Aaron Magness from Zappos – Podcast Transcript

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Shaun Ryan: [0:02] Hi, I’m Shaun Ryan for the Ecommerce Podcast, and today I’m talking to Aaron Magness from Zappos.com. Hi, Aaron.

Aaron Magness: [0:07] Hey, how are you doing today?

Shaun: [0:09] Very good. Now, I’ve got a traditional first question on this podcast. What’s the first thing you ever bought online?

Aaron: [0:15] Oh, the first thing I ever bought online. I’d probably have to say that I purchased a flight.

Shaun: [0:23] A flight, OK. Cool.

Aaron: [0:25] So yeah, it wasn’t a product per se.

Shaun: [0:28] And do you know what the most recent thing was that you bought online?

Aaron: [0:32] Most recent think, I think I bought a pair of jeans from Zappos, actually, a pair of seven For All Mankind jeans.

Shaun: [0:42] Great to see you’re using your own company.

Aaron: [0:45] I’m a big fan.

Shaun: [0:49] And I trust it was a good experience?

Aaron: [0:51] Phenomenal.

Shaun: [0:53] Phenomenal, great.

Aaron: [0:54] That’s pretty much what we’re all about here, and it’s amazing.

Shaun: [0:59] So can you give me some background about yourself and how you got to be in this position? What is your position at Zappos?

Aaron: [1:07] Well, my official title is, I think, business development manager. Zappos doesn’t really focus a lot on titles. Currently I oversee brand marketing, our creative services department, public relations, and other business development initiatives.

[1:26] I started, for the last seven years, doing business development for Williams-Sonoma in San Francisco, and I joined Zappos about four months ago, and just sort of jumped in, figured out, you know, what can we do, and what direction can we go in.

Shaun: [1:44] Excellent. And are you still based in San Francisco?

Aaron: [1:48] No, I moved out to Las Vegas. Big change from city to city.

Shaun: [1:54] Now, I was reading a little bit about what happens to new employees. Did you get the time, the first few weeks, where you had to be on the phones talking to customers?

Aaron: [2:06] Definitely. So that’s a huge initiative that, you know, it’s an amazing way to make sure that everyone who is hired comes in and has the right mindset for the culture and what we’re trying to accomplish.

[2:16] So my first four weeks, everyone’s first four weeks they go into a training, and the training is set up for call center associates. So you learn company history, you learn about our core values and what we’re trying to do, and then you take two full weeks of phone calls. So for two weeks I was, yeah, when someone was calling into Zappos, very well they could’ve talked to me.

[2:40] So it’s a great way to really make sure everyone is on the same page and understanding, like, we’re a service company, and in order for me to understand that, I need to interact with the customers. And everyone from accounting to legal, and everywhere in-between, is taking those same calls, and it does a great job keeping us all on the same page and focused.

Shaun: [3:00] Yeah, I mean, that’s a fantastic idea of making sure people understand the business, you know, because in the end, the business is all about the customers and giving them good service.

Aaron: [3:10] Yeah, and we do get a lot of questions, you know, because it’s a huge expense, people coming in at different salaries and working in the call center for four weeks before they’re even able to start what they were hired for, but we don’t see it as an expense, we see it as an investment to make sure that we, we need to stay grounded in what we’re here for, and we’re here for the customer and making that best experience possible.

[3:34] And you can’t tell someone about the experience unless you’ve actually been there interacting with the customer, so it works out really well for us.

Shaun: [3:43] That’s just superb. Now can you give, you told me you had to learn about the company history as part of your induction, so can you tell me, give me a brief history of Zappos and what the company does.

Aaron: [3:56] Definitely. So, the company was founded in 1999. The founder was going to a mall, actually, in San Francisco, trying to find a pair of shoes, and he found the right pair of shoes but not the right size, and he found the right size and not the right color, you know, on and on. So he got frustrated, went home, and said, there’s got to be a better way to go about doing this, and started a company, and initially got funding from Tony Hsieh who is now our CEO. He, at the time, had a venture capital fund incubator that he invested in the company.

[4:33] And he almost didn’t even take the call because, you know, who’s going to buy shoes online? The idea was just absurd. And when he started looking at it, at the time, a $40 billion a year industry, five percent of all sales were being done through catalogue, and online shopping was outpacing the growth of catalogue shopping.

[4:52] You can definitely see the direction it was going, so he jumped in and since then, we’ve gone from $0 in sales in 1999 to this year a goal of right about $1 billion. So we’ve seen some really phenomenal growth in a short amount of time in a field that people didn’t think would be really possible.

[5:15] And since then we’ve really branched out our focus to multiple categories; we sell everything from clothes, you know, obviously still the footwear, but handbags, eyewear, home, house-wares, electronics. And we’re branching out based on customer requests and customer needs, because again, that’s what we’re here for is making sure that customer has the best experience.

Shaun: [5:37] And what is it that’s special about the Zappos experience compared to other online experiences?

Aaron: [5:42] Well, I think the main thing that stands out is our culture. I think a lot of companies will often try to hire people and then make sure that they fit into the culture afterwards, whereas we sort of turn it on its ear. During the interview process, 50 percent of the interview is focused on, you know, your technical skills, can you do the job you’re being interviewed for, but the other 50 percent is culture fit. Are you going to fit in?

[6:11] You can have the most amazing technical person, but if they’re not going to be a culture fit, they’re not going to be hired. So by focusing on our culture, we’re able to excel in the service industry, because great service isn’t something that you can teach. It’s got to be innate to you. So we make sure that we hire to that; the great service comes naturally afterwards.

Shaun: [6:36] Right. And I also read that you put a lot of effort on making sure that you can deliver the products very quickly. Is that right?

Aaron: [6:45] Definitely. Another thing about when we originally started, the focus was to drop-ship everything. So we would hold no inventory, but we would work with all the brands and they would drop-ship.

[6:58] And when we wanted to focus on customer service, well in order to do that, it means you have to own the entire experience. So we don’t outsource anything that we do. So we own our own call center, and it’s in the same building as our corporate headquarters because we want to make sure, again, we’re all on the same page. And that continues on through the distribution center, where it’s owned and operated by us with that end goal of how can we control that entire experience.

[7:33] And we try to make as many upgrades as possible, you know, a lot of companies spend a lot of money on advertising campaigns and things like that; we try to make sure we’re focusing those dollars in ways that will continue to improve the customer experience.

[7:48] When we first started, shipping was free, which it still is, but everything shipped out ground, and as we continue to grow and become more successful, we upgraded shipping to two-day. And then now, we upgrade almost all of our orders to overnight shipping for free, and we do that as a service to our customers to really wow them, you know?

[8:07] When you’re ordering something online, oftentimes it can take two weeks before you get it. So we already tell you you’re going to get it in four to five days, and then it’s a great “wow” factor when, about an hour after they place their order, they get an email saying, hey, by the way, we upgraded you for free.

[8:23] One of the challenges with buying clothes and shoes online that we’re very aware of is people want to make sure that it’s hassle-free to try things on, so we want to get it to them as soon as possible and then also make sure that, if there’s any questions or any problems, we’re here 24 hours a day for them and they have up to a full year to return items, shipping is always free both ways, so we just try to make the experience as simple for the customer as possible.

Shaun: [8:55] And I mention, that must help with your marketing. You sort of talked a little bit about advertising; I don’t believe you do a lot of advertising yourselves, but are more focused on word of mouth.

Aaron: [9:07] Well, definitely. I mean, word of mouth is really what helps register growth on any given day. 75 percent of all our orders are from repeat customers, so we have a very loyal customer base that has helped us grow. And as with everything, if you have a great experience, you’re going to tell people, if you have a poor experience, you’re going to tell people. So we’ve been really lucky to be on the, you know, we really focus hard to be on the positive side of things.

[9:35] But we also do traditional marketing as well, we’ve got a TV campaign, we’ve run print ads, but just not as much as people would probably expect or as much as other companies.

Shaun: [9:45] Right. And so, so you have the TV and the print, what other ways do you attract people to your site? You’re doing search engine marketing?

Aaron: [9:54] Yeah, definitely. So, online is a huge focus for us, you know, especially if you’re a pure play ecommerce site, you really need to rely on that. So we do, you know, search engine, obviously, AdWords, and things like that. And it’s a continued focus of, how can we get more people to find the product that they’re looking for and make them aware that it is here at Zappos.com.

Shaun: [10:20] Right. Now, do you have a marketing campaign you’re particularly proud of?

Aaron: [10:24] Well, I’m proud of everything.

[10:28] [laughter]

Aaron: [10:30] No, I think there’s some things that really stand out. One thing we really try to do is be first to market in a unique way, from an ad campaign. So one of the things that we’ve done that’s generated quite a bit of buzz is we partnered with TSA at some of the airports here in the United States about going through the security lines, where we sponsor the security bins.

Shaun: [10:58] Yes.

Aaron: [10:59] So, you know, you take your shoes off, and you’re putting them in the bin, and there’s a Zappos ad right there. And that’s something that stands out, it’s unique, there’s no other players in the market right now, so it’s something that, you know, it was able to have a huge focus for us or generate a lot of publicity.

[11:16] And so, we try to find those little things like that where, before it gets saturated, before you have to look at 97 different branding impressions in front of you, if we can own that one, get in, make sure that we have a good experience with it, and then continue to look for the next opportunity like that.

Shaun: [11:34] Yeah, I mean, that’s a fantastic idea because those bins are, they’re just blank, grey planes looking at you.

Aaron: [11:47] Yeah.

Shaun: [11:47] So, who came up with that idea?

Aaron: [11:48] You know, it was before I came in, but, you know, I think the idea to definitely go after it, because it had never been tested, obviously, and it’s a risk anytime you’re going to spend money on something like that. But I’m pretty sure that Tony, our CEO, was the big driver. He’s very innovative and always looking for new ideas, and that’s an example of something like that.

Shaun: [12:12] And, sort of following on from that comment, I see Tony’s on Twitter.

Aaron: [12:21] Yes.

Shaun: [12:23] Can you tell me about your Twitter campaign and how that’s been working for you and what you’ve been doing there?

Aaron: [12:29] Definitely. Well, we live by 10 core values, and, I believe core value, I don’t have it in front of me, so don’t quote me, I think it’s core value number six is open and honest communication, along those lines. And one of the great things about Twitter is it allows you to create these personal emotional connections with your employees, with your customers, you know, with everyone, and really break down the walls of the consumer and the corporation.

[12:59] So it’s not just Tony, he is on Twitter at Zappos, so that is him. And a lot of people even ask about that, you know, is it a PR person that’s actually doing it, or a marketing person? No, that’s our CEO, and he wants to make sure that he’s connecting with our customers as much as possible. We have a lot of employees on it, obviously not as many as popular as Tony, he has about 15,000 followers right now.

[13:28] But he uses it for everything that a regular, you know, someone not focused on their business would use it for. He talks about places, trips that he goes on, speaking engagements, you know, random places that he’s out at, but he also talks about, you know, hey, we’re re-launching our website, here’s the beta version of it, take a look, let me know what you think.

[13:57] So, really getting the customers engaged in making sure that we are growing with our customers and not trying to build something and then hope the customers catch on. It’s a great way to really interact and create that connection.

Shaun: [14:09] Yeah, that’s fantastic. I mean, Twitter’s such a relatively new, compared to the other types of blogging or whatever, it’s really interesting to see someone using it successfully.

Aaron: [14:25] Yeah, definitely.

Shaun: [14:28] I mean, what advice would you give to another ecommerce player if they were considering using Twitter? How should they go about it?

Aaron: [14:35] You know, I really think everyone should, but I think some of the other companies that have tried it seem to come across very sales.

Shaun: [14:45] Yeah.

Aaron: [14:46] And, you know, people get enough ad campaigns shoved in their face. They don’t need, you know, now, to get that again through Twitter. So my main advice is just be yourself. Don’t try to be something that you’re not, because you’re either going to turn someone off or they’re going to figure it out.

[15:05] And don’t pretend, you know, don’t say that you are the official spokesperson for the company if it’s not. That’s something that, you know, open and honest is a very big part of what we do.

[15:18] And that’s my suggestion, is just be as upfront as you possibly can, and really form that relationship. I think a lot of companies are not focusing on creating that, so focused on, you know, well, how can I squeeze one more penny out of that customer without realizing, we’re building a relationship, and over time, as long as the customer’s happy, we’re going to grow and be successful as well.

[15:43] We preach that, especially all of Tony’s speaking engagements, always just be open, talk to your customers, find out what they want, and work towards that.

Shaun: [15:58] Yeah. And if you’re open and you have a passion for your business, then that’s going to come through your communications, be it on Twitter, blog, or however else you’re talking to your customers. Right.

Aaron: [16:09] Yeah, definitely.

Shaun: [16:11] So, what do you as your biggest opportunities online now?

Aaron: [16:15] I think the biggest opportunity right now is just continuing our differentiation. A lot of ecommerce companies are more or less a faceless piece; there’s no real interaction with the customer. And our opportunity is to really continue to show who we are. We don’t hide our contact number, for example; it’s on the same spot of every page that you click on.

[16:48] Zappos, what do you want to know? You have a question, any time, call us up, we’re here for you. You know, continuing to deliver “wow” through service, that’s what our main goal is, and make sure that we are getting the orders out in a timely fashion, as quickly as possible, correctly, and that we have the items you want to purchase, that we have them available online.

[17:10] And as we continue to focus on customers, staying customer-minded and customer-focused, you know, that’s where we have the opportunity to differentiate ourselves. And that, again, starts with our culture and making sure that we’re hiring the right people from the start, and then being able to maintain those service levels on the backend.

Shaun: [17:31] Yeah, now that makes sense. And I mentioned, are you going to be expanding or continue to expand your product line as well?

Aaron: [17:39] Well, we expand it based on customer needs. So it’s not, you know, someone wasn’t just saying, for example, for the electronics, hey, we should sell electronics. We were getting enough searches and requests for electronics that we figured, well, it’s time for us to go into it.

[17:57] With our main focus being a service company, we consider ourselves a service company that happens to sell… shoes and clothes and handbags, and now as a result of everything else, eventually it can be anything and everything as long as we maintain our focus on the customer and satisfying and exceeding their needs and expectations.

Shaun: [18:18] That makes perfect sense to me. Do you have an ecommerce site other than yours that you particularly admire and why is that?

Aaron: [18:27] Oh. A lot of sites that I go to, I’m trying to think of who I am very loyal to. Actually now with Zappos selling so many different things, I’m trying to think of who else I use. I’m trying to think of the last time I bought a product online that wasn’t for…

Shaun: [18:58] That wasn’t from Zappos.

Aaron: [19:00] You know, I think… Yeah. That does say a lot there. I think something like Williams-Sonoma. It’s an amazing brand that people really believe in. And I think they do a really good job telling the ‘us’ story. They’re really selling them experience as opposed to selling products.

Shaun: [19:16] Yep.

Aaron: [19:17] You know what I mean? I definitely like what they do.

Shaun: [19:20] OK. No, and that’s great. And it’s interesting. It’s not the product itself, it’s the whole experience is the attractive part about that.

Aaron: [19:31] Definitely. You can find products anywhere.

Shaun: [19:35] Right.

Aaron: [19:35] On some level, everyone is selling; there are a lot of places selling the same thing. What’s the differentiation? What’s the experience that’s going to drive you to come back? Because in the end, the cost is all going to come out about even, so it’s all going to be about the same. The product you know is the same.

[19:52] So what sets it apart? It’s having that experience. And for us it’s making sure the customer-that we’re exceeding the customer’s expectations.

Shaun: [20:01] Now, with close to a billion dollars in sales, you must have a lot of people come on to your store and it must put some stresses onto your ecommerce system. Can you tell me a little bit about what sort of technologies you’re using to run your online store?

Aaron: [20:18] I don’t know if I’m the best person to answer that. I know, and especially with me being relatively new, but I know that it’s built on a lot of open-source platforms that allow us to be flexible without- and reacting to different things. The site was built 100% internally.

Shaun: [20:40] Yep.

Aaron: [20:41] So it’s not a lot of off-the-shelf pieces that are plug-n-play. As we continue to grow, obviously, there’s going to be more incorporation of different things like that. But what the early-on focus was we want to be nimble and quick, and as lean as possible, using as much open-source as possible.

Shaun: [21:01] Yep. And that makes sense. What do you think your current, your biggest headaches are at the moment?

Aaron: [21:07] I’m sorry. Say that again.

Shaun: [21:09] What are your biggest headaches, what keeps you awake at night?

Aaron: [21:12] My biggest headache is what – definitely what I notice is brand awareness. I think when I’m talking to people or either interacting, people either know and love Zappos or they haven’t heard of Zappos. So continuing to get that awareness.

[21:30] There are not a lot of people out there that are like, “Oh, I know them, and I know what they do, but I just don’t buy brands from someone else.” We just don’t have that segment. It’s all, “I buy as much as I can from Zappos,” or “I never heard of them.”

[21:42] So really trying to maintain, you know, get that across, to make it aware as possible to different people. And the other thing, we started out selling shoes, and it’s still a majority of our business, and that’s completely fine. But now that we sell so many different products, it’s making people aware that we sell all these different things.

[22:04] When people do know Zappos it’s, “Oh, yes, the shoe company.” Well, we’re not necessarily shoes any more. We’re also clothes and handbags, everything else. So really changing that mindset about that.

Shaun: [22:19] How are you going about that?

Aaron: [22:21] Well, we’re, through our campaigns, we’re definitely trying different things. Our early-on campaigns were, obviously, all about shoes. And now we’re trying to be as project-nostic as possible.

[22:34] Our campaign is all about getting the Zappos box. It doesn’t matter what’s in it, because it’s the experience you went through in order to get that box or those boxes-it’s like happiness in a box. You know, you open it and you’re excited. That’s what goes with it.

[22:53] We’re trying to get way from our own internal messaging and external messaging being about shoes and more about who we are and all the different things that we do offer.

Shaun: [23:05] And that’ll come over time. How long have you been selling products other than shoes?

Aaron: [23:10] I guess probably with the real focus, I think clothes really started coming on last year.

Shaun: [23:18] Yep.

Aaron: [23:18] And everything else just trickled in at different times since then, as well.

Shaun: [23:25] So it’s still relatively recent in your history though and going on.

Aaron: [23:28] Yeah, definitely. And I think we all understand it is something that takes time, and that’s the challenge we have ahead of us.

Shaun: [23:37] Now, the big focus at the moment is the economy and the financial crisis. How do you see that effecting your growth and your business in the coming months and the longer term?

Aaron: [23:53] Well, you know. The economy is what it is, and it’s not something we can control. What we can control is that customer experience, and maintain our focus on that. We’re still growing and doing well. But are we growing as fast as we would be otherwise? Probably not.

[24:12] But those are the kinds of things that now, with the economy as it is, it allows for a time of retrenching and refocusing on where we need to be aligned at and what direction we need to be headed to. I think it’s a great opportunity for top retailers to really come out leaps and bounds ahead of where we would be if everything were going normally.

[24:42] It really forces you to think about your state of your business and how you can improve, and come out of it in the end.

Shaun: [24:52] So you expect ecommerce to continue to grow in general through this recession?

Aaron: [25:02] Yeah, we do. I think one of the things holding ecommerce back is the number of people who have broadband connections. And as those continue to grow, ecommerce is going to continue to grow.

[25:14] It also allows for opportunity, because gas prices, although they’ve come down recently, people want to spend as little as possible. Especially for a company like Zappos, where shipping is free, you get it the next day. There’s no real pain point keeping you from, “Oh, I have to go to the mall for this.” You can just shop online from the convenience of your home. I think that’s where we have the opportunity to do well.

Shaun: [25:45] It’s great to hear someone reasonably positive in this time of gloom. Switching topics, ecommerce is still relatively new, and there continue to be new things coming up. How do you keep up with the latest trends?

Aaron: [26:07] I like to-I definitely read a lot online, different blogs. I read “Tech Crunch” often. Figure out what’s going on. I’m always “Wall Street Journal,” “Fortune,” things like that. But I just try to read as much as I can about business in general, and see how other people are doing and the direction they’re going.

Shaun: [26:31] Yep. And how about trade conferences, do you get to go to conferences at all?

Aaron: [26:36] I haven’t with Zappos. I think as Tony becomes more and more in demand, he’s traveling to a lot of different conferences and speaking engagements. So I think there’s opportunity there to get out and see what other people are doing.