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									Chapter 5

Peter Hopkins: Now how has this played out for Zappos in           cause there is a lot of learning. You know, there is some areas
the context of the Amazon purchase last year? Just for context,    that they are better at than we are and vice versa on the ware-
Amazon purchased in all-stock transaction Zappos valued at         housing side, but then there may be other departments where
1.2 billion, and around that there was a lot of discussion that    they just do a quick phone call once a quarter, just check in,
you had to have with your colleagues after the fact to explain     and it’s much less interaction, but we really leave it up to each
what this was all about to give them a sense of what was go-       of our department or subdepartment owners at Zappos.
ing on, and one of the interesting things you mentioned was
that Zappos has a lot to teach Amazon in much the same way         Peter Hopkins: And I was saying to you before the inter-
Amazon has a lot to teach Zappos about different things.           view started that our last interview we had Jason Fried at
You said that Amazon really can teach us a lot about technol-      37signals. Actually, they have a relationship with Amazon and
ogy and being the very cutting edge. We can teach Amazon           Jeff Bezos in particular, not Amazon per se. Was anything
a lot about culture and how it can really **** to its benefit in   about Jeff Bezos and his particular view of been, which is very
a range of ways. Explain that for the audience and also talk       interesting, that helped you get over the hurdle of making this
about the experience in the last year. How has that played out     marriage, or was it really just about the essential aspects of
thus far?                                                          the two companies?

Tony Hsieh: And so as a precondition for even exploring the        Tony Hsieh: Well, we actually have this document called the
acquisition start… because most Amazon and I guess corpo-          Five Tenets Document that we use internally, and basically
rate America in general acquisitions are the plan is to inte-      it spells out that we’re going to remain independent and the
grate the company being acquired into the parent company,          only decisions that Amazon can basically overrule Zappos on
and eventually the company becomes…The identity becomes            are ones that are legally necessary, so one example would
lost, and we said, as a precondition, we would only consider it    be that we, prior to the acquisition, one of our core values is
if Zappos could remain independent, and we would continue          about being open and honest, so we were very open in shar-
to grow our brand, our culture and our way of doing busi-          ing our financials and so on with whoever, but now that we’re
ness our way, and so from our… And they remained true              part of a public company, there are certain FCC regulations
to their word. From our point of view, it’s as if we swapped       where we can’t be as open as we were before.
out our board of directors with a new one, and, yes, there is
definitely a lot we can learn from each other. Amazon, I think,    Peter Hopkins: And how do you see…? What is the vision
really takes more of a high-tech approach. We take more of         now in terms of the growth trajectory of Zappos in relation-
a high-touch human approach, and we’re not, I guess, trying        ship to Amazon? Amazon obviously is and wants to continue
to necessarily change each other, but we recognize that there      to be the leading global online retailer. Zappos is the leading
is also a lot we can learn from each other, but the way it has     retailer, online retailer, of a certain subsection of goods. How
worked from our perspective is now it’s as if Amazon is this gi-   do these two entities…? Where do you see these two enti-
ant consultant company with lots of resources and knowledge        ties going, and what do they look like in relationship to each
that we can tap into as little or as much as we want to and we     other?
leave it up to each individual department or subdepartment
to decide how much they want to do that. So for something,         Tony Hsieh: Yeah, in terms of because we are so indepen-
like, on the warehousing side, for example, the way we run         dent from Amazon, I don’t know actually much of what their
our warehouse is pretty different from the way Amazon runs         internal plans are, but I can tell you from Zappos’s perspec-
their warehouses. There is a lot of sharing back and forth be-     tive. We started out in footwear and now doing over a billion
Chapter 5

dollars in gross merchandise sales there, and in the U.S.,
apparel is four times the size of the footwear market, so in
theory at least, that should keep us busy until we hit five billion,
and then I’m sure the footwear category will continue to grow
during that time as well. So we’ve got plenty of work cut out for
us for at least the next several years just focusing on expanding
into clothing.

Peter Hopkins: And do you see yourself still at the helm
and kind of leading this group?

Tony Hsieh: Yeah, I am still CEO of Zappos and have no
plans to leave, and actually it’s interesting because we actually
structured the deal, so it was not like most normal deals. Most
deals, I guess—whether it’s Amazon or another company—
they have a retention pool or bonus that they give to the top 5
or 10 executives and in order to keep people in the company.
But for me, personally, I actually asked not to participate in
the pool, and we actually spread the bonuses amongst all our
employees. And my salary prior to the acquisition was 36,000
a year and it still is now, so and that’s the only…So there is
really nothing keeping me at Zappos except for making sure
that I’m happy. So in a weird way that actually gives me more
leverage over Amazon in terms of they have to worry about
making me happy because I don’t have any golden handcuffs
or anything, and what makes me happy is feeling like we have
our independence, can make our decisions at Zappos.

Peter Hopkins: And are they supportive of this whole
movement, this happiness movement and your efforts above
and beyond Zappos in Las Vegas, Nevada?

Tony Hsieh: Yeah, they’re support…I mean, I don’t think
they know too much in detail about it. I’ll probably have con-
veyed more information in this interview than they’re aware
of, so.

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