17 Revelations On How An Online Retailer Went From Zero to $1.2 Billion

I have recently been researching about how an online retailer has gone from zero to $1.2 billion in less than 10 years just selling shoes and I have been especially interested in their implementation and use of social media including Twitter and online video. The 35-year-old serial entrepreneur , Tony Hsieh (he made his first mint selling LinkExchange to Microsoft for $265 million – when he was 24!) figures he goes through 1,000 tweets a day that are either directed at him or mention Zappos. By contrast, the company (and he) gets about 2,000 email messages a day. In fact, it takes six different members of the CEO team to respond to messages.

Zappos’ Customer Loyalty Team fields between 5,000 and 6,000 calls a day. Almost every customer, at one time or another, winds up calling Zappos at least once, Hsieh says. And that represents the biggest opportunity in social media to make a lasting impression since it currently lacks brick-and-mortar stores. “Our best branding tool, as unsexy and low-tech as it may sound, is actually the telephone,’’ says Hsieh. “And if we get that interaction right, it’s something they remember, maybe for the rest of their life, and tell their friends and family about.”

“The payoff is not in the current quarter or the current year,” Hsieh says. “The payoff is probably going to be two or three years down the line. So it’s about how long-term you are thinking.” Listening and interacting is also improving. Even if just one customer asked for an action button to appear in a particular place on a page, it’s likely it would pop up shortly thereafter. So what are some key elements that have enabled an online shoe retailer to go from zero to 1.2 Billion is sales in under 10 years.

1. The Differentiator: Customer service and interaction

2. Multi-Chanel  Core Customer Interaction Channels:

  • Telephone
  • Email
  • Twitter
  • Blogs
  • Streaming video
  • Partnerships with Facebook, YouTube

3. Culture is the Top Objective: “Our number one priority as a company is our company culture. Our whole belief is if we get the culture right, then most of the other stuff, like building a long-term brand or delivering great customer service, will just naturally happen on its own.” Hsieh wants it  to stand out for its personality, individuality and, yes, friendliness. Something social. Not automated. Not designed to make a sale, quickly. Bosses and un-bosses are supposed to spend 10 to 20 percent of their time outside the office, getting to know each other. Happy hours at bars, for instance. Ski trips. Note: Staff are trained for 5 weeks before commencing work

4. The Zappos Ambition: To build a collection of businesses “powered by customer service.’’ To be equated with service in the way Richard Branson’s Virgin businesses are thought of as cool and hip.

5. A Twitter Fact: The chief executive of a billion-dollar company has 770,692 followers on Twitter which garners a lot of attention

6. Amazing Revelation: Tony Hsieh, the CEO of online retailer Zappos.com, “does not” find the 140-character messages the best way to interact with customers. For that, “the really effective social media” is

  • Email and
  • Telephone

Note: They still consider the most “social” of the media they use to interact with customers is the phone

7. The Phone Strategy: The toll-free 800 number on the top of every webpage to encourage callers. There are no scripts in front of customer service reps, when they take a call. As with twittering or appearing in a streaming video, the reps are encouraged just to be themselves. Be chatty. Tell jokes. Find facts (Is that your dog barking? What kind is it?). Whatever works. No particular approach is proscribed. Except one: Spend as much time on the phone as it takes. Describe the return process in detail, if the caller is not familiar with it. Figure out what kinds of shoes match a particular dress. Just talk, if the caller is lonely, they’ll remember!

8. Social Media is not to drive up sales: Blogs, microblogs and streaming video — have a different purpose, Hsieh says. Hsieh contends these tools “give the public glimpses into how we act.” They are not used to drive up sales, although that may happen, as a byproduct. (These are the pre-cursors to the sale)

9. Social Media is not aimed at lowering costs:  Although the various video skits, waves of tweets and blog postings likely save the company significant sums on TV or other conventional forms of brand advertisinga typical 30-second ad costs $125,000 in prime time, Zappos estimates the cost of reaching out to past, present or potential customers in these micromedia at $300,000 a year – or less than three-hundredths of one percent of its $1.2 billion in annual sales (2009).

10. It’s not even looking for a return on that investment (ROI). “We don’t assign metrics to it,’’ Hsieh says. “It’s really just about our unwavering belief that making the customer happier is going to win in the long run.” There’s no way, Magness and Hsieh contend, to trace a straight line from all this dialogue, digital or otherwise, to the company’s ability to sell shoes.

11. Social Media  allows Zappos’  to be a customer relationship management (CRM) system for the digital customer: The company is made up of individuals. Happy individuals. Be a company full of people you’d like to get to know, explains Hsieh. And, oh, yeah, somewhere down the road, when you are ready to buy something, hopefully you’ll call us first (or go to its site, before that of any online rival).. “The question is, how do you break through that coldness where it is just you and a computer screen and you’re looking at 20 different retailers,’’ says Vaughan. “This gives character to the name Zappos and differentiates them from the other retailers you could be going to online.’’ How is this done?

  • 450 of the company’s 1,400 employees are on Twitter.
  • An untold number contribute to its “Inside Zappos” blog, which aims to be “fun and a little weird.”
  • You can see the faces of and antics of Zappos’ employees on videos that appear on Facebook, YouTube and Zappos.tv.
  • You can hear their voices all day long, over the telephone. There are neither scripts nor time limits on conversations ( A little different to your normal call center)
  • The goal is to create 1,400 spokespeople for the company, online–and offline

12. Devotion to streaming video: Any Zappos employee at almost any time can become a star. But the time frame is not Marshall McLuhan’s 15 minutes. The frame of fame is now less than five minutes.

13. Online Video Reources: A five-person video team makes micro stars of members of Zappos staff, chronicling when they take a fitness walk (to Starbucks, across the street) or just showing off the “things” on, say, a quality assurance team member’s desk, like the meditating frog she uses to keep her “sane through the day.” The “AV” club represents the only staff devoted full- time to thinking about, coming up with, blogging about, shooting and editing what goes on at Zappos, at work and play. There’s one combination cameraman and technician, three combination video editors and bloggers and Houchin, who acts as the video and blog supervisor, as well as publisher. The five people represent one-third of 1 percent of Zappos’ work force. And they act as a kind of cross between comedy improv sketch crew and news team, in creating or reporting on hijinks at Zappos.

Note: They have also built 10 in house video production studios to film online video product reviews, with the goal of having 50,000 online video reviews on their website by the end of 2010.

14. Free shipping both ways: Making it as easy to try on a pair of oxfords in your living room as in a store.

15. Social Media Marketing Campaigns: This is built on building up the human side of Zappos, as if showing humanity and personality is totally counter-culture amongst faceless private (or public) companies. And asking only one thing of employees: “Just be yourself’’

16. Zappos 4 keys to great online retailing:

  • Do what you say you’re going to do, promptly.
  • Deliver the exact products ordered, on time.
  • Take returns without a hitch.
  • Avoid complaints and frustrated customers, who might flood your phone banks, email boxes and tweet streams with angry (and costly) messages.

17. Zappos wants both insiders and outsiders to be talking about the company. And the outsiders to be customers for life. The “intangible ROI” also can be described by another benchmark, Magness says: the “wow” factor. (Three pairs of shoes are sent to the customer, 1 pair a size above, 1 of the size requested and  another a size below with a free mail bag to send back the shoes that don’t fit)

So have you used some of these elements for your eCommerce  store?


  • http://pvesey.blogspot.com pvesey

    — The only company that will consistently say “THANK YOU” when I blog about them.

    Zappos, Merry Christmas

  • http://www.oldschoolventures.blogspot.com Lou Sagar

    In having the opportunity to work with Zappos, its impressive to learn how a Company would look at outbound shipping and return costs as a “marketing” investment and not an line item expense. Zappos “Powered by Free Shipping” is their “Pentium Inside”….

  • http://zappos.com Jonathan Lueck

    Jeff, you WOW me! This blog is simply awesome! I’ll be passing this around the office.

    We absolutely appreciate you taking the time and effort to let people know about us, our methods, and our culture. Reading and hearing things like this is one of the most rewarding parts of working here. You’re helping us spread the happiness, which is what it’s all about, if you ask me. Thanks so much, and thank you EVERYONE for your support!

  • http://www.businessesgrow.com/blog Mark W Schaefer

    Jeff, you are one of my favorite bloggers but honestly I am so sick of hearing about Zappos I could hurl.

    The blogosphere needs to come up with a few new success stories.

  • Bobbie Lewis

    I had a great customer service experience with Zappo’s. While ordering, I inadvertently moved the cursor choosing the color of the sandals I wanted, and noticed only at the moment when I clicked “submit order.” So I called customer service right away and instead of telling me there was nothing they could do, the rep was able to change the order so I received the shoes in the color I wanted.

  • http://nakedpizza.biz Robbie Vitrano

    Great post Jeff. You capture Zap’s methodology but more importantly a human, optimistic and successful method of conducting business. A lingering global recession, created by the behavior of business, is my proof that we need to keep talking about companies like Zappos. Not simply because of their methods, but because they make a business case for consciousness and we need the optimism to win out over the cynicism. A basic confidence in capitalism, something a bit more flip than the “invisible hand” and “free markets.” Financial promise AND social purpose.

    Thank you.

  • http://mortensaxnaes.wordpress.com Morten Saxnæs

    Thanks for a great post Jeff.

    First time on your blog, but will be returning.

    I can see why many get tired of hearing about Zappos, but this cse is simply to impressive, that we need to scream it out loud, so that other companies will follow their lead.

    Sure, we need to find new best cases, but until they are as clear as the Zappos case, I will continue to read about it and share the knowledge.


  • http://www.boots4you.com/ Laura

    Zappos has also been very active in working with internet marketers to promote its site. Contrast that with Endless.com, which has failed completely where Zappos has succeeded. This is what caused Amazon to buy Zappos. From a service perspective, Endless beats Zappos in almost every area, and the prices on Endless are usually also lower (and guaranteed, which they are not at Zappos). Still customers prefer Zappos. It comes down to three words. Marketing, marketing, and marketing.

  • http://twitter.com/softwarecandy softwarecandy

    Jeff, this is a great article. Insightful and educating. It will be retweeted…

  • http://debrasfinancial.com Debra Beasley

    As the mother of a teenage son, who buys all of his shoes from Zappos, I have to agree completely with this article. When people ask what he wants for Christmas, I always tell them a Zappos gift card. When people ask me what to get other teenagers, I always recommend Zappos. Kids love their products and parents love them because of there no-fault return policy. And, this article is right on about their customer service department. My son placed an order on Christmas Day – and forgot to use his gift card…but we were able to reach someone at Zappos (on the phone) on Christmas Day, and get it corrected – after placing the order. I don’t know of any other company that can correct an online order – after it has been placed.

  • http://www.maxigripstore.com/ Richard Potvin

    They are a model for us, eTailers!

  • http://utehagen.wordpress.com utehagen

    Thanks Jeff for summarizing the Zappos experience and business model so succinctly.
    If just more companies (not only Etailers) understood the fundamental commitment to fulfilling customer needs, the world would be a happier and more profitable place.

  • http://www.klauspierre.com klaus pierre

    Zappos shoes are what the French used to be in the beginning of time…just what people needed!

  • http://www.expansionplus.com doug hay

    Love the CEO’s viewpoint about social media. As a social media marketer, would love him to educate other C suite execs who are still resisting the benefits of it. Their business plan is brilliantly simple.

    • http://www.maplesyrupworld.com/ Charles

      Indeed Doug, would love to spend a day with him and ask all the questions I want.

      I buy all my shoes from Zappos!

  • http://www.facebook.com/romona.foster Romona Foster

    Good stuff as always Jeff!