Tony Hsieh: Zappos In The Business of Selling “Happiness”

Silicon Valley entrepreneurs are often criticized for seeking quick exits instead of building companies with long-term value. However, Tony Hsieh, CEO of Zappos.com for over nine years now, is immune to this criticism having built an online retail business that strives above all for customer loyalty and the sale of “happiness”.

In a wide-reaching talk at Startup2Startup in Palo Alto last night, Tony explained how Zappos doesn’t try to extract the most profit out of every transaction that’s made on its site. Instead, Zappos makes the experience of buying merchandise on Zappos as pleasurable as possible so that customers will refer the site to their friends. This word-of-mouth marketing strategy is bolstered by a well-funded call center (a so-called “customer loyalty center”) that uses the 10 minutes or so it has with each captive customer on the phone to make the best impression possible. In effect, Zappos takes a lot of the money it would have put into advertisements and channels this money into providing great customer support.

To ensure that Zappos provides the best customer service, the company is intent on developing an extraordinary corporate culture, one that recently earned it 23rd place on Fortune’s 100 best companies to work for list. Employees are hired and fired based on their appreciation of customer service, and all employees – regardless of their rank – are required to undergo the same training program, which puts them in the call center and on the shipping floor for two weeks. Zappos holds its employees to 10 core values (which include principles like “Be Humble”) by applying these core values to its performance reviews.

Zappos may be best known as an online shoe retailer, but Tony says that the company actually has plans to become a multi-purpose corporation, one that’s in the business of selling happiness in a variety of ways. Like role model Virgin, which is in the business of selling “hip and cool” products and services in several industries, Tony expects Zappos to move into other verticals. More clothing and electronics listings are coming in 2009, and Tony only half-joked that perhaps by the year 2019 Zappos would have an airline focused on helping passengers enjoy flying again.