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How did Zappos become the top shoe e-tailer? Tony Hsieh explains.

What’s next for Zappos? Chief executive Tony Hsieh, 35, says accessories and apparel. “I think apparel can be a $1 billion business in five years,” he says.

What’s next for Zappos? Chief executive Tony Hsieh, 35, says accessories and apparel. “I think apparel can be a $1 billion business in five years,” he says.

From the ashes of the dot-com bust, in 10 years zoomed to No. 1 among online shoe retailers. At the helm is a 35-year-old chief executive who rewrote the rules at a company that hit $1 billion in sales in 2008. Armed with a Harvard computer science degree, Tony Hsieh took over the struggling start-up with some of the $265 million he earned selling an Internet ad service. This unlikely footwear king of e-commerce chatted recently at a University of Florida retailing program conference in Orlando.

Why did you pick the shoe business?

They were the poster child for dot-com retail failures.

How did customer service become the key to success?

Because no other online retailer did it. They don't want to talk to you. The phone is one of the best communication devices ever, not something to outsource. Other sites just took orders, then had a manufacturer ship them in a day or two. We buy our inventory — 4 million shoes in stock in 200,000 styles and sizes. Our warehouse is next to the UPS hub in Kentucky. You order at midnight, and they are at your door by 8 a.m. That's a customer service wow.

Is that why you banned call center scripts?

We are real people — one might be jokey while another might have a dog barking in the background because she loves dogs. Only 5 percent of our orders are by phone, but people have questions, so we take the time. The record call is four hours. She didn't buy anything.

Because customers can keep their purchase a year before returning them free, your return rate is 35 percent, triple the mail order average. Why?

People get two pairs for the right fit. We sell returned shoes as new, just like a shoe store.

You personally get about 2,000 e-mails daily in your office cubicle. Your personal Twitter account has 800,000 followers. You have 400 employees on Twitter. How does social networking translate to sales?

Indirectly. It's just another way to emotionally connect with customers. I put up a couple Tweets a day I hope are amusing, inspirational or link to something I find interesting.

What's next?

Apparel and accessories are now 15 percent of sales. I think apparel can be a $1 billion business in five years. Customers have asked us to take over an airline or run IRS. Not yet.

Why are you driven about Zappos' corporate culture?

Because I wasn't at my first company. It was the reason we sold it. Sometimes you should fire hiring mistakes. It got so bad even I dreaded coming to work. People have to be engaged and enjoy being with people who share their values, want to create a little weirdness and socialize.

How do you know they fit in?

We hire one of 100 people who apply. They pass two interviews and a test that determines if they share Zappos' values. The management didn't define them at some retreat. Hourly employees did in surveys identifying 10 attributes we share. Everybody, even executives, work two weeks in the call center and a week at the warehouse. It's part of training. Each new hire is offered $2,000 plus what they earned if they want to leave after six weeks. These are jobs that start at $11 an hour plus a free meal and 100 percent medical and dental. Only 1 percent take the offer to leave.

Is this hope for emotional connection why you offer tours of the Las Vegas call center?

Yes. We pick you up at the airport and deliver you to your hotel. One guy said he was finding Zappos boxes his wife hid all over. So we showed him her account. She had spent $62,000 with us.

Mark Albright can be reached at or 727-893-8252.

How did Zappos become the top shoe e-tailer? Tony Hsieh explains. 06/26/09 [Last modified: Monday, June 29, 2009 2:17pm]
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