One of the highlights of SxSW for me was a keynote delivered by Zappos CEO, Tony Hseh, who also runs a very insightful business blog.
Las Vegas-based Zappos started in 1999 by selling shoes online, and has since grown to a $US1 billion per year retailer. It has expanded into clothing, handbags, sunglasses, and numerous other categories.
Early on in its life, Zappos made a deliberate decision to re-direct its marketing budget towards delivering exceptional customer service with a great company culture, helping the business to thrive where others have failed. Tony highlighted many deliberate decisions that the company made with the long-term view in mind, such as:
- encouraging customers to order as many products as they wanted in order to “try them on,” then offering free return shipping for a full 365 days
- only listing products on the site when stock was in their own warehouse (which actually lowered sales by 25% at a time when the company was still in the red)
- deciding to run their warehouse operation 24/7 to deliver super-fast turnaround on orders, despite it being an inefficient way to manage fulfillment
- encouraging customers to call them about nearly everything. Their call center takes 5,000 calls per day, and employees work independent of scripts, quotas, or call time limits. The longest call to date has been four hours. Zappos views the phone experience as a branding device, and speaks to virtually every customer at least once.
- deciding to invest in “surprise” (free) upgrades to overnight shipping for most customers. This means that most orders are delivered within 24 hours, despite the web site indicating it will take 2-5 business days.
Decisions like these are rarely undertaken today in corporate America. Instead, many businesses compete on price instead of service, reign-in customer service expenses as tightly as possible by outsourcing to call centers, and implement key performance metrics like upsell percentages and average call times that agents are expected to meet.
Tony shared the story of a late-night outing with a few vendors, where one of their clients had a craving for pizza and decided to half-jokingly call Zappos customer service for help. After a brief pause, the customer service agent researched and provided a list of nearby pizza parlors that were still open.
Company culture is important from the start. Zappos conducts two separate interviews — one focusing on the applicant’s background and experience, and the second one on cultural fit. Over the years, Zappos has passed on numerous experienced employees for the simple reason that they were wrong for the company culturally.
The emphasis on cultural fit extends to the training process, where new employees cycle through work in the Kentucky warehouse and call center, and receive lessons on company history and core values.
What are Zappos’ core values?
- Deliver WOW through service
- Embrace and drive change
- Create fun and a little weirdness
- Be adventurous, creative, 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
Nothing on the list is particularly unique, but what makes Zappos different from thousands of other companies is that they live those values, instead of just hanging them on the wall. For example, to exercise their open and honest relationship value, the company opened its extranet to 1,500 outside vendors who can now view what products are in stock, how many are selling, and even what the profit margins are.
“Once a company compromises too many times on its core values, the entire culture goes downhill,” says Tony Hseh. Every year, the company reinforces its core values by publishing a 500-page culture book with unedited contributions made by employees and vendors. They distribute it company-wide, as well as to anyone who wants to purchase a copy. The company even opens up its Las Vegas offices for free tours, and welcomes companies like Southwest Airlines to spend time watching Zappos’s call center operations, recruitment practices, and training.
Jim Collins, author of Good to Great quotes, “It doesn’t matter what your core values are, as long as you have them and everyone is aligned, moving in the same direction.”