Delivering Happiness

How I Got the Original Idea
by Nick
Buying a pair of shoes shouldn’t be so hard, I remember thinking.
Store after store, mall after mall, I couldn’t find a single pair. It
wasn’t as if I was living in Smalltown, USA, either. If I couldn’t find
shoes worth buying in the Bay Area, I could only imagine the kind of
trouble people had elsewhere.

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At the time, there were just a bunch of mom-and-pop stores on
the Web that didn’t make shoe shopping any easier. So I thought,
why not create a single place online that people could come to, find
exactly the shoe they want in exactly the right size, and have it show
up on their doorstep in a few days? It was such a simple idea, why
wasn’t anyone doing it?
It was brilliant until I discovered the reason—it wasn’t going to
be easy. The shoe industry was extremely fragmented and not very
tech-savvy. But if I could figure out a way to create a network among
all the separate shoe stores, that could be the solution.
I went ahead and reserved the domain name 
Shoesite.com
. With
the site ready to go, I just needed one other thing—shoes.
I headed down to the local shoe store, took pictures of their stock,
and put them on the Web site. Every time someone bought something
on the site, I’d buy it from the store and ship it to them.
For a big believer in technology, I couldn’t have found a more
primitive way to do it.
But it worked. People started buying shoes. I didn’t have the
faintest clue about the workings of the shoe industry, but I knew I
was on to something. Even though I’d never bought a pair of shoes
through mail order, statistics proved there were a ton of people doing
it. I stopped thinking, Hey, this is a good idea, and started believing
in it. Somehow, I had to make it work.
A few weeks later, Nick contacted us and said that he wanted to set up a
lunch meeting. He’d found someone named Fred who worked in the men’s
shoe department at Nordstrom and was interested in joining the company,
but only if the company got funding beyond the small friends-and-family
round that Nick had already raised. Nick also asked me what I thought of
“Zapos” as the name for the company, derived from zapatos, which was the
Spanish word for “shoes.” I told him that he should add another p to it so
that people wouldn’t mispronounce it and accidentally say ZAY-pos.
And thus, the name Zappos was born.

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A few days later, Alfred and I met with Nick and Fred at Mel’s, a 1950s-
themed diner a block away from where we lived. As we talked about the
potential of Zappos, I did my best to not let the fact that Fred was a spitting
image of Nicolas Cage distract me from the business conversation. Fred
was thirty-three years old, tall, and really did look like he could be Nicolas
Cage’s stunt double.
I ordered the turkey melt, with a side of chicken noodle soup to dip the
sandwich in. Fred ordered a turkey burger. Exactly ten years later, Fred and
I would return to Mel’s and order the same thing to celebrate our ten-year
meeting-versary together.
Nick talked about the progress that the Web site had made over the past
few weeks. They were already getting $2,000 worth of orders a week, and
the numbers were growing. They weren’t making any money, because
anytime an order was placed, Nick would run to the local shoe store, buy
the item, and then ship it out to the customer. Nick wanted to put up the
Web site just to prove that people would actually be willing to buy shoes
online.
There were literally thousands of different brands in the footwear
industry. The real business idea was to eventually form partnerships with
hundreds of brands, and have each of the brands provide Zappos with an
inventory feed of what was in each of their warehouses. Zappos would take
orders from customers on the Internet, then transmit the order to the
manufacturer of each brand, which would then ship directly to the Zappos
customer.
This was known as a “drop ship” relationship, and although it already
existed in many other industries, drop shipping had never been done before
in the footwear industry. Nick and Fred were betting that they would be
able to convince the brands at the next shoe show to start drop shipping, and
then Zappos would not have to own any inventory or worry about running a
warehouse.
Fred told us that he’d climbed the corporate ladder at Nordstrom for
eight years, just bought a house, and just had his first kid. He knew that
joining Zappos would be a big risk, but he was ready to take a leap of faith
if Venture Frogs would provide the seed funding for the company.
Alfred and I looked at each other. Nick and Fred were exactly the type
of people we were looking to invest in. We didn’t know if the shoe idea

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would work or not, but they were clearly passionate and willing to place big
bets.
We decided that we would invest enough money so that Zappos could
hire more employees and meet payroll through the end of the year. The idea
was that if the company was progressing and doing well by the end of the
year, then Zappos could raise a lot more money from a venture-capital firm
such as Sequoia. We felt confident that since Sequoia had made out with
more than $50 million from their $3 million investment in LinkExchange,
they would be willing to place another bet on a company that Alfred and I
were involved in.
A week after our seed investment, Fred quit his job at Nordstrom. He
was officially a Zappos employee now. He and Nick headed to the shoe
show in Las Vegas the very next day.