Hsieh bought a bigger loft to utilize as their office and party space. In 1999, Hsieh turned 26 and planned a big party at the new loft. Stocked with plenty of Red Bull, Hsieh focuses on meeting people and building relationships and doesn’t believe in carrying business cards. The benefit of getting to know someone personally builds relationships later on. Stop trying to network and instead build up the number and depth of the friendships. The more diverse the relationships the more personal and business benefits will be realized from those friendships later down the road. Hsieh had about 100 people show up for a New Year’s Eve party. They called the loft “Club Bio.” He had fog machines going off and it caused the fire alarms to go off in the entire building and the fire department showed up. The fire department laughed and handled it well. Over the years, Tony Hsueh and his associates had a restaurant, gym, movie theater and lofts all under one roof.
Hsieh had invested in 27 companies and had spent most of the money he has gained on the sale of LinkExchange. Once the investments had been made they were dealing with companies that weren’t making money. They needed to raise money for a second fund but investors were hesitant to invest. Hsieh decided to switch from investor back to entrepreneur. He had discovered his new passion about proving everyone wrong.
Profits and passion.
Concentrate your passion and figure things out. Hsieh’s next two years at Zappos were stressful and the market was down. October 19, 2000, Hsieh sent out a memo to the Zappos employees. He told them to watch their expenses carefully and to maximize the gross profit they could make over the next few months. They wanted to increase new visitors, repeat customers and increase profit. Once they reached profitably they could plan longer term and the bigger picture. But harping on the employees wasn’t going to be enough and they would have to either layoff or ask employees to take a reduction in pay. They knew they still had problems but all felt they were on the right track. Some people decided to leave. Hsieh set up his loft with beds and allowed employees to live there for free. Many stepped up and those who left were the underachievers and those who didn’t believe. Everyone else was making sacrifices but the company was still losing money. Hsieh started selling his properties to keep Zappos going. Everything he was running was losing money. They cut their marketing expenses and focused on getting their repeat customers to continue to buy from them. In 2003, they decided to make customer service their focus. They had all made sacrifices and believed in Zappos and Hsieh made it his goal to save the company.
Looking at the Zappos’ financials it wasn’t going to be enough by just cutting back. They needed a miracle. Hsieh and Fred met at the bar to discuss what they could do. What if they carried all the brands and styles customers wanted. They would need to hire and grow a buying team to decide what products to buy and manage the inventory. They would need to convince the brands to sell to them. They would need to update their software and a warehouse to house all the inventory. They would need to open up a retail store and hire someone to run it. They would need the cash to purchase the inventory and would need another two million dollars. This would all need to be done within the next couple of months. They would buy an existing store and then be able to sell the brands online. This strategy was either going to save or end Zappos. But Hsieh already had a plan to liquidate all his assets to come up with the two million. He had taken Zappos this far and he believed in Zappos and Fred.
They set up a store at the movie theater and it worked. And they found a small shoe store to purchase and suddenly they had access to a lot more brands. They also found an abandoned department store to store their inventory. In 2000, they did 1.6 million dollars in sales and in 2001 they ended up doing 8.6 million dollars in sales. In 2002, they were approached by UPS representative to retain eLogistics and relocate their inventory office to Kentucky which would be closer to shipping. They packed everything into three trucks and moved in three days. They packed 40,000 pairs of shoes. But one of their semi-trucks lost control and rolled over. All the shoes were destroyed. They had to contact all the customers to advise their shoes wouldn’t be shipped. This was just another little bump in the road for Tony and his associates.