Shoe-ing Away Convention

The online shoe store has built a loyal customer base that keeps on growing.


Las Vegas, July 8, 2008— -- If you're looking for a certain pair of shoes, there's a warehouse in Kentucky that probably has them. It has 1,000 brands in just about every style, size and color, totaling 4 million pairs of shoes.

Twenty-four hours a day, they're boxed up and shipped out to shoe shoppers sitting in the comfort of home.

Online shopping Web site Zappos is doing for shoes what Amazon did for books: trying to revolutionize not only how business is done but how people work.

The name is an adaptation of the Spanish word for "shoe." This year, nine years after going into business, Zappos is on track to sell $1 billion worth of shoes.

Zappos is headquartered in Las Vegas, where the company has office carrels similar to almost any other corporation. Right there in the middle of these cubicles, in an area nicknamed Monkey Row, sits Tony Hsieh, the emperor of shoes with no more office space than Dilbert.

"One of the things that's really important for us, actually, probably the most important focus for Zappos, is to make sure we have the absolute best company culture, and part of our culture is just having a familylike atmosphere," he said.

At times Zappos looks like one of those Internet startups that disappeared when the bubble burst. One afternoon, the entire finance department was racing Pinewood Derby cars in the office.

But unlike those failed startups, last year Zappos made a 5 percent profit -- and it helps that the CEO is setting an example by making a lower salary than some of the call center employees.

"I don't have a calculator, but my salary is $36,000 a year," Hsieh said. "So I think some of them make more than me."

Of course, he can afford it. Just a few years out of college, Hsieh sold an Internet company to Microsoft for $265 million. But to look at him you wouldn't know it.

He's not really into shoes. Hsieh owns about 10 pairs at the moment. Before Zappos he "used to have one pair that I would wear for two years until it had holes in it and then buy the same pair again."

What he is into is building a company where people love to work and customers like doing business. Do that, he says, and the rest will follow.

"For us, Zappos isn't just about selling shoes online. For us we really want this Zappos brand to be about the very best customer service, the best customer experience," he said.

Selling shoes over the Internet would seem difficult because people want to try them on, see the size and color. Zappos overcame that with free shipping both ways: order as many shoes as you like because you have a year to return what you don't want.

They'll take several hundred million dollars' worth of returns a year. And if they treat the customers well, they do pretty well by the employees, too. Free food is always available in the cafeteria.

Even the snacks are free.

But that's nothing. The company also pays 100 percent of medical and dental benefits.

It sounds almost revolutionary. Hsieh says that's because companies that offer such benefits don't see the payoff until two or three years down the line.

At the heart of the Zappos revolution is the call center, where actual human beings answer the phone. There's no script, no time limit on calls and no push to sell more than the customer wants.

Ninety-five percent of Zappos' business comes over the Internet, but the company spends a lot of time and money training people who talk to customers on the phone. There's a four-week training course that every single employee, from the executives on down, are required to take -- even if their jobs don't usually require interaction with customers.

Sari Levine works in the design department, but she is a member of the latest call center class. After Levine finished her training at the call center, she began shipping shoes in Kentucky.

"We call it KY boot camp. We go to our Kentucky fulfillment center, and you do, you understand every single aspect of how the warehouse works and you physically get to go and put shoes in a box and watch it go down the conveyor belt straight to the customer's door," said Levine.

Just before she was hired, she and the rest of her class were offered cash to walk away -- $2,000 was the latest offer.

"We offer the money to trainees to quit because we really want to make sure that people who are working at Zappos are truly passionate about the company and this is the place that they want to be," explained Hsieh.

Very few take the money. Once graduation time arrives, there's a ceremony that includes pomp and circumstance, diplomas, and the Zappos pledge: "I'm on a Zappos mission to live and deliver Wow. Armed with core values, I'm going to start now."

Their list of 10 core values to work by includes the decree to "create fun and a little weirdness."

"What that's about is, it's just a fun way of saying that we really respect and celebrate everyone's individuality," said Hsieh. "I think it's just really important for people to feel engaged, that they always need to feel like they're learning and growing."

They refer to their call centers as customer loyalty teams. Employees even advise customers as to which competing Web sites have shoes if they aren't available on the Zappos site.

Hsieh says that policy begets customer loyalty. Seventy-five percent of Zappos' business is people who come back.

Now Zappos is branching into clothing, electronics and even cookware.

"We've received e-mails from customers that have asked us to start an airline, and we're not going to do that this year, but 30 years from now I wouldn't rule out a Zappos airline," Hsieh said.

Of course, in that case, you'd probably have to pay for shipping.

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