Entrepreneurial Strategies 111Tony Hsieh:
Strategy That’s A Step Above
His first entrepreneurial success came at the
age of 12; Tony Hsieh made pin-on buttons
with photos, and then sold a couple of hun-
dred dollars worth to his classmates every
month.
At Harvard he sold pizzas in the dorms;
his friend Alfred Lin bought some of those
pizzas, and resold them by the slice.
Armed with a B.A. in computer science
from Harvard, Hsieh went to work for Oracle,
but in 1996 he started a banner ad swap pro-
gram for small Web sites called Link
Exchange. Hsieh and his former fellow stu-
dent, Lin, sold that business to Microsoft in
1998 for $265 million. They then used some
of the money they received to found Venture
Frogs, an Internet start-up incubator and
investment company that invested in start-ups
including Ask Jeeves, MongoMusic, and
Zappos.com.
In the words of one of their customers,
Zappos is a “shoe store that comes to you.”
Its Web site offers more than 500 brands and
90,000 styles for both women and men, and
there are almost two million items in stock.
Hsieh became interested in Zappos when he
learned that only $2 million of the $40 billion
in annual shoe sales was attributable to mail
order. A 1999 survey reported that only a
third of Zappos’ customers had purchased
shoes by mail order before, but Hsieh
believes that in the future 30 percent of all
retail purchases will be online. “Over time I
saw there was a lot of potential for the com-
pany,” he says.
Zappos had already hired an experienced
shoe buyer from Nordstrom, a department
store famous for its selection of shoes, when
Hsieh became the company’s CEO in 2000.
Under Hsieh’s leadership, gross merchandise
sales grew from $1.6 million in 2000 to $370
million in 2005. After his old friend, Alfred Lin,
joined the company as CFO in 2005, Hsieh
predicted that Zappos would reach $600 mil-
lion in sales and become profitable by the
end of 2006.
An almost fanatical devotion to customer
service distinguishes Zappos from its com-
petitors. In addition to offering a wide selec-
tion of shoe styles and sizes, the company
provides both free delivery and free return
shipping. It warehouses every item it sells
under one roof in Kentucky. Because the
warehouse is staffed around the clock, seven
days a week, customers can often order
shoes as late as 11 p.m. and still get next-
day delivery. To emphasize its commitment
to customers, Zappos locates its customer
call center in the same building as the com-
pany’s corporate headquarters in Las Vegas.
These strategies must work; Zappos does
very little advertising, and credits repeat busi-
ness and word-of-mouth recommendations
for its phenomenal growth.
Zappos isn’t just good to its customers.
All employees get a free lunch every day,
and the company pays 100 percent of
employee health insurance premiums.
Suppliers like Zappos, too. “You can’t
believe how pleasant they are to work with,”
says a regional manager for Clarks
Companies North America.
SOURCE: Adapted from Kimberly Weisul, “A Shine on
Their Shoes,” Business Week, December 5, 2005: 84
http:// http://www.zappos.com.PERSONAL PROFILE 4