Customer service king Tony Hsieh dies, aged 46 – With insights from The Wall Street Journal

The major difference between the wise and the foolish is one group learns from the experiences of others, while the not-so-smart insist on only paying attention after something actually happens to them. When it comes to customer service, Zappos is the global gold standard – a shoe seller whose experiences have been replicated by many wise retailers the world over. So the passing of Zappos founder Tony Hsieh is being widely mourned. Here's the story of this remarkable son of Taiwanese immigrants to the USA from our partners at The Wall Street Journal. – Alec Hogg.Use Spotify? Access BizNews podcasts here..Use Apple Podcasts? Access BizNews podcasts here..___STEADY_PAYWALL___.Former Zappos chief Tony Hsieh exalted customer service, set high bar for rivals.Entrepreneur nurtured online shoe seller, was bestselling author and management guru.By James Hagerty for The Wall Street Journal.Updated Nov. 29, 2020 5:25 pm ET.Tony Hsieh, who led online shoe retailer Zappos.com Inc. for two decades, had some surprising guidance for employees: If customers wanted a shoe Zappos couldn't supply, the representative should direct them to a rival that could..That service, he figured, was a good way to cultivate loyal customers..Mr. Hsieh, an internet pioneer, customer-service fanatic, management guru and bestselling author, died Friday at the age of 46 of injuries from a house fire in New London, Conn..As a young entrepreneur, he changed the face of internet retailing with bold strokes. To overcome customer skittishness about ordering shoes without trying them on first, Zappos offered free shipping and free returns, giving customers as long as a year to send back unwanted products. Customers could order dozens of pairs of shoes and keep only those they liked—a policy that set a high bar for rivals..The Harvard-educated chief executive, whose parents were immigrants from Taiwan, also insisted on keeping his call center in the U.S. rather than outsourcing it to an overseas supplier that might not meet his exacting standards. Instead of being compensated for handling a high number of calls quickly, Zappos employees were encouraged to spend hours on the line with a single customer if that's what it took to reach satisfaction..Virtually all retailers claim to offer great service, a generous assortment and competitive prices, said Mark A. Cohen, director of retail studies at Columbia University Graduate School of Business. "Most of them," he added, "are not telling the truth." Mr. Cohen, also a longtime Zappos customer, said the company persisted with what he called an incomparable service level..Alfred Lin, who met Mr. Hsieh at Harvard and served as chief financial officer of Zappos in its early years, said Zappos succeeded partly because of his friend's willingness to try things that struck others as crazy. One of those ideas was offering recent hires a month's pay if they quit. That proved a good way of eliminating employees who weren't highly committed, Mr. Lin said..Lavish customer service was costly in the short run but paid off long term, Mr. Lin said. Those who returned the most shoes also ended up paying for lots of shoes and were the most profitable customers, Mr. Lin said..Mr. Hsieh, fueled by Red Bull and Grey Goose vodka in his early days as a sleep-deprived entrepreneur, came across as shy and reserved but loved to throw huge parties. For a spell he lived in an Airstream trailer in downtown Las Vegas, where he kept a pet alpaca named Marley..He co-founded an online ad company in his early 20s and sold it to Microsoft Corp. for about $265 million in 1998. The next year he invested in what became Zappos, nursed it through the dot-com bust and later became CEO. Amazon.com Inc. bought Zappos in 2009 for about $1.2 billion and, impressed with Mr. Hsieh's style, let it operate as an autonomous subsidiary led by Mr. Hsieh, whose name is pronounced shay. He retired in August as chief executive of Zappos..Phone numbers were displayed prominently on the website, and customers were encouraged to call Zappos representatives rather than email them. "The telephone is one of the best branding devices out there," Mr. Hsieh wrote in his 2010 bestselling memoir, "Delivering Happiness.".He was known for management experiments that struck some as visionary and others as wacky. Among the company's 10 core values was "Create Fun and a Little Weirdness." One of its conference rooms featured a pit filled with small plastic balls. In recent years, Zappos has tried out a management style called Holacracy that seeks to eliminate managers and let employees figure out what to do..The oldest of three sons, Tony Hsieh was born Dec. 12, 1973, in Illinois, where his parents were graduate students. When he was 5, the family moved to the Lucas Valley area of Marin County, Calif. His mother was a social worker, and his father a chemical engineer at Chevron Corp..At age 9, he persuaded his parents to pay $33 for a box of dirt containing at least 100 earthworms. His idea was to create a worm farm in his backyard and sell his slithering product to the public. He buried chicken wire in an effort to keep his worms from escaping and fed them with raw egg yolks. After a month, he discovered they had all escaped..His SAT training began in sixth grade. His parents also required him to take piano and violin lessons. To make them think he was practicing, he recorded practice sessions and played them back early on weekend mornings..His mother hoped he would go to medical school or earn a Ph.D. He preferred the idea of going into business so he would be free to do whatever he pleased..As a teenager he delivered newspapers but quit after calculating that he was making only about $2 an hour..In the magazine Boy's Life, he found an ad for a $50 kit that could make pin-on photo buttons and persuaded his parents to buy the device. He advertised the service and soon was making about $200 a month through mail orders. The venture persuaded him, he wrote later, that he could run a successful business with no face-to-face contacts..Later, he spent $800 for a Boy's Life ad offering to sell magic-trick kits for $10 apiece. He received one order and wrote the venture off as a lesson in humility..In high school, he signed up for a Pascal computer-programming course and hung out in the computer lab. Soon he was making $15 an hour working for a programming company. To get more free time, he wrote, "I started making deals with my teachers in which they agreed to let me not attend their classes as long as I did well on their tests." When one teacher assigned him to write a sonnet, he decided the iambic pentameter form was too much work and instead wrote 14 lines in Morse code. The teacher gave him an A+..At Harvard, he studied computer science and generally tried to do the smallest amount of schoolwork required for decent grades while earning money through computer programming and managing a pizza supplier. He signed up for Mandarin because he already knew how to speak it..After graduating, he joined Oracle Corp. in 1995 and was trained in database programming. Five months later, he quit to focus on a business he and a Harvard classmate, Sanjay Madan, had started to create websites for companies. Quickly bored by that business, they transformed it into the LinkExchange internet ad service, based in San Francisco, and attracted funding from Sequoia Capital..Within two years, Mr. Hsieh was bored by that business and agreed to sell it to Microsoft. To celebrate, he took about 15 friends on a three-day Caribbean cruise..With another friend, Mr. Lin, he set up an investment fund and business incubator, Venture Frogs. They soon heard from Nick Swinmurn, who had set up shoesite.comand aimed to create the Amazon of shoes. Mr. Hsieh thought that it was "like the poster child of bad internet ideas," as he put it later. Who would buy shoes without trying them on? He changed his view after Mr. Swinmurn told him that 5% of U.S. shoe sales were already being done via mail order..Mr. Hsieh suggested finding a snappier name for the website. Mr. Swinmurn came up with Zapos, derived from a Spanish word for shoes. Mr. Hsieh told him to add another P so people wouldn't call it ZAY-pos. Venture Frog provided seed investment..After Sequoia initially declined to invest in Zappos, Venture Frog put in more capital, and Mr. Hsieh began spending more time advising the shoe company. Then came the 2000 dot-com stock crash, and funding from other potential investors dried up. Mr. Hsieh decided to spend full time guiding the people he called Zapponians—and prove doubters wrong. The first step was to lay off some of the staff and cultivate the ones willing to bet their careers on online shoe sales..To keep the unprofitable business going, Mr. Hsieh raised cash by selling his prized San Francisco loft. To give Zappos a better assortment of shoes and more reliable service, the company began holding its own inventory instead of relying on shoe manufacturers to ship the product. Sales jumped..Zappos initially outsourced the warehouse operations. That proved disastrously unreliable, and Mr. Hsieh scrambled to set up a company-owned warehouse in Kentucky. For an e-commerce company, he concluded, warehousing and related logistics were too vital to be entrusted to outsiders..Among cities identified as good places to open a call center was Las Vegas. Mr. Hsieh, a poker player who had spent time at high-stakes tables there, decided to put both the call center and the headquarters in Las Vegas so front-line customer-service people would be at the heart of the company rather than on the fringes..In Las Vegas, Mr. Hsieh invested $350 million into revitalizing part of the city's downtown including real estate, restaurants, retail and a tech startup fund starting in 2012. His vision included the development Container Park, a quirky shopping and entertainment center where retailers operate in converted shipping containers. Visitors are greeted by a giant sculpture of a praying mantis that shoots fire..Mr. Hsieh was unmarried and had no children. In 2012, he told the New York Times that he enjoyed "hanging out with different people" rather than formally dating. "I'm not opposed to the idea of marriage," he said. "But statistically, if half of all marriages end in divorce, and of the ones that remain married many are unhappily married, the odds are stacked against you.".Friends recalled his sense of humor. After Zappos had a rash of late deliveries in 2014, he sent an apology note to customers and provided a phone number for use by anyone who suffered "undue hardship." As for those who were merely annoyed, he said, they were welcome to call Zappos and "ask whoever answers the phone to do something weird and embarrassing, like sing 'I'm a Little Teacup.'".Write to James R. Hagerty at bob.hagerty@wsj.comCopyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8.Appeared in the November 30, 2020, print edition as 'Ex-Zappos CEO Put Service First.'

Customer service king Tony Hsieh dies, aged 46 – With insights from The Wall Street Journal

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