Q&A With Zappos Execs

This month, Zappos.com held its annual Bald & Blue day, an event where employees shave and paint each other’s heads. A few days earlier, the company brought in dance instructors for a class on hip-hop moves.

In short, life has remained unchanged inside Zappos’ quirky headquarters in the seven months since the e-tailer was acquired by Amazon.com. “Amazon has stayed true to their word,” said CEO Tony Hsieh. “They understand our culture is what makes us unique and they will protect that.”

Under Amazon, Zappos continues to operate independently; however, according to Hsieh, it is valuable to have the backing of a powerhouse.

“We think of them as this giant consulting firm that we have for free,” he said. “They are really customer-focused and long-term thinkers.”

In the meantime, Zappos continues to forge ahead with aggressive expansion. After reporting gross sales of $1.19 billion for 2009, the e-tailer said its net revenues in the first quarter rose 49 percent.

That is due, in part, to a new focus on clothing. Zappos now stocks 250 apparel brands and recently added several big names, including Lacoste, Calvin Klein and G-Star. This year, the site will also introduce eight new private-label footwear and apparel brands.

“We view clothing as our biggest long-term growth opportunity,” said Fred Mossler, who oversees merchandising and other departments.

Here, Mossler and Hsieh sound off on the Amazon/Zappos marriage and their growth agenda.

FN: How have things changed since the acquisition closed?
TH:
Fred and I fly up to Seattle once a quarter for board meetings. We go over last quarter’s numbers and talk about challenges [we’re facing]. Other than that, it’s the same. One of the prerequisites for us to even consider the deal was that we wanted to keep the Zappos brand distinct and our culture separate, which is very different from the other acquisitions [Amazon has] done. We actually have a formalized document with five tenets [that we follow]. There have already been a few cases where the decisions we’ve made are different from the decisions they’ve made.

FN: Can you give me any examples?
TH:
Amazon doesn’t apply for Fortune’s “100 Best Companies to Work For” list. From their perspective, it’s not [something that benefits] their customers. We made the list again this year, and the process starts right about now for [next year]. Our perspective is that culture is the No. 1 priority, and if you get that right, the customer part will be right.

FN: How did employees react to the deal?
TH:
Inititally, they were surprised. It was announced at around 1 p.m., and we thought there wouldn’t be any work done for the rest of the day. But a few hours went by, and people got back to work. Two days later, we had an all-hands meeting, and everyone was cheering and happy. … That day was probably one of the top moments in Zappos’ history. That and signing Nike.

FN: How did vendors take the news?
FM:
We have amazing relationships in the industry, and their initial concern was that those relationships would go away and that the way we operate the business would change. They’ve all seen now that it hasn’t changed.

FN: One change that they will see is the departure of COO/CFO Alfred Lin early next year. How will that affect the company?
FM:
Alfred has made a lot of great friendships in the industry. Those personally connected with Alfred are very sad to see him leave. But I don’t think they are concerned about the business.

FN: Do you plan to replace Alfred?
TH:
Yes, but we definitely want to be patient about it. A lot of the mistakes we’ve made are because we’ve hired the wrong people.

FN: Are you guys going to stay at Zappos?
TH:
As long as Amazon continues to treat us the way they’ve been treating us.

FN: What are the firm’s biggest initiatives?
FM:
Clothing is becoming a big part of our business, and a large part of our focus is on that category. For our existing customer base, we’re probably a footwear site. For new consumers, we want to send a clothing message.

FN: Clothing is central to your new TV campaign. What has been the reaction to that?
TH:
From what we’ve seen on Twitter, people mostly seem to love it. We did have a few people say the puppets were creepy.

FN: According to a recent e-mail you sent to employees, you two are planning a secret project. Can you say anything about it?
FM:
The secret is that it’s a secret.

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