Hsieh says Zappos can teach its new parent company, Amazon, a thing or two about the importance of a “high-touch, human approach” in business.
Question: What can Zappos teach Amazon?
Tony Hsieh: As a precondition for even exploring the acquisition start... because most Amazon and I guess corporate America in general acquisitions are the plan is to integrate the company being acquired into the parent company and eventually the company becomes... the identity becomes lost. And we said as a precondition we would only consider it if Zappos could remain independent and we would continue to grow our brand, our culture and our way of doing business our way. And they remained true to their word. From our point of view it’s as if we swapped 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 really takes more of a high-tech approach. We take more of a high-touch human approach. And we’re not I guess trying to necessarily change each other, but we recognize that there is also a lot we can learn from each other, but the way it has worked from our perspective is now it’s as if Amazon is this giant consultant company with lots of resources and knowledge that we can tap into as little or as much as we want to. And we leave it up to each individual department or sub-department to decide how much they want to do that, so for something like on the warehousing side for example the way we run our warehouse is pretty different from the way Amazon runs their warehouses. There is a lot of sharing back and forth because there is a lot of learning. You know there is some areas that they are better at than we are and vice versa on the warehousing side, but then there may be other departments where they just do a quick phone call once a quarter, just check in, and it’s much less interaction. But we really leave it up to each of our department or sub-department owners at Zappos.
Question: Where do you see Amazon and Zappos going?
Tony Hsieh: Yeah, in terms of, because we are so independent from Amazon I don’t know actually much of what their internal plans are, but I can tell you from Zappos’ perspective. We started out in footwear and now doing over a billion 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.
Question: Are you still in charge of Zappos?
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, 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 is 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.
Recorded September 24th, 2010
Interviewed by Peter Hopkins