The Zappos website features an 800 number at the top of every page.

Tony Hsieh: In 1999, Nick Swinmurn, the company founder, was walking around a mall in San Francisco looking for a pair of shoes. He went to one store where they had the right size, but not the right color. He went to another store and they had the right color, but not the right size. So he ended up spending probably an hour walking around the mall, which to a guy is a pretty horrible experience. And so finally, he went home empty-handed, and tried looking online for the same pair of shoes. He wasn’t able to find them online either, but what he did notice at that time was that there really wasn’t a dominant retailer of shoes online–just a lot of mom-and-pop shops. So he decided, almost on a whim, to start Zappos.

ER: What is the company’s business philosophy?

Hsieh: The original idea was to just have the best selection of shoes online. But over the past nine-plus years, we’ve actually evolved. Long-term, we want the Zappos brand to be just about the very best customer service and the very best customer experience. For example, we offer free shipping both ways. If a customer isn’t sure if he’s a size 9 or 9.5, we encourage that [individual] to order both and then whichever one doesn’t fit, he can send it back to us and we’ll pay for the shipping. We have a 365-day return policy and a call center that is staffed 24/7.

ER: What makes Zappos stand out from other e-retailers?

Hsieh: It’s our focus on customer service, like staffing the call center 24/7 and offering free shipping both ways. Another thing that we do is promise customers they’ll get their shoes in four or five business days, but we actually do a surprise upgrade to overnight shipping for almost all of our customers. That’s just part of what we call our “Wow” philosophy, because we want to wow our customers no matter how they interact with us. And by investing a lot of resources and money into things that improve the customer experience, it really causes the customers to come back to us over and over again. And they’ll also tell their friends about us. We started out doing almost nothing in sales in ‘99. This year, we’re on track to do about $1 billion in gross merchandise sales. That’s pretty rapid growth and the number-one driver of that growth has been repeat customers and word of mouth.

ER: Can you tell us how you are using social networking?

Hsieh: We do have a presence on MySpace, Facebook and YouTube, but probably our biggest presence is on Twitter. We have a total of about 1,600 employees and about 800 are in our Las Vegas headquarters. And a little over 400 of those employees in Las Vegas are on Twitter. That’s something that we introduced our employees to and encouraged them to try out. The reason why we do that is really to help our culture, so there are a lot of benefits to that.

ER: How does social networking help build your brand?

Hsieh: The philosophy doesn’t really come from social networking, specifically. I think it started out with encouraging customers to call us. When customers call us, our agents don’t have scripts; they’re encouraged to just be themselves and provide above-and-beyond service. That’s why we have our 800 number on every single page of our site. We’ve found that on average, every customer calls us at least once sometime during their life cycle, for five to 10 minutes. That gives us the opportunity to build a more personal relationship with the customer. So, the same thing applies to Twitter. There are customers who will follow me on Twitter or follow multiple Zappos employees and by doing so, they end up getting a more personal view of each of us. It just makes the company and our employees seem much more human and real.

ER: What is ZapposTV?
Hsieh: We work with over 1,500 brands, and so when those vendors come and visit our offices, one of the things that we do is give them a tour. It really lets them see the benefits of the culture that we have, and they get to see that we’re having fun and getting work done. The vendors are often surprised to see everyone always smiling and friendly. And they’re even more surprised to learn that it’s not an act. Some days, we probably have 20 to 30 tours going on. And the comment that we always get from the vendors is that they knew that Zappos is about customer service, but until they visited our offices they never really got to fully experience our culture. In fact, they would also tell us that we should figure out some way of bottling that and showing [the public online] what we do. So, ZapposTV is one way in which we do that; it’s really employees just having fun and us making that publicly accessible to the rest of the world.

ER: What other types of marketing do you do?

Hsieh: I would say that the vast majority of our paid advertising is online for things like buying keywords on Google. We have a few different types of e-mail marketing. We have general e-mail that goes out every one or two weeks. Right now, a little over 4 million people are subscribed to that. And then there are e-mail announcements that anyone can sign up for, which are very specific to them. For example, if I really love Kenneth Cole shoes or clothing, I can sign up to receive an e-mail every time Zappos gets a new style for that brand. Another example would be where some customers want to know anytime a size 13EEE shoe becomes available, because that’s a pretty rare size. So, we’ll send them a notification on that as well. In terms of print, we advertise in a whole slew of magazines. They tend to be smaller ads and they are kind of halfway between direct response and branding.

ER: Tell us more about your customer service operations.

Hsieh: The call center is actually in the same building as our main offices. The thing that we care about is we want our customer loyalty team to go above and beyond when talking to a customer. So, they can spend an hour on the phone with a customer and if it doesn’t result in a sale, then that’s perfectly fine with us. While a lot of call centers have their reps try to upsell, we don’t do that unless the customer actually asks for suggestions. Another example would be if a customer is looking for a specific pair of shoes and if we are out of stock in their size, everyone is trained to look on at least three competitor websites. And if they find the shoe available on a competitor’s website, they’ll actually direct the customer to that competitor. We’ll lose that sale, but we’re not trying to maximize the transactions when customers call us–we’re trying to build that long-term relationship.

ER: In the past, you have shared your 10 e-commerce lessons learned. What do you believe are the most important?

Hsieh: Focusing on repeat customers and word of mouth, I think, are really important. In the early days, we had the mindset of trying to acquire as many new customers as possible, but that takes the focus away from your existing customers. So, it’s much easier to get an existing customer to come back and buy from you again than it is to get a new customer who’s never heard of you. I would put those two things up there. And then, focusing on company culture is our number-one priority. Our belief is that in the long term, your culture and your brand are just two sides of the same coin. So, if you just make sure you get the right culture, then your brand will take care of itself and your customer service will take care of itself, too.