both ways. Even though free shipping of both orders and returns has cost us more, it has enabled us to keep our customers longer.”

By year’s end, Zappos decided to give customers 365 days to return the shoes, as long as they were in “like new” condition and in the original box.

 

 

4. From San Francisco to Henderson – 2004

It became increasingly difficult to hire customer service personnel in San Francisco; many locals viewed customer service as a temporary job. However, Hsieh knew quality customer service was of great importance, and would eventually become the company’s differentiator.

After brainstorming with several other employees over lunch, Hsieh decided relocating to Nevada would be the best move forward. Although the choice to take the company out of San Francisco came as a big shock to most employees, 70 of the original 90 employees picked up their lives and moved to the desert.

Being in an unfamiliar town with unfamiliar people, Zapponians would hang out with each other outside the office. Culture in the workplace becomes a top priority — even more important than customer service.

“We thought that if we got the culture right, then building our brand to be about the very best customer service would happen naturally on its own,” said Hsieh.
 

Guests are encouraged to stick their name tags to Lucille, which weighs well over 100 pounds.

 

5. Customer loyalty 24/7 – 2004

Shortly after moving to Henderson, Zappos’ Customer Loyalty Team (CLT) broadened their services to 24 hours a day, seven days a week, 365 days a year. Five to ten new agents were hired every two weeks. Due to this rapid growth, there were 100 customer service employees among the 400 employees.

Customer service was unique from the beginning. There are no scripts and no time limits on phone calls. One customer interaction lasted almost six hours. Did they talk about shoes the entire time? Probably not; but the opportunity to create deep and emotional connections with customers, whatever the topic of conversation, was smiled upon.
 

6. Dual job interviews – 2005

Having one job interview is tough enough; having two job interviews at the same company can be downright stressful. But that’s what Zappos did—and still does. In 2005, two different types of interviews were instituted: one for business and one for company culture.

The business interview ensures that the candidate has enough talent and proficiency to do the job. The culture interview ensures they’ll fit in with the rest of the Zappos family. Being identified as a culture fit holds significant value since employees spend a lot of time together both on and off the clock. Hiring people that become good coworkers and good friends is of utmost importance.
 

Ryo, a Zappos tour guide, plays the ukulele for his guests.

 

7. New hire boot camp – 2005

This year brought the creation of something fondly called “customer service boot camp,” which is still a part of new-employee orientation.

During the first three weeks of the program, new employees absorb the company culture, customer service program, inventory management system, and work with an experienced employee in the customer contact center. During the final week of the program, employees went to Zappos’ fulfillment center where they picked, packed and shipped orders and perform other inventory management tasks.

At the end of boot camp, each employee was offered $100 to quit. According to Hsieh, the boot camp and extra money helped Zappos weed out employees who won’t be a long-term cultural fit. As of 2019, new hires are offered one month’s salary to quit.
 

8. The creation of core values – 2006

In San Francisco, Hsieh, Swinmurn and Mossler interviewed each candidate that came through the door to ensure the proper fit for the company. As the company continued to grow in Henderson, this became too time-consuming. Someone from the Legal Department suggested creating a list of core values to serve as a guide when making hiring decisions.

Tony reached out to all Zappos employees, asking for their input on core values. Thirty-seven beliefs were refined, and on February 14, 2006, Zappos’ 10 core values were born.
 

The on-campus gift shop features core value branded shirts, mugs, and more.

 

9. Free overnight shipping – 2007

The holidays are stressful at the best of times, so Zappos took a little pain away from their customers. On January 20, CLT Supervisor Chris Sciotto sent out this message:

“Beginning tonight at midnight, every order will be shipped OVERNIGHT for FREE!! That is right folks, any order placed by 1PM PST Monday-Thursday will be delivered the next business day and overnight orders placed anytime Friday or Saturday will be delivered on Monday. Orders placed Sunday before 4PM PST will also be delivered on Tuesday.”

Because the warehouse was located so close to the UPS Worldport, this guarantee was a promise Zappos could make, but few other online retailers could.
 

10. More than shoes – 2007

Now that the core values were established, what better way to pursue growth and learning than to add to the inventory? 2007 saw three big additions to the Zappos line.

New Balance

New Balance became the first apparel line within Zappos’ arsenal, along with various styles of eyewear and watches. In total, Zappos stocked over 3.5 million shoes, handbags, apparel items and accessories from over 1,200 brands.

6pm.com

Zappos acquired 6pm.com from ebags.com to provide an online shopping experience that reflected customers’ needs, including matching shoes to handbags.

Nike

2,000 emails; 1,900 phone calls; 15 bi-yearly meetings. Zappos had tried to get Nike since Mossler joined the company. Every connection within Nike was tapped, yet efforts yielded no results. Merchandise Buyer Chris Peake said he saw Mossler moments before he sent out the email announcing that we got Nike on March 21, 2007. “He was nerve-wracked, not himself at all,” recalls Peake.
 

CEO Tony Hsieh addresses employees at the company's quarterly all hands meeting in 2008.

 

11. Zappos Insights – 2008

Business was in full swing, and the company’s focus had expanded beyond footwear and clothing. Zappos decided to share its understanding of culture and customer service to the world by creating a company within the company, aptly naming it Zappos Insights.

Insights teaches other companies what Zappos has learned up to this point. Topics range from helping start-ups grow their business, how to attract and keep great people, how to deliver exceptional customer service, and of course, ways to improve company culture.
 

12. “Zappos and Amazon sitting in a tree” – 2009

On July 22, Tony Hsieh sent this email to all employees. He began his letter like this:

Over the next few days, you will probably read headlines that say, ‘Amazon acquires Zappos’ or ‘Zappos sells to Amazon.’ While those headlines are technically correct, they don't really properly convey the spirit of the transaction. (I personally would prefer the headline ‘Zappos and Amazon sitting in a tree.’)

Amazon, a powerhouse in the retail industry, enabled Zappos to diversify further into apparel and accessories and help grow its brands. Amazon maintains a hands-off approach, and Zappos runs the way we always have: with a little fun and weirdness.
 

Zappos leadership pose together to commemorate the 2010 Corporate Challenge.

 

13. Calling all holiday helpers – 2009

Zappos turned 10 years old in 2009. Still “Powered by Service,” Hsieh asks employees from other departments to volunteer to help the Customer Loyalty Team answer phones during holiday peak times.

The trial was proven to be a wild success, so Hsieh sends out the following message companywide:

“For next year's holiday season, we are going to follow UPS's example and no longer ask for volunteers. Just like UPS has all of their managers out in the field delivering packages during the holidays, here at Zappos, helping out on the phones will become an annual requirement for everyone in Las Vegas starting next year. I'm excited about this because it'll make us even more customer-service focused than before.”
 

14. "Delivering Happiness" – 2010

Hsieh is an entrepreneur at heart. He wanted to share his story with the world and hopefully prevent others from making the same mistakes he did when it came to building a company. His bestselling book, "Delivering Happiness," was published in March 2010.

In it, Hsieh shared the business lessons he learned throughout life. These included starting a worm farm, creating his own newspaper, holding garage sales (complete with a lemonade stand) and running a pizza business in college. He also created and sold LinkExchange to Microsoft for $265 million. He discussed the highs and lows of Zappos’ infancy when he let employees live in his personal lofts rent-free so they could keep the fledgling company afloat.

Ultimately, he has showed how using happiness as a framework can produce profits, passion and purpose, both in business and in life.
 

Zappos moves downtown and into the former Las Vegas City Hall in 2013.

 

15. “Wouldn’t it be cool if we could move Zappos there?” – 2013

Years earlier, Hsieh was referring to the monolithic façade of the old city hall building in downtown Las Vegas. City hall had moved to a brand-new glass building several blocks away, leaving the old building ripe for a makeover.

Zappos would eventually move into the building, but not before it was completely gutted and retrofitted to fit the company’s needs and long-term vision. Thus, on September 9, 2013, more than 1,200 employees grabbed scissors and took part in breaking the world record for the most people cutting a grand opening ribbon at once.
 

16. Implementing Holacracy – 2014

Zappos prides itself on its innovative and quirky culture. Hsieh believed Holacracy, a complete system of self-organization, to be the correct course of action because of a nagging feeling that Zappos' growing size was threatening what made it exceptional.

Leading the Holacracy transition at Zappos, John Bunch said, “In its highest-functioning form, the system is politics-free, quickly evolving to define and operate the purpose of the organization, responding to market and real-world conditions in real time. It’s creating a structure in which people have the flexibility to pursue what they’re passionate about.”
 

Hired in 2016, Anne Mehlman becomes the company's first female executive.

 

17. The first female C-suiter – 2016

Anne Mehlman joined the Zappos family from 2016 to 2018 as chief financial officer. She was the first-ever female executive in Zappos history. Anne came to Zappos after five years as the vice-president of finance at Crocs.

Like all Zapponians, Mehlman went through new hire training. Mehlman said that her constant curiosity to learn new things and her willingness to uproot her family from city to city led her to become the chief numbers guru at Zappos. “Be true to yourself,” said Mehlman. “Remember, you don’t have to have all the answers.”

 

18. Zappos for Good – 2017

Zappos had always been generous to the local community, holding Thanksgiving feasts for the less fortunate and donating shoes to charitable organizations such as Soles4Souls and Goodie Two Shoes.

In 2017, Zappos for Good was created to intensify that focus. Over 230,000 items were donated, impacting people locally and nationally, which included a partnership with Spread the Word Nevada and the Kids in Need Foundation.

As of 2019, over one million items have been donated to various causes … and counting.
 

Tyler Williams, director of brand experience, speaks to employees at The Smith Center.

 

19. Adaptive shoes and clothing – 2017

Spurred on by a grandmother who couldn’t find appropriate footwear for her grandson with autism, a grassroots team was created with one mission: to provide functional and fashionable clothing and shoes to make life easier for those who have trouble getting dressed.

Following several months of immersive research, education, and talking with families and people with disabilities, Zappos Adaptive continuously looks for brands and products that meet all types of needs.
 

20. Zappos Theater – 2018

Zappos takes a first step in disrupting the entertainment industry with world-class customer service. In collaboration with Caesars Entertainment, Planet Hollywood’s Axis Theatre on the Las Vegas Strip was rebranded as the Zappos Theater.

Under the multiyear partnership, the venue is aimed to surprise and delight concertgoers in new and unexpected ways.

“We want to mix what we know about service with what Caesars Entertainment knows about putting on an amazing show. Zappos Theater will let us create fun, a little weirdness, and an opportunity to WOW people through rocking out," says Tyler Williams, Zappos’ director of brand experience.
 


 

Twenty years ago, Zappos was a small start-up with a big dream. Zappos built success on a foundation of customer service and company culture. By creating WOW experiences around the brand, we continue to bend the barriers of traditional corporate practices.

Hsieh continues to lead the company with passion, determination, and yes, even a little weirdness. So, in the immortal words of Prince, “Tonight [we're] gonna party like it's 1999.”

 
 

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