This is a live post of Tony Hsieh’s fireside chat at DOMAINfest…updating.
Tony Hsieh, CEO of Zappos.com gave a keynote fireside chat with Oversee.net CEO Jeff Kupietzky.
Hsieh founded LinkExchange, which he sold to Microsoft. He then invested in and joined Zappos.com, which he sold to Amazon.com. He’s a 36 year old Harvard graduate.
He ran a pizza business in college, where he met Alfred Lin, who is now the CFO at Zappos now. Alfred would buy pizzas from them, and sell it by the slice.
LinkExchange’s reach was more than Yahoo or any other internet property back then. They had about a million web sites in their network. The sixteenth web site on their network was what became eBay. They sold the company because it stopped being a fun place to work anymore. They didn’t pay attention to company culture. Even Hsieh didn’t enjoy coming to work anymore.
They (Lin and Hsieh) used the money from selling the company to invest in OpenTable and many other startups, but they passed on PayPal.
“The original business idea never works out the way you” think it will. So they should have invested in the team behind PayPal, not the original idea (PayPal was supposed to send money over Palm Pilots).
They got the investment pitch for Zappos, and they almost passed. But the founder gave stats about the state of the shoe business, so they realized the web could take over the 5% of shoes sold via mail order. At first it was going to be a dropship business. They did that for the first couple years (100% dropship). Then they realized there were some brands that didn’t have the ability to dropship. They moved to a hybrid model. It was OK, but not a great customer experience. So they decided to become a ‘customer service’ company.
Overnight, they dropped the dropshipping business, which was 25% of their business.
Original name of site was ShoeSite.com. They based name on Spanish word for shoes. The name Zappos.com was available. Some people thought it was “Zappo’s”, and people went to Zappo.com. They ended up buying the domain for hundreds of thousands of dollars later.
He bought BBQ.com for something like $25,000. He bought Drugs.com at the height of the dotcom bubble, he bought through GreatDomains. He paid $823,456, which were the first six digits of his cell phone number, which he set up as his max bid. Then .com crash happened, and he was betting on Zappos, he sold Drugs.com for the same amount a couple years later. He put that money into Zappos.com.
They view phone calls as a branding experience, rather than a cost to be minimized. Although 99% of sales are on the web, most customers will call at some point. They don’t have phone scripts, they just ask reps to connect with the customers. Reps use their personality.
Spending money on offline ads improves ROI of online ads.
Idealab had the domain Clothes.com and sold it to Zappos. It was at the time they were focused on shoes and thought their next category would be apparel. It seemed like “there’s only one clothes.com”.
Tony had no idea that domain names was an industry before hearing about this conference.
Amazon.com approached Zappos five years ago, and Zappos wasn’t interested. Then Amazon launched Endless.com, which didn’t gain a lot of traction. Then Amazon came back and realized that what makes Zappos special is its culture, so it acquired Zappos but kept it as a separate organization.
M. Menius says
Amazing timing of this story. The domain CustomerService.com was just recently included in a Rick Latona brokerage list I saw somewhere (maybe the recent auction).
Anyway, when I saw this, I emailed Rick and told him about Zappos, Tony Hsieh, and that the company was completely built around creating the best customer service experience ever.
I think if Rick indeed follows up with Tony, who knows, CustomerService.com could make the ultimate acquisition for Zappos.
I have always viewed CustomerService.com as a tremendous brand in waiting,a category killer. The right company, at the right time, could create a powerhouse opportunity with this domain. Could Zappos be that company?
Thank me later. 😉
Brian Null says
always interesting to read about how things evolved… Tony certainly has a great story, I didn’t realize parts of it… thanks for posting the highlights Andrew
DR.DOMAIN says
Wish I had met Tony first a coupla’ years back…instead of his marketing director.I had a company that introduced advertisers to the sport of MMA.The Zappos marketing people went about it their own way shortly after my sales pitch…and went into the sport pretty BIG for awhile.Can’t win ’em all.
Louise says
Hi, Enjoyed this article! Thought Tony Hsieh is full of himself, based on this NY Times interview, but your summary puts into perspective Mr. Hsieh has business regrets like everyone else, and is a nice guy to divulge his story to DomainFest participants!
How was the Getty Center last night? The air is clear now, so you have a lovely day!
CustomerService.com is a great name! That stood out to me on the list, as well. Maybe Tony should write a book about it, as he has distinct views, based on the NY Times article linked to, above.
Walter says
I understand that because CustomerService.com didn’t sell at the recent Las Vegas TRAFFIC auction, it will be up for auction again (with a lower reserve) at the TRAFFIC conference in Milan, Italy in late April.
Roberto Chandler says
Thanks for the nice post on the comprised history of Tony and Zappos. Zappos currently only ships within the USA but whenever they are ready to ship to our neighbors to the south (Mexico) I have Zapatos.mx and Zapatos.com.mx. Zapatos is the exact translation of Shoes in spanish. Mexico is the most populous spanish speaking country in the world and is the second most populous country in North America and Latin America with a predominantly young population which already prefers and buys name brand shoes, apparel and accessories. Tony, whenever your ready to capture and dominate this new huge market you can reach me at [email protected]