Do you want to know how Zappos was acquired
by Amazon for $1.2 billion? Do you want to know how CEO Tony Hsieh brought
about this success? It was not an easy path. Tony had many failures along the
way. In this book, you will learn about the story of Zappos and Tony Hsieh. You
will learn valuable lessons which you can apply to your business and to your
In Search of Profits
Tony’s parents are typical Asians. They wanted him to have good grades and learn musical instruments. They wanted him to be doctor someday. But since childhood, Tony had a different calling.
He wanted to be an entrepreneur. He wanted to build things and make them grow. Tony wanted to earn lots of money. This is what led him to his first business venture.
At 9 years old, Tony dreamt to be the richest worm breeder in the world. He ensured the safety and health of his worms. But after a month, he found them all gone.
Tony told his parents that it’s boring
anyway. But he was very disappointed with his failed business venture. In the following years to come, Tony Hsieh
failed his way to success.
You Win Some, You Lose Some
Tony made many good friends at Harvard. They spent a lot of time hanging out together. Some of them became his business partner. One of them is Sanjay.
Sanjay and Tony were both hired by Oracle after college. Both of them eventually quit. The two friends decided to build their own start-up instead. They called it Link Exchange. It’s a service that runs banner ads on company websites.
Link Exchange had many clients. Tony and Sanjay hired people they know. But as the company grew big, it lost its sense of culture. Tony saw that many of the employees did not care about the welfare of the company. They have their own personal agendas.
Microsoft bought Link Exchange for $265
million. Tony was required to stay for another year but he couldn’t just do it
anymore. He quit and looked for his next business venture.
Tony bought some lofts in San Francisco. He invited his college friends to join him. One of them is Alfred, the former finance VP of Link Exchange. They all started an investment fund which they called Venture Frogs.
One day, a guy named Nick Swinmurn called Tony. He talked about his small online business. Shoesite.com is where Nick posted pictures of shoes from local stores. When he gets an order, he purchases it and ships it to the customer.
At first, Tony was unconvinced. But then, Nick talked about the statistics. There is indeed a potential market for shoes online. Shoesite.com soon became Zappos.com
Tony and the others agreed to do drop shipping. Zappos will relay the orders and the brands will be the ones to ship. Venture Frogs funded the company. But it needs more investors.
Meanwhile, Tony got involved in
day-trading. When Zappos run out of funds, he decided to commit full-time. He
wanted to something more meaningful than just making profit. Tony had Zapposmoved
into the San Francisco lofts.
Concentrate Your Position
The dot com bubble and 9/11 happened. The economy was in recession. Not one investor is willing to fund Zappos. Tony sold his real estate properties and put in all his remaining money. It came to a point when Zappos had only 2 weeks’ worth of funds.
Tony had to lay off 20% of the staff and cut pay to 20% less. He let the employees move in to his lofts for free. He thought of ways on how they can increase sales.
Zappos shifted from drop shipping to inventory. In this way, they can have more brands and more stocks available. Zappos would be able to offer the shoes which are in demand.
The warehouse and shipping was outsourced to a company named E-logistics. But it turned out to be a terrible idea. Zappos only lost more money because of inefficiency.
Tony solved the issue with his college friend Keith. They set up a new warehouse system. They also got rid of the wrong shipments and delayed orders.
The improvement of inventory and warehouse
system became the turning point of Zappos. Year by year, the sales increased.
Zappos was able to provide free shipping and free return shipping to the
Platform for Growth: Brand, Culture, Pipeline
More than the changes in business process, the major factor in Zappos success is the happiness of the customers and of the employees. Instead of advertising and marketing, Zappos invested on customer service and company culture.
Tony had Zappos move to Las Vegas to set up a competitive call canter department. He called it Customer Loyalty Team. The 1-800 phone line is accessible 24/7. The call center agents take time in engaging with the customers.
The employees stick together through thick and thin. They came up with the 10 core values. Tony didn’t want to commit the same mistake with Link Exchange. He wanted Zappos to have a strong culture.
The first core value is Deliver Service Through WOW. Zappos makes sure there is personal touch in every transaction. Sometimes, customers are surprised with flowers and overnight shipping. The partnership with the UPS Worldport Hub made it possible to ship 24/7, anytime and anywhere.
The fourth core value is Be Adventurous,
Creative and Open-minded. Employees are recruited not only based on their
abilities but also on “culture fit”. They are encouraged to have fun, to be a
little weird and to just be themselves.
Taking it to the Next Level
Zappos gained more popularity in the media. The quality customer service spread through word of mouth. Tony and the others would share the Zappos story in events, blogs, tweets and day to day conversations.
The board members are not happy with this identity that Zappos created. They wanted Tony to focus on making profit. That’s why Tony and his friends thought that they need more leverage in the company.
Fortunately, in 2009, Amazon expressed its interest in Zappos. Tony likes to call it a marriage. Amazon did not settle with money. Instead, the shareholders traded their shares. It was an acquisition which benefited both companies.
Amazon is more high-tech and Zappos is more
high-touch. Together, they were able to provide the best customer service. The
Zappos employees were secured that nothing will change. The culture of
“Delivering Happiness” will remain the same.
Tony learned that there are 3 types of happiness. The first one is pleasure. That is the happiness brought about by profits. It’s only temporary. Tony gained that happiness from Link Exchange and his day-in trading. But it did not last for long.
The second type is passion. It is how the loyal employees of kept going through thick and thin. They committed themselves, worked hard and believed in what they do.
The third type of happiness is purpose. If
you have a higher purpose which is bigger than yourself, then you will have
long-lasting happiness. Zappos delivers happiness to the customers, to the
employees and to the world. That’s why it continues to succeed.
You learned about Tony Hsieh’s journey from profits to passion and purpose. You learned about the failure and success of Zappos. Tony wants to inspire other businesses to change their framework. The happiness of the employees and the customers will bring financial stability for the long-term. If you bring happiness to people, if you find a deeper goal than money and fame, then you will succeed.