“The Zappos Experience” Featuring Joseph Michelli [0:00:00] Interviewer: Hello and welcome to Soundview Live, an interactive conversation that puts to you in touch with today’s top business authors. My name is Andrew Clancy, Senior Editor for Soundview and I’ll be your host for today’s event. Before we introduce today’s guest, I want to remind everyone that our best events are driven by the questions that you submit to our authors. To submit a question for today’s guest go to the chat window on your player. You’ll see it in the lower left hand corner of your screen. Select private and select leaders and assistants. Type your question into the box that appears and then click the arrow you’ll be able to send us your question. Our event today is scheduled to run for 60 minutes so our advice to you is to submit your question throughout the course of the event. If you wait till the very end to submit your question we may not have time to answer it. Also, we frequently receive questions about the availability of the slides from our presentations. Slides from today’s presentation will be made available to you. You’ll receive an email in three to five business days. That email will include a link to download the slides as well some addition links for content and a replay of today’s event. Now for today’s guest. When it comes to companies that dominate the headlines as well as numerous lists of best companies and best companies to work for, there’s probably a few names that instantly come to mind. Obviously that one of the companies that you would think of would be Zappos. The online retailer provides a fascinating study of the power of great costumer service, outstanding workplace culture and a commitment to being great by doing good. Our guest today is here to explain how Zappos does it and how you can do it too. He’s the authors of bestsellers such as Prescription for Excellence and A Starbucks Experience. Soundview is very pleased to welcome the author of The Zappos Experience, Dr. Joseph A. Michelli. Joseph, welcome to Soundview live. Interviewee: Andrew, thanks for having me. This is wonderful. I’m excited to be here. Interviewer: With that, we’ll let you begin your presentation. Interviewee: All right. Well let’s imagine that about ten years ago someone came to you and said, “I got this great idea. If you’ll just put out a lot of money and what you can do is just you can put shoes online and we’ll sell them online to people and people are just going to love it. They’re going to love the idea that they can get a wide array of shoes, they don’t have to go to a shoe store with a limited number of sizes and they’re just going to trust you implicitly to send them the shoes that they want. They’re going to get the quality they want, the product they want. It’s going to be terrific.” I mean how many of you really would have invested money back in the day. Surely, lots of people put money down on other products online. Let’s take pet food for example and Pets.com receives an incredible amount of money in its IPO and they had the soft profit and they were advertising during the Super Bowl and people knew intuitively that a product like kitty litter would be something people would trust to be sent to their door and how far wrong could you go unlike shoes. Zappos really came from a very strange idea with good background at least from the standpoint of distribution of shoes but it was a brand that was destined to fail. As we look now ten years down the road and see where Zappos is and we realized that Pets.com blew up in the dot-gone era. Money and positioning wasn’t all there were. There were other things who were very important to success in the brand family and that included the service experience. We’re going to talk today about five principles to really inspire, engage and allow your internal customers to bring their vendors along with you to be able to leverage all that so that the external customer is truly engaged and wowed by whatever it is you deliver and serve whether that’s kitty litter or shoes. So with that said let’s take a look at why should we study Zappos. Obviously they had meteoric success despite the question of all value prepositions of online shoes. They were sold in case you didn’t know about a year and a half ago to Amazon.com for just over a billion dollars. Realize the start up came about for – you know it’s really been a lot of money over time but literally it was just a short amount of money that one individual had when he realized he couldn’t get the shoe he wanted after traveling all over a forayed day in San Francisco. He got the idea, put together a little website, try to court some vendors and ultimately had not a lot of success until he attracted some venture capital money from Tony Hsieh and Alfred Lin. They have made some money in an entrepreneurial venture called LinkExchange which they sold to Amazon. Tony Hsieh was about 24 at the time and his little LinkExchange Company when it’s sold to Amazon netted about $265 million so he was using that money to capitalized a variety of different entities one of which we choose to get involve with was Zappos. As a result of his investments and a lot of hard work for a lot of people the brand was able to break the $1 billion mark for Amazon purchase. In terms of best places to work, Zappos is in the top 10 of Fortune’s best places to work. [0:05:00] It’s a list that many American companies have drooled over for a long time. Some companies have spent an incredible amount of money to be on that list at least in terms of enriching their workplace experience whether that’s the Googleplex and Lap pools and Doctors on Sight or a variety of other kind of amenity items that tend to help you get on that list along with other things. Zappos does not have that rich of a program of amenities. Most of the way in which figured unto the list is through their efforts with creating a family environment at Zappos and a very different kind of work place culture. I think one of the reasons it’s worthy of study is because it has a different kind of culture. Everybody talks about culture like great service. I mean no CEO would step up and say we don’t want great service and we don’t want a great culture. But getting from that vision of what a great culture looks like to actually delivering it and delivering consistence service across your platform, that’s where Zappos has a lot to teach. And then finally Zappos has done a fairly good job on the word of mouth side of the business. Very little of what they do is a result of advertising. They do some just-in-time advertising like having a shoe bins with their logo in it and some advertising in shoe bins at the airports and the security lines when you’re just in time thinking about shoe purchases or shoe related issues but they haven’t spent a lot in the traditional media. They’ve used social media very effectively particularly Twitter. That is their strong suit in terms of their responsiveness in communication. They use their blogs very effectively and they use video blogging and they have incorporated a culture for grabbing a video camera to see the latest things going on from one department or another is just core to the way they think about business. So with that said, we have a why for Zappos. We’re going to talk a little bit about the who of Zappos and the picture you see two of the who’s, two of the early framers of The Zappos Experience. That would be Tony Hsieh in the blonde hair and Alfred Lin, the original CFO in the more brunet shade. Also missing from this picture are Nick Swinmurn who is the guy who walked around San Francisco looking for his Chucker Boots and couldn’t find them and opened the early version of the Zappos Online before it was actually named Zappos with limited funding. Tony Hsieh is actually just a venture capitalist who got involved in this. He’s really a serial entrepreneur to be honest and he is a venture capital then got embedded into the culture of Zappos and really brought it forward and is the current CEO. Alfred Lin was the original CFO and was a roommate of – was actually a good friend Tony’s in college and they worked together in making money in LinkExchange then ultimately through Zappos. And then they brought Fred Mossler, who goes as just Fred, at Zappos along. In order for Tony and Alfred to get involved with Nick and bring this idea forward, they required Nick to have subject matter expert. Nick had to bring along Fred Mossler, who worked for Nordstrom, in the shoe department.