Tony Hsieh's Blog

Our very own Tony Hsieh was recently featured on the "Pivot" series on A TOTAL DISRUPTION, two-time Sundance-winning director Ondi Timoner's YouTube channel that provides business and tech insights from the innovators defining our future.

In this video, Tony discusses how Zappos' pivot to focus on customer service and company culture has paid off—for both customers AND employees.

It's been a little over a year since we first announced our plans to relocate downtown. In a somewhat complicated deal, we announced a year ago that we were partnering with Resort Gaming Group (RGG). RGG will purchase the current Las Vegas City Hall and act as our landlord, and we will be leasing our future office space (City Hall) from RGG

Recently we passed a major milestone towards our goal of being in our new home by late 2013, and we're issuing a joint press release today announcing it. The press release is below.

The short version is that we've finalized the terms of the lease with RGG and are moving forward, full steam ahead, to collaboratively design our new campus with input from all of you as well as our new downtown community. Look for more details about our new campus in early 2012!

If you have any questions or need help locating a lost unicorn (newborns are smaller than sea monkeys, so can be easily misplaced), please let me know!

Thanks,

-Tony

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RESORT GAMING GROUP, ZAPPOS FINALIZE LEASE TERMS FOR CITY HALL

LAS VEGAS, NV --- Representatives of Resort Gaming Group (RGG) and Zappos.com, Inc. (Zappos) announce today the finalization of terms on the lease agreement for the existing Las Vegas City Hall in downtown Las Vegas.  The City Hall building and surrounding property is planned to become the corporate headquarters for the Zappos Family of Companies in 2013. In November 2010, RGG announced plans to purchase Las Vegas City Hall to lease the site to Zappos. The 2010 agreement between RGG and Zappos allowed for 16 months to finalize lease terms. The negotiations were completed in 12 months, four months ahead of the deadline.

The lease execution is contingent upon passage of a modification to RGG’s development agreement with the city of Las Vegas.  The modifications to the agreement are necessary to conform to legal points in the lease between Zappos and City Hall LLC, a Donner company managed by RGG. The modifications are not monetary and do not result in increased risk to the city.  The amendment to the development agreement is expected to be on the January 18 city council agenda.

“Finalization of lease terms with Zappos is a significant step in bringing to fruition a pivotal transaction for the redevelopment of downtown Las Vegas,” said Andrew Donner, owner and founder of RGG. “My partners and I are humbled to be a part of something so special and are excited about the future of our great city.”

Ranked the #6 Best Place to Work in America by Fortune Magazine, the Zappos Family of Companies intends to relocate its corporate headquarters to the current Las Vegas City Hall site in late 2013, after completing building renovations. Zappos’ plans for the site include adapting the site to accommodate up to 2,000 employees. 

About Zappos.com

Established in 1999, Zappos.com, operated by Zappos Development, has quickly become the leading destination in online apparel and footwear sales by striving to provide shoppers with the best possible service and selection.  The Zappos Family generates gross merchandise sales exceeding $1 billion annually. Zappos.com currently showcases millions of products from over 1000 clothing and shoe brands. Zappos.com, Inc. was recognized in 2009, 2010 and 2011 by FORTUNE MAGAZINE as one of the "100 BEST COMPANIES TO WORK FOR". Zappos.com is also proud to be rated ELITE by STELLAService and was named a J.D. Power 2011 Customer Service Champion, one of only 40 companies so named in the U.S. More information about the customer service philosophy, unique culture, and job openings can be found at http://about.zappos.com. More information about Zappos Insights and its business membership program can be found at http://www.zapposinsights.com.  

About Resort Gaming Group

Resort Gaming Group is a Las Vegas, Nevada-based hospitality management and development company founded in 2002 and wholly-owned by Andrew Donner. Currently, RGG provides management and consulting services to full service restaurants, casino gaming operations and taverns. RGG is currently focused on building up its development arm, Urban Development Group, to accelerate the development of other downtown Las Vegas projects.

The following email was sent to our employees by Chris Nielsen (our

CFO)

Thanks everyone for your patience!

Hello Zappos Family and loyal Zappos customers,

 You deserve an update on where we are with the WMS project and how things are going today.  The project officially went live last Monday, and despite everyone’s best efforts we have faced some challenges since then.

 Those challenges come in two forms: 

1)      Going through the backlog of customer orders that were built while we had the previous system offline and were transitioning to the new system.  Over the cutover weekend, we were accepting orders from Thursday through Monday but not able to process them until Sunday night.  During this time, we were doing the work necessary to change from the previous system to the new one.  That timeline meant that we needed to start quickly shipping orders with the new system.  Shipping began slower than we expected as we ran into some unanticipated mechanical, systems, process and training issues.

2)      Fixing pieces of functionality and processes that are not working as we expected them to.  As with any system transition, we are finding errors that need to be corrected, enhancements that need to be made and process changes required to maximize volume through the FC.

 The backlog challenge has been greater than fixing pieces of functionality.  Our KY team has been working incredibly hard (including extremely long hours with little or no sleep, herculean recruiting efforts to staff up, making drastic headcount realignment decisions and creatively working past every obstacle in their way) to make progress here, and we turned a corner over the weekend and Monday.  We will have over 500 temporary workers in the building this week to help us.  We are now at an outbound run rate where we are churning through the backlog.  If we continue this progress, the customer order backlog will be down to a manageable level by this weekend and cleared within days after that.

 Our tech teams are focused daily on making the changes necessary to make the system perform as we need it to and delivering efficiencies to the FC to help clear the backlog.  That process will continue indefinitely, and we are prioritizing the most important aspects for our customers and teams.

 We know that some customers have been inconvenienced as part of this transition.  Frankly, nothing disappoints us more than this.  We are addressing those individual customers and will be reassuring them that we will quickly be reverting to our previous high standards.  Our CLT team has been great at working with our customers to the best of their ability to address customer concerns.

 Over the last week, we have been inspired by your ability to Drive and Embrace Change.  Change is sometimes difficult and painful, and this transition has been both of those things at times.  Together we will work though this and come out the other side with better long-term capabilities to serve our customers as our business continues to grow. This is the biggest and most complex systems and operational transition (you might think of this as the equivalent of a heart transplant or changing the engines of a plane while in flight) in Zappos history.  Thank you for your part in making it happen!

Chris, Craig and Arun

Hey, everyone. While we often have fun things to talk about in this space, we sometimes have less pleasant topics to share.

We have made the difficult decision to shut down the canada.zappos.com site and stop shipping to Canada. One of our core values is to "deliver WOW through service". That means the best selection of brands and products that can meet just about every individual's needs as well as fast, free shipping and free returns, all at competitive pricing. Our Canadian customers know that we have not lived up to these service levels.

Product selection on canada.zappos.com is limited due to distribution agreements with the brands we sell in the United States. In addition, we have struggled with general uncertainty and unpredictability of delivering orders to our Canadian customers given customs and other logistics constraints.

We would like to thank our loyal Canadian customers and are sorry that we will not be able to serve you in the same way. Beginning April 1, 2011, we will no longer ship orders from canada.zappos.com. Some of you may have electronic certificates with open balances. If that is the case, please be sure to redeem them prior to April 1, 2011. Of course, as always, we will still be accepting your orders placed from Canada and shipping to US addresses on www.zappos.com. Customers can always reach us 24/7 by calling 1-800-927-7671 or emailing cs@zappos.com.

Thank you for reading this. While you may not like our decision, we hope you understand the reasons.

Chris Nielsen
CFO, COO
Zappos.com, Inc.

The following email was sent to Zappos Las Vegas employees yesterday:

As many of you know, Fred and I have been working on and talking about a secret project for the past year or so. The project had to remain secret because it involved a lot of complicated moving parts, the details of which would make its own interesting book one day.

Even though nothing is definite yet, we finally feel like we have enough of our ducks lined up to announce what we've been working on: The future Zappos campus!

The short version is that we hope to be able to move into the current Las Vegas City Hall location and adjacent expansion land downtown sometime in 2012 or 2013.

More details are in the joint press release that is going out today (see below), and I'll be sending out a separate email about Q&A meetings to give more color on everything as well as get everyone's ideas on what we'd like to see in a campus!

Stay tuned!

-Tony

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Zappos Eyes Downtown Las Vegas

Company Hopes To Relocate Headquarters To City Hall Site

In what would be a major economic boost, Zappos.com, Inc. is looking to relocate its corporate headquarters to downtown Las Vegas on the current City Hall site.

The Resort Gaming Group (RGG), wholly owned by founder and CEO Andrew Donner, made an unsolicited offer to the city of Las Vegas to buy the site and about seven surrounding acres earlier this year with the intent of developing it as a corporate campus for Zappos.

Such a move is expected to bring an initial 1,000 jobs into the downtown area. Zappos.com is a leader in on-line clothing and footwear sales by way of an unparalleled focus on customer service.  Zappos is known as having a fun and family-type culture with a focus on employee happiness. Highlighting Zappos' accomplishments is inclusion in Fortune Magazine's 100 Best Companies To Work For list for 2009 and 2010.

"This will be a game changer for Southern Nevada," said Mayor Oscar B. Goodman. "This move will bring about a critical mass of creative persons to the inner core of Las Vegas in addition to causing a significant shot in the arm for the economy and for new jobs."

City leaders have noted the importance of keeping local businesses excited about being in Las Vegas. "Having Zappos in the Las Vegas area is vital to diversifying our economy beyond gaming," said City Manager Betsy Fretwell. "This move will also encourage similar companies to look at Las Vegas as a potential site for corporate headquarters."

The city had already made plans to relocate City Hall to another downtown location with a timeline to vacate the current facility in 2012.  Zappos hoped to capitalize on the city's move, expressing an interest in being in a downtown environment with room to grow.  The current City Hall campus and nearby city-owned properties comprise approximately 17 acres.

"At Zappos, our number one priority is our company culture. Our belief is that if we get the culture right, most of the other stuff -- like delivering great customer service and building a long-term enduring brand and business -- will be a natural byproduct of our culture," said Tony Hsieh, CEO of Zappos.com, Inc. "Our proposed future downtown location will be a great urban environment that will help grow the cultures of both Zappos and Las Vegas."

Founded in the San Francisco Bay Area, Zappos first moved to the Las Vegas Valley in 2004.  At the time, the fast-growing start up brought 70 employees with it.

"Zappos is among the world's most successful, progressive and forward-thinking companies as created by its incredibly visionary leaders," said Donner. "To work in partnership with Tony Hsieh, Fred Mossler and the entire Zappos team has been both humbling and enlightening.  The company is committed to this 
project and more importantly, to reinvigorating downtown. The support of this caliber of business leader speaks volumes for our city.  We believe this project will have more impact on downtown revitalization than any other development to date."

The city had been in exclusive negotiations with The Cordish Companies to build an arena and entertainment district on the current City Hall site. City officials could not negotiate with any other potential developers unless Cordish was agreeable.  The city and Cordish agreed to move the arena/entertainment complex to Symphony Park, clearing the way for RGG to discuss the purchase of the City Hall site with city leaders.  A new exclusive negotiating agreement (ENA) with The Cordish Company was approved by the City Council on November 17.

The City Council must now consider the sale of the current City Hall site to RGG.  The item is scheduled to be on the council agenda of December 1. If approved, the parties will enter a due diligence period, meaning this would be the first step in seeing the deal come to fruition.  The transaction is expected to take several months to finalize and is expected to close by mid-2011.  Construction will begin as soon as the new City Hall is complete in the spring of 2012 and city workers have transitioned to the new facility.

"The economic uplift that will be created by Zappos' move to downtown will be significant," said Donner. "Zappos' corporate campus will elevate downtown, its profile, its vibe and its appeal to both locals and tourists alike."

About Zappos.com
Established in 1999, Zappos.com, operated by Zappos Development, Inc., has quickly become the leading destination in online apparel and footwear sales by striving to provide shoppers with the best possible service and selection.  The Zappos Family has gross merchandise sales exceeding $1 billion annually. Zappos.com currently showcases millions of products from over 1000 clothing and shoe brands. Zappos.com, Inc. was recognized in 2009 and 2010 by FORTUNE MAGAZINE as one of the "100 BEST COMPANIES TO WORK FOR". More information about the customer service philosophy, unique culture, and job openings can be found at http://about.zappos.com. More information about Zappos Insights, Inc. and its business membership program can be found at http://www.zapposinsights.com.

About Resort Gaming Group
Resort Gaming Group (RGG) is a Las Vegas, Nevada-based, regional hospitality management and development company founded in 2002 and privately owned by Andrew B. Donner. Currently, RGG provides management services to several businesses including gaming taverns, full-service restaurants, quick service restaurants, catering operations and casino gaming operations under the direction of President Keith E. Grossman. RGG is licensed by Nevada Gaming Control. RGG and its affiliates are partners in the redevelopment of the Lady Luck Casino and Hotel. The newly renovated hotel casino is expected to open under a new name in fall 2012 along with many new food, bar, club and retail venues in the exciting, new 3rd Street District.  RGG and its affiliates are also developing approximately 100,000 square feet of retail, food, beverage and convention space surrounding The Mob 
Museum, which is expected to open fall 2011.

Today is the 1 year anniversary of when we announced the marriage between Zappos and Amazon. It's hard to believe it's already been a year!

I thought it'd be interesting to read through the original email that I sent out a year ago (http://blogs.zappos.com/ceoletter) and comment on it to see whether things happened as planned and promised. The original email is below, along with my comments ***[in brackets and asterisks:].

Enjoy!

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Tony Hsieh
Follow me on Twitter: a

I get asked by a lot of people outside of Zappos why I'm still here, because so many entrepreneurs leave the company not long after an acquisition.

One of the big reasons is because what we're doing isn't just about making Zappos customers, employees, and vendors happy. What we're doing is a lot more important. It's about starting a movement and changing the world by inspiring and helping other companies to focus more on culture, core values, customer experience, passion, and purpose -- all...

Zappos.com, Inc. has filed a class action lawsuit against the Walt Disney Company over false advertising. Tony Hsieh, CEO of Zappos, says it's just one battle in his efforts to prevent companies from making misleading claims.

The lawsuit alleges that Disneyland's tagline of being "The Happiest Place on Earth" is "clearly false, deceptive, and confusing to the marketplace",and cites internal Net Promoter Score (NPS) metrics that suggest that the designation should be given to Zappos.com, Inc.

A ...

I sent the following email to our "Friends of Zappos" mailing list today:

Dear Investors, Employees, Partners, and Friends of Zappos:

It's been awhile since I last sent an update to our "Friends of Zappos" list. So much has happened over the past year!

Despite a tough economic environment, we continued growing in 2009, finishing the year doing nearly $1.2 billion in gross merchandise sales.

As many of you know, back in July 2009 we announced that Amazon was acquiring Zappos: 

You can read and post comments here! (Read the email I sent to employees first.)