One. Can you tell us a little bit about yourself and how you got to the position of COO/CFO of Zappos.com?

Alfred Lin: I met Tony Hsieh (CEO of Zappos) during our college days. He was the consummate entrepreneur. He and Sanjay Madan, one of Tony’s roommates, took over the grill in our dorm. The tradition was that students would run the grill at nights and serve burgers, fries and shakes. Tony had the idea to put a pizza oven in the grill because he thought it would be higher margin. I had a large college rooming group and so I would go downstairs each night to buy a few pies and I took it upstairs and sold it by the slice. Tony often says that’s why I am the COO/CFO of Zappos.

It wasn’t all that glamorous. I made money purely by accident. All I wanted was to recover the costs of the pizzas. After all, these were my college roommates, but quarters were a prized possession in college because we needed quarters for laundry, video games, vending machines. So instead of paying me $1.25 or $1.50 per slice, I got $2 per slice. I made a pretty good profit with virtually no risk.

After college, Tony and Sanjay started a company called LinkExchange. I joined a year later as VP of Finance after Sequoia Capital invested about $3 million in the company. Seventeen or 18 months later, LinkExchange was sold to Microsoft for $265 million. Sequoia made 17x or 18x in 17 to 18 months.

Tony and I wanted to figure out how to replicate the really fun and early times of a startup. With backing from friends and family of LinkExchange, we started Venture Frogs, a $27 million angel investment fund and an incubator. We invested in about 27 companies. Initially, Zappos was just one of the companies we invested in. Over time, both Tony and I got more and more involved with Zappos because it was the most promising company in our portfolio. We also discovered we enjoyed building business way more than investing in them.

Two. Zappos has been around for 10 years, and started out slowly at first if I remember correctly. When did Zappos became the No 1 e-commerce site for footwear? And what was that realization like for a relatively new company?

Alfred Lin: Yes, Zappos started in 1999. We grew extremely quickly given how little capital we raised to build a relatively capital intensive business where we need to invest in distribution centers and inventory. Today, we have about $180 million in inventory at cost. Relatively early in the company’s existence, we knew we were “the web’s largest shoe store”. In fact that was our tag line for a while, but as soon as we achieved that tag line, we were already moving onto something bigger. We wanted to be a service company that just happens to sell clothing, shoes, bags, and accessories. One of the many things we do is to constantly expand our vision over time.

Three. Most of us have seen the Zappos branded shoe trays at various Airport security check-thrus and they are definitely clever. What has been the response from this, and what are some of the metrics -if any- you use to measure the success of these viral campaigns?

Alfred Lin: The response has been great. We get lots of emails and comments about how creative it was that we were the first to start advertising in the security trays that and how creative the ads were. We do measure ROI on the security trays and they have a pretty decent ROI, although it is still mostly a branding campaign. It’s pretty hard to get someone to respond immediately to an advertisement while they are rushing through a security line with their laptop in the tray.

Four. What is your favorite thing about working at Zappos?

Alfred Lin: My favorite thing about Zappos is the company culture and the people of the company. We are all friends and family here. We all work long hours so having friends and family at work makes it that much more fun and enjoyable.

Five. When you ask people how they found out about Zappos, what do they say? What do they say about their experience?

Alfred Lin: The vast majority of them say that a friend, family member or coworker told them about Zappos. We believe in providing great service to our customers and creating a WOW experience for them because we believe in the power of word of mouth. Our customers are our most powerful advertisers.

Six. How has the ways in which Zappos advertises online changed over the years? What are some ways that the company has changed with the changing trends, and the changing economy?

Alfred Lin: It hasn’t really changed for us. We have always focused any advertising on an ROI basis. We are willing to try and test any vehicle. We redirect money from advertising vehicles that have below average ROI to vehicles with higher ROI. It is as simple (and as complicate) as that.

Seven. How did the Amazon deal come about? Has there been a change in the corporate culture since Amazon purchased Zappos? Has anything else changed significantly?

Alfred Lin: We have kept in touch with Amazon over time. It came about very naturally. We want to continue to build our culture, our brand and our business. We came to an agreement that would allow us to do that this time and made sense for both parties.

Eight. I know Zappos is very open about the premium they place on customer satisfaction. Would you say creating what you guys refer to as the ‘wow’ factor has been the single-most important factor in the brand’s success?

Alfred Lin: The single most important factor in our brand’s success is our culture. The importance of culture comes from a very simple philosophy. You can’t have happy customers without having happy employees, and you can’t have happy employees without creating a culture and a work environment that employees want to belong to and help build. Tony says that brand and culture are two sides of the same coin. So it is important to get all employees aligned to the culture and live, breathe and inspire the culture of the company. You can find many brands that are larger than life and larger than what you might expect the brand to be from the company’s size of revenue, profit, organization, etc. because the employees live that brand.

Nine. I have to ask this one: Zappos is famous for offering new hires $2000 to quit on the spot. The premise is, if they take the money, then they were never that interested in the job in the first place – and, as such would not have made a good Zappos employee in the first place. Have you ever experienced any strange or unusual stories about this, or how often do people take the money?

Alfred Lin: Yes, we believe if you can be convinced to take the money and run, you aren’t that committed to Zappos. We want to weed out the uncommitted as quickly as possible. That is why we make the offer. A very small percentage of people take the offer and that suggests to us that the offer maybe too low. If you are really good at interviewing and judging people, you might be right 60% to 70% of the time. That still means you are wrong 30% to 40% of the time.

10. Is there anything else you’d like to add?

Nope. Thanks for interviewing me.