It would never be easy to follow Tony Hsieh, acclaimed CEO of Zappos, who turned a tiny online shoe seller into a $ 1 billion giant through an obsessive focus on corporate culture and happy employees. But Kedar Deshpande took over at a particularly difficult time.
Zappos, which is owned by Amazon, was already remote working and struggling with pandemic changes in the way people shop when Mr Hsieh abruptly retired in August after two decades, which resulted in that Mr. Deshpande has been appointed CEO. Then tragedy struck in November: Mr Hsieh, 46, died as a result of a house fire in New London, Connecticut, and sent shock waves across the 1,500-strong company as well as in technical and entrepreneurial circles.
It has since been reported that Mr. Hsieh had behaved erratically for months and that friends had considered conducting an intervention last summer. The revelations brought new circumstances to the circumstances of his departure from Zappos.
Mr Deshpande, who was previously Zappos’ chief operating officer, said when Mr Hsieh told him last summer that he wanted to pursue other projects, he hadn’t pushed back.
“From my experience with Tony, Tony always believed in the things he wanted to change,” Deshpande said in an interview, his first as CEO. “I asked him, ‘Hey Tony, are you sure?’ And he said, “Yes, I want to retire” – that was the end of the conversation. “
Now, 42-year-old Deshpande is tasked with leading Zappos through the late stages of the pandemic and into the next stage of the business as an online retailer without the guidance of Mr Hsieh. He also has to show whether the corporate culture of “fun and a little weirdness” in Las Vegas can survive without the chief architect.
“The situation in Covid and everything else makes it very difficult, especially in a culture that relies on physical closeness and happiness associated with it,” Deshpande said in the Zoom interview from his home in Henderson, Nev. But he is optimistic about the future, especially given the decade he has spent in various roles at Zappos.
“The culture is not just one person or two people,” he said.
There was apparently no long-term succession plan in place when Mr. Hsieh resigned. The board of directors of Zappos, which consists of employees from Amazon and Zappos, has appointed Mr. Deshpande to the role. Founded in 1999, the company has long acted as an independent entity within Amazon, which acquired it in July 2009 for $ 1.2 billion and does not disclose its financial data.
It’s difficult for a person to replace a CEO with an oversized person like Mr. Hsieh, said Erik Gordon, a professor at the University of Michigan’s Ross School of Business, who expected the culture of Zappos to see some changes under new leadership will put.
“The person who takes over the founder, who created the culture, doesn’t have the authenticity or moral authority that the founder had,” said Gordon. “Can he keep the same spirit of fun and a little bit of craziness and positive team spirit?”
(Mr. Hsieh did not found the company, but was referred to as the founder from the start due to his involvement as investor and managing director.)
Mr. Deshpande, who is from Aurangabad, India, came to the USA for a Masters in Computer Technology and came to Zappos after holding positions at General Electric and PepsiCo. He joins a growing list of South Asian executives in the US at companies like Microsoft. Google’s parent company Alphabet; and gap.
Zappos, which derives its name from “zapatos”, the Spanish word for shoes, was an early e-commerce success story under Mr. Hsieh, who wrote a bestselling book in 2010: “Bringing Happiness: A Way to Win, Passion and Purpose . “It has been argued that a company’s top priority should be its culture and that employee satisfaction leads to success with customers.
The company, which moved from the Bay Area to southern Nevada in 2004 and now has a campus in downtown Las Vegas, has developed a reputation for being a fun, almost iconic, place to work, where employees regularly socialize at work and outside the office . The company has claimed it is more difficult to get a job at Zappos than it is to get to Harvard.
Mr Deshpande said Zappos employees have moved closer together in some ways over the past year when they brought family or pets to the remote working group.
“When we have Halloween competitions, it’s the whole family that takes part,” said Mr Deshpande, who has two young daughters. He described packages that Zappos sent to employees and their families, for example to plant herb gardens or carry out scientific experiments.
He suspected that employees would return to the office after July 1 and likely develop hybrid schedules of remote and personal work.
While Zappos didn’t struggle with dropping off in physical stores like so many other retailers did, it took a hit at the start of the pandemic when shoes and clothing became an afterthought. Few people bought high heels in March. Sales have since rebounded, driven by demand in the so-called performance and home categories – think running and hiking shoes, pajamas, sports and slippers.
Mr Deshpande said he wasn’t sure when demand for high heels would return, but reckoned that as the economy reopened, people would continue to want comfort.
Zappos has introduced and expanded ways to offset the problems of online shopping during the pandemic, such as: B. to enable some customers to return via UPS Home Pickups and to simplify the exchange of items. It was also found that the average call duration to customer service agents had increased as people had more time in a closed world. They also left more detailed reviews on products.
One of the company’s biggest goals, and a top priority for Mr. Deshpande in the years to come, is to find out how online shopping could be less transactional and more like browsing malls and department stores. This includes the development of new digital magazine-like “verticals” – similar to media companies – such as “The Ones”, which is tailored to female sneakerheads and is advertised as “powered by Zappos”.
Zappos is also behind VRSNL, a luxury site that has its own web address and no visible link to the shoe site. It shows goods by designers such as Dolce & Gabbana and Proenza Schouler. The company has put new efforts into product detail pages and informational videos aimed at audiences such as new runners, and even developed merchandise and campaigns with the brands it carries.
“What online doesn’t deliver, what physically delivers today, is related to these different experiences,” said Deshpande. “Until you actually go and deliver those experiences, I think people will go back to the physical and stay online only for transactional experiences.”
The company calls this effort “Experience Commerce,” and said the category drove 25 percent of its investment. As well as encouraging consumers to discover more, Zappos seeks to make online shopping more coherent – all with the aim of getting consumers to spend more money over time.
“One of the challenges was having someone looking for a jacket, for example, showing inventory side-by-side online – like a $ 30 jacket, $ 50, $ 100, $ 300 jacket,” Deshpande said . “This is a very disorienting experience.”
In his view, all efforts are in line with Zappos’ obsessive focus on service over the past 20 years, which he is expected to keep for the next 20 years.
While the company continues to mourn Mr. Hsieh, the employees will continue to embody the values he stood up for. He pointed to a holiday case where a staff member mentioned that children had missed meeting Santa Claus during the pandemic, resulting in a multi-part effort to set up Santa Zoom meetings for children across the country.
“For me, Tony’s legacy is bringing that happiness to everyone,” Deshpande said. “This culture that he created or developed will be alive.”