Twitter: @Zappos
Website: http://Zappos.com

Why you should read Tony Hsieh’s Interview

Tony started his entrepreneurial days much like I did - in the college dorm room.  Unlike me, Tony went on and sold his company to Microsoft for $265M!  I feel this interview is of the utmost importance to every young entrepreneur out there.  It’s not about the type of marketing that Tony did to promote his company or the technology that Tony used.  His success comes down to two very critical components of a company: the company culture and customer service.

Throughout this interview, you’ll notice Tony stress the importance of customer service and company culture and how focusing on these two elements made his company hit over $1 Billion in sales in under 10 years.  I dare you to test his customer service.  Tweet something about Zappos on Twitter and see what happens.  Call their customer service line at 2am and see if someone picks up the phone in a happy manner.

Tony walks the walk, and reading this interview will take you one step closer to becoming a successful entrepreneur.

Question to Tony Hsieh:  How old were you when you started your first online business, how much capital did you put into it, and where did you get the money from?

Tony:  I co-founded LinkExchange with Sanjay Madan in 1996 when I was 21 or 22. I ran a pizza business in college on the ground floor of our dorm (we had about 300-400 people in our dorm).  Sanjay was my roommate during college and ran the pizza business with me. I remember the early days of the company were a lot of fun and very exciting. When it was just 5-10 of us, we were working around the clock, sleeping under our desks, and had no idea what day of the week it was. LinkExchange just started out as a side project, but within a week of launching we knew we were onto something big.  When we first started, we only had a few thousand dollars that was saved up from jobs that we had previously worked at.

Question to Tony Hsieh:  You went from nothing, to selling LinkExchange to Microsoft for $265M in 1998! How were you able to accomplish such a success?

T:  A lot of people actually don’t know why we ended up selling the company, and the reason is because the company culture went downhill. Even though it was a lot of fun in the early days, by the time it was 100 people, I just didn’t look forward to going into the office anymore. At the time, we didn’t know any better to pay attention to company culture.

With Zappos, I want to make sure that I don’t make the same mistake again, so from the beginning we’ve always made company culture a high priority. Today, we’ve formalized the definition of our culture into 10 core values:

http://about.zappos.com/our-unique-culture/zappos-core-values

You can learn more about our culture by reading our blogs:

http://blogs.zappos.com

Question to Tony Hsieh:  You then went on to found Venture Frogs - a startup incubator. What are the criteria you look for when investing into a company?

T:  Our investment philosophy was pretty simple. We looked for:

• Smart people who work well together
• A good idea for a big market
• A good opportunity to be #1 in that market

While it was not a hard and fast rule, we strongly preferred to invest in companies located in the San Francisco Bay Area (where we lived). In addition, we generally preferred to fund entrepreneurs with strong, hands-on industry and/or Internet experience rather than teams of consultants or business school graduates who had spent little time in the industry.

Question to Tony Hsieh:  What made you decide to join Zappos.com full-time, which at the time was one of the companies you had invested in?

T:  Back in 1999, there really weren’t any great destinations online for buying shoes. After learning that it was a $40 billion market in the US, and 5% of it ($2 billion) was being done through paper mail order catalogs, it seemed like a good investment opportunity. I got involved with Zappos about 2 months after it started.

Question to Tony Hsieh:  Why has Zappos become so unbelievably successful?

T:  I think it’s because of our focus customer service and company culture. Our whole belief is that if we get the culture right, then most of the other stuff, like delivering great customer service or building a long term enduring brand, will happen naturally on its own.

We’ve grown from almost no sales in 1999 to over $1 billion in gross merchandise sales in 2008. The #1 driver of that growth has been through repeat customers and word of mouth. On any given day, about 75% of our orders are from repeat customers. Our philosophy is to take most of the money we would have spent on paid advertising/marketing and put that into the customer experience instead, including things like free shipping both ways, our 365-day return policy, and staffing our call center 24/7.

Question to Tony Hsieh:  What is the one thing that you were able to do better than anyone else?

T:  For us, we really think most of our innovation has been through company culture and customer service.  From the beginning, we’ve always thought that customer service was important. But it wasn’t until 2003 that we decided we wanted the Zappos brand to not just be about shoes. Instead, we decided that we wanted the Zappos brand to actually be about the very best customer service and customer experience. Once we made that decision, we started making a lot of changes to our business to be even more customer-service focused.

It’s a combination of making sure that everyone understands our vision of having the Zappos brand be synonymous with the very best customer service as well as making sure that we hire people that are a fit for our company culture. Our culture is defined by our 10 core values:

1. Deliver WOW Through Service
2. Embrace and Drive Change
3. Create Fun and A Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Honest Relationships With Communication
7. Build a Positive Team and Family Spirit
8. Do More With Less
9. Be Passionate and Determined
10. Be Humble

You can learn more about our core values here:

http://about.zappos.com/our-unique-culture/zappos-core-values

Question to Tony Hsieh:  You’re famous for offering new hires $2,000 to quit. Why do you do that?

T:  We offer prospective employees $2,000 to quit to make sure that the new hires at Zappos.com really want to be here.  Our culture is our number one asset and we need to make sure that everyone here is in alignment.  In the end, we feel we are saving money by paying those people who are not a culture fit now, rather than losing money over the term that they are here.

Question to Tony Hsieh:  Zappos is known for it’s amazing customer service. What is your favorite customer service story that you would like to share with us?

T:  Here’s a link to my favorite customer service story:

http://www.zazlamarr.com/blog/?p=240

Question to Tony Hsieh:  What advice would you give to someone who doesn’t have much money and wants to start a business?

T:  Be creative.  Find innovative and cost-effective ways to help your  business.  One of our Zappos Core Values is to “Do More with Less.”  This core value came from the beginning of Zappos.  During the first few years, there were many times when we we didn’t have enough money to pay our own employees, but we had such a passionate and dedicated group of employees, that many of them decided to forgo or reduce their salaries because they all believed in the long term potential of the company.

T:  I would say rather than focus on what will make you the most money or be best for your career, figure out what you would be passionate for 10 years and go pursue that. A lot of people work hard at building a career so that one day down the road they think it will bring them happiness. And most of the time, when they finally accomplish their goal, they realize that it doesn’t really end up bringing happiness or fulfillment for the long term. One of the things that the research has shown is that people are very bad at predicting what will make them happy. If the ultimate goal is to achieve enduring happiness, it seems like it’s worth spending some time learning about the science of happiness so you don’t wind up in the same situation.