March 7, 2011

How a Single Cold Call Ignited an Industry

By Selling Power Editors

If not for a single cold call, online retail giant Zappos.com might never have been founded at all — much less gone on to pull in more than $1 billion in gross sales in less than 10 years.

In his book, Delivering Happiness: A Path to Profits, Passion, and Purpose, Zappos.com Inc. founder and CEO Tony Hsieh recalls his reaction to the fateful voicemail he received in 1999 from Nick Swinmurn, a recent college graduate with a small Website and a vision to build the world’s largest online shoe store. “It sounded like the poster child of bad Internet ideas,” Hsieh writes. “Other companies were selling pet food and furniture online and losing large sums of money in the process. In my mind, it seemed like there was no way people would be willing to buy shoes online without trying them on first.”

Swinmurn’s business operations were admittedly primitive. After reserving Shoesite.com as a domain name and collecting inventory by snapping photos of shoes at local shoe stores and posting them on his site, he simply waited for the online orders to roll in. Whenever anyone made a purchase, Swinmurn would run to the store, buy the merchandise, and ship it out. Although he had discovered that the shoe industry was “extremely fragmented and not very tech-savvy,” he believed he was onto something. “It worked,” he remembers. “People started buying shoes.”

Swinmurn wanted to bring his business to the next level – so he called Hsieh. Just 24 years old, Hsieh was already famous in the red hot dot-com world for cofounding an Internet start-up and accepting a $265 million buyout from Microsoft. Although he was actively contemplating ideas for a new company, he nearly deleted the voicemail. But then he heard Swinmurn cite some intriguing stats:

  • The footwear industry was worth $40 billion in the United States.
  • Mail-order catalog sales represented 5 percent of the market.
  • Mail-orders were the fastest-growing segment of the industry.

Hsieh figured that since people were already demonstrating a willingness to buy shoes without trying them on first, Web sales might one day evolve to replace mail-order sales. At an informal meeting, Swinmurn summarized his pitch: The 5 percent of mail-order sales represented about $2 billion of a $40 billion industry. “It is likely that e-commerce will continue to grow,” said Swinmurn. “And it is likely that people will continue to wear shoes in the foreseeable future.” Hsieh decided he liked the odds. As the business grew, he was eventually named CEO.

In the end, Swinmurn’s cold call paid off for all concerned. Today, not only is Zappos.com considered a pioneer in employee happiness and customer-service success practices, the company was also acquired in 2009 by Amazon in a deal valued at more than $1.2 billion.

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