Delivering Happiness

Tony Hsieh CEO tony@zappos.com Follow me on Twitter: twitter.com/zappos Inc 500 | 5000 Conference September 24, 2009

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A Little About Me (Tony) My Background
‡ 1994-1995: ‡ 1996-1998: Pizza business in college LinkExchange (online advertising) Sold to Microsoft for $265 millon Venture Frogs, LLC (angel investment fund) Invested in Zappos.com

‡ 1999:

‡ 1999-Today: Zappos.com ‡ July 2009: Announced Amazon to acquire Zappos

http://blogs.zappos.com/ceoletter

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Zappos at a Glance Corporate Background
‡ ‡ Founded in 1999 1300 employees (half in Las Vegas headquarters, half in Kentucky) 
#23 in FORTUNE MAGAZINE s 100 Best Companies To Work For  Highest debut for a newcomer in 2009

‡

Zappos is Powered by Service 
Providing the best online shopping experience possible.  Fast, Free Shipping. Free return shipping. 365-day return policy.  Fast fulfillment. Expedited delivery. Fast, friendly & expert customer service.

‡

Best selection 
Over 1,000 brands, over 200,000 styles, over 900,000 unique UPCs.  4 million items in warehouse  100% of products inventoried (no drop ship).

‡

Zappos is a service company that happens to sell clothing, shoes, handbags, eyewear, watches (and eventually a bunch of other stuff).

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but we pay more attention to our customers ‡ TV Stories ‡ ‡ ‡ Oprah (2008/2009) ABC Nightline (2008) 60 Minutes (2007) ‡ Fortune 100 Best Companies to Work For ‡ #23 (2009) Highest ranking newcomer to list ‡ Fast Company 50 Most Innovative Companies ‡ #20 (2009) ‡ BusinessWeek Top 25 Customer Service Champs ‡ #7 (2009) Slide 5 .Recent Recognition: Nice.

27 returning customer in Q407 Slide 6 . ‡ Customers come  Over 11 million total purchasing customers  Over 4 million have purchased in the last 12 months ‡ Customers come back  On any given day.5x in the next 12 months ‡ Customers come back. about 75% of purchases from returning customers  Repeat customers order >2.Customer service value proposition in action Zappos is committed to WOWing every customer.86 first time customers in Q407  $156. order more and order more often  Repeat customers have higher average order size  $123.

.000 $800 Gross Sales $M's $600 $400 $200 $0 2000 Gross Sales 1.Power of repeat customers and word of mouth.6 2001 8. $1..6 2002 32 2003 70 2004 184 2005 370 2006 597 2007 841 2008 1014 Slide 7 .

Customer Service: What customers first see ‡ ‡ ‡ ‡ 24/7 1-800 number on every page Free shipping Free return shipping 365-day return policy Slide 8 .

helpful above and beyond customer service Occasionally direct customers to competitors web sites Slide 9 . accurate fulfillment Most customers are surprise -upgraded to overnight shipping  Create WOW ‡ ‡ Friendly.Customer Service: What customers experience ‡ ‡ Fast.

Culture Book Interviews & performance reviews are 50% based on core values & culture fit. no sales-based performance goals for reps. Run warehouse 24/7. core values. We ll pay you $2000 to quit. Inventory all product (no drop-shipping). customer service. 5 weeks of culture.Customer Service: What we do internally ‡ ‡ ‡ ‡ No call times. Twitter helps build company culture. ‡ ‡ ‡ ‡ Slide 10 . and warehouse training for everyone in Las Vegas office. The telephone is one of the best branding devices available.

Owning the 3 C s Clothing Customer Service Culture Slide 11 .

Clothing Slide 12 .

Customer Service Slide 13 .

Culture Slide 14 .

Culture Culture Customer Service Clothing Slide 15 . Customer Service.Owning the 3 C s: Clothing.

Slide 16 .Zappos Delivering Happiness (customers and employees) People may not remember exactly what you did or what you said. but they will always remember how you made them feel.

CULTURE Committable Core Values Slide 17 .

10. Creative. 8. 5. 7. and Open-Minded Pursue Growth and Learning Build Open and Honest Relationships With Communication Build a Positive Team and Family Spirit Do More with Less Be Passionate and Determined Be Humble Slide 18 . 9.Zappos Core Values 1. Deliver WOW Through Service Embrace and Drive Change Create Fun and a Little Weirdness Be Adventurous. 4. 6. 3. 2.

COMMITTING TO TRANSPARENCY Be real and you have nothing to fear Your culture is your brand Don t try to be someone you are not Slide 19 .

zappos.Commitment to Transparency: Examples ‡ ‡ ‡ ‡ ‡ ‡ twitter.com/live Slide 20 .zapposinsights.com Zappos Insights Live events www.com Ask Anything newsletter Extranet for vendors Tours & reporter visits ZapposInsights.

That s great for Zappos but it would never work at my company Slide 21 .

ALIGNMENT Slide 22 .It doesn t matter what your core values are as long as you commit to them.

not the money Slide 23 . think bigger.VISION Whatever you re thinking. Does the vision have meaning? Chase the vision.

Sean Combs aka Puff Daddy to rapper Biggie Smalls aka Notorious B.I. in Notorious Slide 24 .VISION Don t chase the paper. chase the dream.G.

ENTREPRENEURS: What would you be passionate about doing for 10 years even if you never made a dime? Slide 25 .

EMPLOYEES: What s the larger vision and greater purpose in their work beyond money or profits? Slide 26 .

VISION MOTIVATION vs. INSPIRATION Slide 27 .

Evolution of Zappos Brand Transcends shoes & service ‡ ‡ ‡ ‡ ‡ 1999 2003 2005 2007 2009 Selection Customer Service Culture and core values as our platform Personal Emotional Connection Delivering Happiness Slide 28 .

Slide 29 .

TAKE A STEP BACK What is your goal in life? .

WHAT IS YOUR GOAL IN LIFE? Grow Company why? Get a Great Job why? Boyfriend / Girlfriend why? Be Healthy why? Retire Early why? Make Money why? Find Soul Mate why? Run Faster why? Spend Time w/ Family why? Buy A Home why? Get Married why? why? Run A Marathon HAPPINESS Slide 31 .

RESEARCH HAS SHOWN: HAPPINESS People are very bad at predicting what will bring them sustained happiness. Slide 32 . I will be happy. When I achieve ___. I will be happy. When I get ___.

HAPPINESS: ‡ There is a SCIENCE behind many aspects of business including: ‡ ‡ ‡ ‡ ‡ conversion psychology of buying direct marketing customer acquisition metrics repeat customer behavior. etc. ‡ What if you spent just 10% of your time studying and learning the SCIENCE of HAPPINIESS? ‡ How much HAPPIER could you be? Slide 33 .

WHAT IS YOUR GOAL IN LIFE? Grow Company why? Get a Great Job why? Boyfriend / Girlfriend why? Be Healthy why? Retire Early why? Make Money why? Find Soul Mate why? Run Faster why? Spend Time w/ Family why? Buy A Home why? Get Married why? why? Run A Marathon HAPPINESS Slide 34 .

A Few Different Frameworks of HAPPINESS .

A FEW DIFFERENT FRAMEWORKS ON HAPPINESS: Perceived Control Perceived Progress Connectedness Vision / Meaning (Being part of something bigger than yourself) Slide 36 .

Maslow s Hierarchy: Slide 37 .

3 TYPES OF HAPPINESS Rock Star (Pleasure chasing the next high) time Flow (Engagement time flies) time Meaning /Higher Purpose (Being part of something bigger than yourself) time Slide 38 .

John King & Halee Fischer-Wright FOUR HOUR WORK WEEK Tim Ferriss HAPPINESS HYPOTHESIS Jonathan Haidt Slide 39 .RECOMMENDED BOOKS: PEAK Chip Conley TRIBAL LEADERSHIP Dave Logan.

zapposinsights.com (photos & videos of culture) http://about.com (more information about us & core values) http://www.com (video Q&A.zappos. employees) http://bit.Put a little Zappos in your day some links to check out ‡ Follow me on Twitter: @zappos http://twitter.com (job opportunities) Slide 40 .com/zappos ‡ ‡ ‡ ‡ ‡ ‡ http://twitter. book recommendations) http://jobs.How Twitter Can Make You a Better (And Happier) Person http://blogs.ly/twitterbetter .zappos.zappos.zappos.com (public mentions.

com for:  A copy of this presentation  Copies of our culture book (need physical mailing address) ‡ Email tours@zappos.Put a little Zappos in your day to contact me or get a tour ‡ Email tony@zappos.com for:  Tour of our offices when you re next in Las Vegas (takes about 45-60 minutes)  We ll pick you up from the airport or your hotel in a Zappos Shuttle! Slide 41 .

and yourself? Slide 42 .What % of your time do you want to spend learning about the SCIENCE of HAPPINESS? How can the SCIENCE of HAPPINESS help your business. your brand.

If the research shows that vision / meaning / higher purpose leads to happiness What is your company s higher purpose? What is your higher purpose? Slide 43 .

Delivering HAPPINESS .

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If you enjoy fine print. so our lawyers. but we are currently a private company so the gross merchandise sales number should be viewed just as an interesting number that we want to share with our friends. This presentation contains forward-looking statements that involve risks and uncertainties. Congratulations on making it through all the fine print. we would have to reconcile gross merchandise sales to the nearest GAAP metric (net sales). These risks and uncertainties include. the financial information presented in this slide show was unaudited. Slide 46 .zappos. if they ever materialize or prove incorrect. including statements of expectation or belief. the risk of economic slowdown. as well as assumptions that. could cause our results to differ materially from those expressed or implied by the forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. and it ignores certain timing cut-offs that are required by GAAP for revenue recognition purposes. the risk of over or underbuying. but you are still reading. auditors and accountants would really like to make sure we make the following clarifications. If we were a public company. and the risk of the world generally coming to an end. We made every effort to present the best information we had at the time.S. This number measures the dollar value of the orders placed in the year before accruing for certain items such as returns. the risk of a natural or some other type of disaster affecting our fulfillment operations or web servers. and any statement of assumptions underlying any of the foregoing. Zappos. but are not limited to. We use it to express the total demand across all of our web sites and stores. look for openings on our legal and finance team at jobs. You might be wondering why we need to have a legal and financial disclaimer in this presentation. the risk of new or growing competition. the risk of consumers not shopping online or at our web site at the rate we expected. Gross merchandise sales is a non-GAAP metric.com assumes no obligation and does not intend to update these forward-looking statements. Although an audit was underway and almost done.Legal and Financial Disclaimer P.com. the risk of supplier shortages.

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