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Zappos CEO thinks online customer service is essential to survival

Tony Hsieh thinks marketers agonizing over their presence on Facebook, Twitter or the next big social media lurking are often missing the forest for the trees.

"They're trying to make customers smile by fixing a facial muscle," said Hsieh, a ground-floor investor and CEO of Zappos who thinks top-notch online customer service and call center staff will become essential to survival. "Unlike many sites, we want to talk to customers. We think the telephone remains one of the greatest brand inventions ever. Where else can you get customers' undivided attention today?"

Hsieh, 36 and author of the breezy, bestselling business book Delivering Happiness, on Monday swung his three-month bus tour and happy-employees-breed-happy-customers gospel to an audience of 340 at the Tampa Bay chapter of the American Marketing Association. They gave him a standing ovation. Zappos is widely regarded as the gold standard for online customer service since the dot-com era relegated customers to e-mail or less.

And Zappos loyalists do talk. Only 5 percent of Zappos orders are phoned in. But just about every customer calls with questions about first-time shipping, returns or fashion advice at some time, and 75 percent of sales are repeat customers. Last week, Zappos' 500-person call center in Las Vegas broke a record when one customer stayed on the line for eight hours and three minutes.

The toll-free number atop each page is one of the "wows" Hsieh used to curry customer favor. Zappos offers free returns for up to a year and overnight shipping that arrives at 8 a.m. for orders placed before midnight. To keep out sourpusses, employees are picked for personality and values. Poor fits are offered $2,000 if they want to quit after the first month.

All this phone talk might sound old school coming from a chief executive with 1.7 million followers registered on his Twitter account. But Hsieh, a Harvard-trained computer scientist, used eager customer service to differentiate Zappos from the crowd and help build the company into the first online retailer to sell $1 billion in shoes a year. And he did it in just a decade.

Under pressure from his venture capital backers, he sold Zappos for $1.2 billion last November to, the high-tech poster child for don't-try-to-call-us retailers.

But Amazon CEO Jeff Bezos pledged to keep Zappos independent. He won't mess with the spontaneous call center costume parades and parties, and Hsieh will remain in charge.

So far Zappos is taking shape as the softer side of Amazon, which is more about hard goods like books, DVDs and Kindles. At Zappos, which added 1 million items to its 4 million in the past year, is expanding the apparel, beauty products, housewares and home decor selections. And sales soared 50 percent in the most recent quarter even as a weak economy caused shoe buyers to spend less or less frequently on footwear.

"All that's changed is I report to a new board," Hsieh said. "If they start changing things, I'll leave."

Instead, he sees this as the start of converting the Zappos brand from only footwear to a top-tier customer service platform with a friendly and quirky corporate culture that can sell most anything. Think of it as similar to Richard Branson's Virgin Group, which has sold recorded music, soft drinks and cell phone service while running an airline and the trains in Britain.

Indeed, with customer service being relentlessly automated and pared back, Zappos promises to be in a growth industry.

"Don't be surprised if in 20 years we're running an airline," Hsieh said.


Tony Hsieh

Last name pronounced "shay."

Youth: Earned $50 a week as a preteen from a mail-order custom lapel button business.

Adult success: At 24, Hsieh and partners sold their Link Exchange to Microsoft for $265 million.

Current job: Chief executive of Zappos, the world's largest online footwear retailer, and author of Delivering Happiness, a business autobiography.

Zappos CEO thinks online customer service is essential to survival 10/18/10 [Last modified: Tuesday, October 19, 2010 1:11pm]
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