tony hsieh zappos ceo

Think and you think not only of happy customers and happy employees, but also of an e-commerce site that’s the poster child of a successful web business.

The architect of all this happiness and success is CEO Tony Hsieh who, in the wake of Zappos recent acquisition by Amazon has penned a book about the rise of his company, Delivering Happiness: A Path to Profits, Passion, and Purpose.

We caught up with Hsieh to find out how e-commerce has changed since he founded Zappos 11 years ago, and why companies should be fearless about social media and infusing their organizations with strong corporate values.

Q So, 11 years of Zappos. Given this trajectory, 11 years in internet time is considerably more than by practically any other measure. How do you feel things have changed, or have they changed in terms of building a successful, sustainable online business? 

Tony Hsieh: Probably the biggest thing that’s changed is just everything’s a lot cheaper and faster than it was 12 years ago. 

Q:  But cheaper and faster don’t necessarily mean easier when it comes to building a successful business, or does it? 

tony hsieh delivering happinessHsieh:  Well, it makes the first step much easier. In fact, 12 or 14 years ago it was much more likely that you needed to raise capital to think about starting a company, whereas today you just do it in your spare time. So I think that’s part of it. And then the other thing I would say is different today versus 12 or 14 years ago is just the speed at which information travels. 

So if you build a great product or service, or have a great story that people are interested in, that can be spread almost instantly through blogging, Twitter, Facebook and so on. It’s part of Zappos – that’s how a lot of our own stories have gotten out.

These aren’t stories that were out there with us telling them. It’s actually our own customers who happen to be bloggers telling the stories and bringing them out and then those stories just spread like wildfire. So for authentic companies or brands, it’s just much easier to have those stories spread.

Q:  You were a really early adopter in terms of allowing consumer-generated media to happen, and in letting your own employees tweet and blog and talk publicly. Was there ever any shadow of a doubt in your mind regarding control, regarding the negative, and all of the potential bad things that hinders so many companies out there from really jumping into social media with both feet?

Hsieh:  Not really. That’s kind of where we started. When you go to, there’s a page there where we have about 500 employees that are on Twitter, and there’s a page where we actually aggregate all their tweets together. 

Initially some people had concerns, but I think part of it is that in using that page, we’re going to assume they have common sense. If there’s something {negative or inappropriate] and people still see a hundred tweets that are representative of us, it’s just like, you know if the same thing happened on instant reviews of the product or merchandise. It lends more credibility to the fact that it’s a real feed, not something that’s being censored.  

Q: How have factors such as SEO, user experience, site design, those less visible but very important aspects of having a web presence, been contributors to your success in addition to the more publicly visible things such as stories and social media?

Hsieh:  I think those are absolutely necessary, and I guess maybe one analogy to use is, for example, if you’re training for a marathon people talk about the training schedule and zone, but people don’t really talk about whether you are sleeping and eating the right food every day.

Some things are just understood as happening and so if you’re going into an e-commerce business, these factors are important. 

Q:  If you were starting a new e-commerce play today, what would you do differently than you’ve done with Zappos?

Tony:  I think for the most part I probably wouldn’t do that much differently. I would say the one thing I would do differently is, we didn’t roll out our core values until about five years into being, we’ve been around for 11 years now.

Q:  Right.

Hsieh: So, that would be something I would roll out from day one and it’s, no matter what company, whether it’s just a regular company unrelated to the internet. Because once you actually have core values that you’re willing to commit to  – and by committing to meaning you’re willing to hire and fire people based on them, regardless of their actual job performance. 

Once you actually have that risk that you’re willing to commit, there’s actually a lot of power that comes from everyone being on the same page, speaking the same language, and you avoid a lot of debate. It also empowers every employee to make their own decisions about the vision of the company and customer support.

Q:  You know your core values are really sensational and solid. They’re also, and I don’t mean this negatively at all, a little bit generic.  You know they could easily apply to another company, or to another business entirely.  So were you to start another company, be it e-commerce or not, would you have the same core values or would you alter them?

Hsieh:  Ultimately we’re starting from the beginning with your founder of the company, or maybe if there’s two of you that are co-founders, the straightforward and easiest thing to do is to actually have the corporate core values to match your own personal values. 

Coming up with a list of your own personal values is actually harder than it may sound. In terms of whether our values are generic, I would say actually our values are basically a formalized exhibition of our culture, which we also believe really ultimately same as our brand. If you look at our list of values and covered up our name or logo, the question is would you know that this is Zappos? I would argue yes. 

Another witness test would actually be, if you just do it through the Google search for each and every one of the core values, how many show up on page one of the search results are going to be from Zappos? I think you’ll find a much higher percentage of matches for Zappos versus core values for any other company. 

Q:  When you say that you hire and fire people based on the core values, is there one or two in particular that stand out as the most difficult for employees to adhere to?

Hsieh:  Not the most difficult for our existing employees to adhere to, but the one that trips us up the most during the vetting process is number 10: “Be Humble.”

This is because there’s a lot of really smart, talented people that we know can make immediate on top of the line, but a lot of them are also egotistical or they think customer service is beneath them.

At Zappos that’s not even a question, it’s just where we put them. Whereas I think at most other companies they have probably seen, they probably think something like well this guy, you know, might rub you the wrong way and is annoying sometimes, but is going to add a lot of value to the company and therefore we should hire them. 

Q:  Which would also be against core value number seven, which is positive team and family spirit.  Your, your wow factor is really wow.  I mean I’ll give you a personal example, I Tweeted about a year and half ago that I was used to Zappos exceeding my expectations, which was wonderful, but it gets to the point where how could your expectations continue to be exceeded? And within five minutes I got a direct message from somebody at your company offering me yet another level of access to Zappos, once again exceeding my expectations. 

But at a point, can’t you over-build expectations for exceeding expectations?  You know, you know it’s not like you’re not going to fly me out to Las Vegas and throw up in the warehouse and say, “Come on, pick out any shoes you want on the house.”

Hsieh:  No, no.

Q:  Where are the limits?

Hsieh: On our anniversary last year, we actually went through our database and looked at which customers of ours had actually bought something from us for, at least once each of the past ten years, every year over the past ten years, and I think we came up with a list of, I want to say maybe it was three customers or so that had done that. And we flew them to Las Vegas and–

Q:  And threw open the warehouse, yeah.  It’s really sensational how you do that. My complements and you, you know you really do exceed expectations.  I can say that as a Zappos customer. Where do you draw the line on exceeding expectations?  I mean you are a business and you’re not going to give shoes away…

Hsieh:  Yeah, and so normally, you know most of the stuff that is about exceeding expectations, whether it’s with customers or with employees, it’s not stuff that necessarily has to cost a lot of money. 

I mean if you walk around our office, the people just naturally make eye contact and smile and, or hold the door open for you, even if you’re a complete stranger visiting Zappos and they have no idea who you are and that doesn’t cost anything.  And the same thing applies when you call our 1-800 number and realise how the other person on the other end of the line genuinely cares about your situation and wants to help you out rather than just being there for a pay check. 

Q:  Well customer service isn’t cheap and you know you’re not outsourcing it out to Bangalore either.

Hsieh:  Yeah, but I guess for us we really do customer service as a form of marketing. So we take most of the money that we would have spent on marketing and instead invest it into the customer experience and let the customers do the marketing for us with word of mouth.

Q:  And they do very effectively.

Hsieh:  Yeah, on any given day about 75% of our orders are firmly repeat customers and if you look at our growth over the years, we basically grew from no sales in x amount of time to we’re now doing over a billion gross in customer sales annually. And the number one driver of repeat customers is word of mouth. 

Q:  You’ve been very adamant about not having any significant cultural or even infrastructural changes following the Amazon acquisition.  How well and how effectively has that succeeded?

Hsieh:  Yeah, so I guess there’s two ways to look at the Amazon acquisition.  So one of– before I, as a precondition for even considering the acquisition, we, we all, both parties agree that Zappos would retain some independence and we’d continue growing the Zappos brand in our culture, our way, and there’s been– since we’re– Amazon makes one decision for it, the rest of Amazon and we may make a completely different decision. 

We’re really just doing what’s right for Zappos. So essentially at Zappos we just switched out our board of directors with a new one and I plan to see how it all it all rolls out…how much they’ve left us alone. Amazon has a lot of history and a lot of resources that we have access to for free. But we leave it up to each individual department or subject brand to determine how much or how little they want to tap into their knowledge, experience and technology.  

Q: What’s next for you? I don’t know that I’ll get that direct an answer to this, but you’ve been there 11 years, you’ve sold the company, you’ve written a book, which is usually an indicator of something. Can we anticipate something new and perhaps Zappos-free in the foreseeable future for you?

Hsieh:  As long as Amazon continues to treat us the way they’ve been treating us, well, you know definitely I’m always interested in new business ideas. But the great thing about building the Zappos brand around the very best customer service is that really it makes much more sense to do something new under the Zappos brand than to it would be to just start all over again.  So one example of something new that you would not think of doing if we were just about retailing shoes online is our Zappos Insights Program.

It’s a separate website: There’s anything from a monthly subscription service to two-day seminars that we host where we help other companies figure out what are the right core values for them and build their own strong core. We also have different department heads and so on,  so that makes perfect sense. We’re trying to build our brand to be about culture, company culture, and customer service.

Q:  Well I wish you the greatest success with the book. Is there anything regarding digital marketing, advertising, or e-commerce insights or best practices that I didn’t ask you that you’d like to share?

Hsieh:  Companies are getting more and more transparent whether they like it or not, just because information can spread so quickly and so for us that fits right in line with our core value of being open and honest, so we share everything with employees, with customers, with our vendors. 

I think the companies that are going to have trouble are the ones where they’re used to being secretive or withholding information. These are often the companies that are trying to figure out this Twitter thing, you know they’re looking at social media as another channel for marketing as opposed to building relationships. 

So I think their challenge is going to be in the way they’re addressing it, so ultimately they need to do it from the cultural perspective, their own values perspective, before they change their internal culture so that it is a lot more open.

Q:  One final question: how many pairs of shoes do you own? 

Hsieh:  I’ve never been much of a shoe person. I used to buy one pair of shoes every two years and wear them to work, and then buy the same pair again. Now I probably have five or six pairs, so that’s 500% increase.