Zappos CEO Tony Hsieh on the Evolution of a Billion-Dollar, Mission-Driven Brand
From shoe retailer to CX evangelist to urban planner
In 2013, Zappos co-founder and CEO Tony Hsieh relocated HQ to downtown Las Vegas, taking over an abandoned city hall building in the Fremont area.
The neighborhood’s outer bounds start just five blocks away from the famous Strip, but back then it was a world away from the glitzy marquees, hotels and casinos that lure over 39 million visitors to the city every year.
After Zappos was acquired by Amazon for $1.2 billion in 2009, Hsieh poured $350 million into a revitalization effort to repurpose a relative ghost town with “two-and-a-half bars” into a neighborhood mecca for entrepreneurs called the Downtown Project built around the Zappos campus.
“Our hope is that 20 years from now, people won’t even realize we started by selling shoes online,” Hsieh said last week in a keynote at Customer Contact Week Vegas. “We want the Zappos brand to just be about the very best customer service and customer experience.”
Building a “city as a startup” seemed a logical evolution in the online shoe retailer’s brand trajectory. Hsieh is famed for coining the expression, “A great brand is a story that never stops unfolding.” Zappos itself has undergone at least three tectonic shifts in its mission – the Downtown Project is the fourth.
When Hsieh co-founded the company in 1999, he was hyper-focused on building the web’s biggest footwear retailer, before expanding into clothing and accessories. Next was breaking records for customer service at its call center (the longest phone call is 10 hours and 43 minutes).
Zappos then pivoted to building a culture so exceptional it now offers consulting services to help other businesses do the same. Hsieh charts this path as the “3Cs” – clothing, customer service and culture – which form the company values.
In a company-wide memo sent in June 2012, Hsieh announced a fourth ‘C’ – community – and with it, the start of the Downtown Project. $200 million went towards real estate investments, while small businesses and tech startups received investments of $50 million apiece.
The shipping container park in the Downtown Project. Image credit: Downtown Project
There’s a shopping center built from 40 recycled shipping containers and modular cubes housing over 30 businesses including restaurants, bars and stores. The entrance is marked by a 40-foot metal sculpture of a praying mantis from the Burning Man music festival, which shoots 20-foot flames.
An early childhood center for babies as young as 6 weeks old just opened, and every block or two there’s a large-scale art installation or wall mural for pedestrians to ogle in hopes of transforming Las Vegas from a driving city to a walkable one.
Image credit: JustKids
Last year, DTP launched a new apartment building, the Fremont9, a five-story mid-rise offering 232 residential units and 15,000 square feet of retail space.
“The main goal is to create a place where you have everything you need to live, work and play within walking distance,” said Hsieh.
But the Downtown Project isn’t just a real estate investment. Hsieh refused to take on any outside investors or debt, which would compel him to meet short-term cash flow needs instead of focusing on the “return on community.” Its approach to urban planning is also reportedly crowd-sourced.
“Instead of taking the traditional top-down, masterplan approach, we would ask people what do you want in your dream neighborhood,” said Hsieh. “If it wasn’t already on a Post-It note on the wall, then we’d encourage them to write it down and put it up.”
In fact, the Zappos team wants so badly to make the area family-friendly that one of its key success metrics is stroller count.
“We have people whose job it is to count the number of strollers that go in and out each day,” Hsieh explained.
Meanwhile, the small businesses and tech startups vying for seed funding have a unique set of criteria to meet unlike what you might find at any other incubator. First, the startup has to create “collisions,” meaning opportunities for community members to “serendipitously meet.” It must also be owner-operated, and the entrepreneur must exhibit a “bias to be helpful to others in the community.”
The first business Hsieh invested in was a restaurant called Eat, owned by a chef who used to work at one of the big casinos on the Strip. She repaid her seed money in just 15 months and has expanded the business into other locations outside DTP.
A former Zappos call center agent started his own barbeque joint called Big Ernie’s BBQ, going from earning $100 a day selling food at a farmer’s market to raking in over $100,000 in revenue during peak months.
DTP has been criticized for not being a “real city” because until recently, residential units were not a part of the revitalization plans. Furthermore, running a company and running a city are not the same thing. In Hsieh’s own words: “The mayor of a city doesn’t actually tell his residents what to do or where to live, and yet cities are vibrant.”
Needless to say, managing a business isn’t quite so hands-off; and when you own the city, everything about it becomes your business.