The Motley Fool's readers have spoken, and I have heeded their cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting the interests of shareholders and the public first and are generally deserving of praise from investors. For reference, here's my previous selection.
This week, I plan to turn the tables toward the private sector once again to highlight online shoe and accessories retailer Zappos.com -- which is owned by Amazon.com (NASDAQ:AMZN) -- and its CEO, Tony Hsieh.
Kudos to you, Mr. Hsieh
Seriously, Tony Hsieh deserves more than just your customary golf clap after infiltrating an online marketplace dominated by eBay (NASDAQ:EBAY) and Amazon.com and still managing to grow its business.
As with most retailers, the biggest concern is whether you have the right merchandise for customers, if the price is right, whether consumers are willing to spend and if it's convenient for the customer to make the purchase. Take clothing retailer J.C. Penney (OTC:JCPN.Q), for example, which has failed on all fronts. It failed to connect with the customer by taking away sales a little more than a year ago and it even drove away its bread-and-butter, direct-to-consumer business traffic. Penney's has made significant changes since it made this move, including ousting Ron Johnson as CEO, but it may be too little, too late.
Another big concern for all retailers is the health of the economy. Higher payroll taxes are expected to have a negative effect on consumer spending as a vast majority of people now have less disposable cash. This was one of the primary reasons that Wal-Mart's (NYSE:WMT) same-store sales declined 1.4% in its most recent quarter. Even having incredible pricing power like Wal-Mart and being able to offer price points that undercut many local competitors wasn't enough to push sales higher.
For Zappos, none of these concerns have mattered because Hsieh has masterfully positioned the company for continued success. To begin with, he turned down a buyout offer from Amazon's Jeff Bezos in August 2005, a year where Zappos turned in sales of $370 million. Keep in mind the company had sales of less than $2 million just five years prior, but the company grew at an annual rate of 104.5% last decade. Instead, just four years later after the company had established its brand culture and its following, Zappos was sold to Amazon for a whopping $1.2 billion with the prospect that it would continue to be run as an independent entity. Simply put, Amazon couldn't beat Zappos so it did the next best thing: pay out the nose for the right to own Zappos!
Zappos also has an absolutely unbeatable return and shipping policy that could possibly run circles around the already-successful eBay marketplace. Driven by buyers and sellers, eBay's return policies and shipping costs can vary wildly. That's not the case with Zappos, which offers free shipping and a very generous 365-day return policy. Zappos has masterfully removed many of the objections often encountered by direct-to-consumer purchases and given them the incentive to buy. Even more interesting, Zappos' warehouse is less than 20 miles away from its global air-freight hub in Kentucky, resulting in some rock-bottom transportation costs.
A step above his peers
Hsieh has certainly made all the right moves for growing his business and building the Zappos brand domestically. However, there's much more to the Zappos story than just this -- there's the support Hsieh gives employees in the form of perks and the donations he has personally made to help the communities Zappos operates in.
Next to Google, a regular among the best places to work list, perhaps no company offers greater employee perks than Zappos. Amazingly, even the basic things you've come to expect at most top workplaces, such as health and dental coverage, are even better there. The company covers all in-network primary, routine, and preventative medical care and allows $2,000 annually in dental care to cover basic and major services.
Beyond medical and dental care, the list of benefits provided is almost too long to list. It includes 40% off merchandise on Zappos.com, free breakfast, lunches, and snacks, an on-site fitness center, on-site health screenings, a nap room, and adoption and infertility benefits that can total up to $6,000 annually, just to name a few.
Hsieh is no slouch when it comes to giving back to the community, either. In December, he donated $1 million of his own money to Venture for America to help business graduates who want to revitalize downtown Las Vegas. Ultimately, he has been working toward building up downtown Las Vegas in the hope of reigniting growth in the area.
As an additional tidbit, Hsieh takes home an annual salary of just $36,000 per year despite his company's success .
If success is built on the happiness of one's employees, then Zappos CEO Tony Hsieh might as well be teaching the class. He has a very favorable 92% approval rating on Glassdoor.com and has grown the company from a dot-com blip into a billion-dollar e-tailer. By focusing on brand identity, keeping costs under control, and putting the customer and employees first, this CEO has created a unique and successful growth story certainly worthy of two thumbs-up.