Zappos and Gilt Groupe: Managing hypergrowth

Zappos' Tony Hsieh and Gilt Groupe's Susan Lyne discuss growth and hiring

Zappos CEO Tony Hsieh and Gilt Groupe's Susan Lyne sat down for an on-stage interview at the Web 2.0 Summit and both talked about what they were wearing, as well as how to manage hyper-growth.

Tony Hsieh first discussed the benefits of being acquired by Amazon.  Zappos had a long-term vision for the company, but had some glitches to work out.  Prior to Amazon, when customers returned shoes, it took up to ten days to refund their credit card.  "Ideally, we would've loved to cut that time shorter, but for financial reasons we couldn't.  When Amazon came along, we said we'd like to cut that number to five days.  We thought we'd have to sell this and justify it, but they (Amazon) were like 'yeah, you should do that, next question.'"

The interviewer joked that Dell used to boast to their investors that they held onto their customers' money for ages, but Tony Hsieh was boasting about getting rid of his customers' money.

"Amazon and Zappos are both long-term thinkers.  We're both thinking about five years down the line, ten years down the line," said Hsieh.

Zappos has increased its employee headcount by 50% since being hired by Amazon and will be adding another 2,000 in 2011.  Zappos, as some may know, offers to pay employees $2,000 to quit in an effort to weed out individuals who will not fit with with the culture.  According to Hsieh, some 3% of individuals take the money and leave, so now the company will be increasing the offer to $3,000.

"We don't want employees who are just there for  a paycheck. We want people who are going to stay on for the long-term," Hsieh explained, adding that everyone at Zappos is trained to perform the more menial jobs like answering phones, working in the warehouse, etc.

But have they gotten to a point where paying people to quit is just...impractical?  "We don't just hire for skills and qualifications.  We hire for attitude," said Hsieh.  With 25,000 applicants and only 1% hired, Hsieh said that Zappos is more selective than Harvard.

Both Hsieh and Lyne also talked about the importance of storytelling in business. Susan Lyne discussed the fact that while Kevin Ryan founded Gilt Group, he let co-founders Alexis and Alexandra take credit for founding Gilt Groupe.

What is Gilt's long-term vision?  "More and more commerce is moving online.  We want to be part of that wave and we want to be better at it than anyone else," said Susan Lyre.

And Gilt is doing that, in part, through the draw of exclusivity.  Exclusivity is an interesting lure for customers, said Lyne.  Gilt Groupe, which is expected to be profitable within the next year, offers a number of member-only "clubs" that customers enjoy.  

And Tony Hsieh made a stunning confession: He only owns three pairs of shoes...which is actually a bump up from one pair.