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   Technology StocksAmazon.com, Inc. (AMZN)


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From: Julius Wong10/28/2020 8:48:10 AM
2 Recommendations   of 164198
 
Ranked: The Top 100 Product Searches on Amazon





What Products are People Searching for on Amazon?When it comes to searching for products online, a majority of U.S. shoppers go directly to Amazon. Thanks to this widespread use, product searches on Amazon provide interesting insights into current consumer behavior, including what shoppers have been focusing on in 2020.

Today’s chart uses data from Ahrefs to showcase Amazon’s top 100 U.S. product searches. We’ll also dive into the most popular categories, as well as top keyword searches on a global basis.

Top 100 Amazon Product Searches in the U.S.Out of the top 100 product searches on Amazon, over half are for electronics.

Nintendo Switch is the most searched product keyword, with approximately one million monthly searches. This makes sense, considering the console’s recent surge in popularity—in March 2020, U.S. sales of the Nintendo Switch more than doubled compared to a year prior.

Here’s a look at the full ranking of all product keywords, by monthly search volume:

Search:
RankKeywordSearch VolumeCategory
Showing 1 to 10 of 100 entries
Previous Next

Two different Apple products make the top 10—Airpods and iPad. It’s interesting that Airpods and iPads have their own search term distinctive from their broader categories (wireless headphones and tablets), demonstrating Apple’s strong brand recognition in America.

Of course, Apple is also dominant in the personal tech market more broadly. For instance, iPhones make up 46% of the U.S. smartphone market by number of devices sold.

Top 100 Amazon Product Searches GloballyLike the U.S. top searches, Nintendo Switch comes in at number one worldwide, with over 2 million approximate monthly searches.

Search:
RankKeywordSearch VolumeCategory
Showing 1 to 10 of 100 entries
Previous Next

Interestingly, three different Apple products appear in the top 10 global searches—Airpods, iPad, and iPhone. Additionally, a couple of older iPhone models make the overall ranking—iPhone 7 comes in at 21st place, and iPhone 8 takes the 28th spot.

On the U.S. list, these older iPhone models don’t even make the top 100.

Keyword Category RankingsWhen it comes to top-ranking keywords, the electronics category appears to be the most important to Americans. Over half the U.S. top product searches fall under electronics, with the home category in second place.

Here’s a look at the full U.S. category breakdown:



Interestingly, when comparing the order of categories in the U.S versus worldwide, the sections remain mostly the same:

Category# of U.S. Keywords# of Global Keywords
Like the U.S., electronics comes in at number one worldwide. However, it’s an even larger portion for the global ranking—70 keyword searches on the global list are for electronics.

The home category is more popular in the U.S. than across the globe, with 22 in the U.S. versus 12 worldwide. In America, air fryer is the most popular keyword search under this section—possibly because people were looking for a quick way to make their meals while they were busy playing Animal Crossing on their Switches.

The second most popular U.S. keyword under the home category is toilet paper. Considering the toilet paper shortages in the spring of 2020, this makes sense, as stores began limiting the number of rolls a person could purchase.

What Will 2021 Bring?Based on the top 100 list, both globally and in the U.S., it’s clear that when searching on Amazon, a majority of consumers are looking for electronics.

However, the specific electronics they’re searching for (such as iPhones and Nintendo Switches), helps to provide some context around the products people are interested in, as well as the particular brands that are currently on everyone’s radar.

Will the Switch get switched out of the top spot in 2021? Because electronics tend to update so frequently, it’s very possible.

visualcapitalist.com

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From: Glenn Petersen10/29/2020 5:52:00 PM
3 Recommendations   of 164198
 
Amazon reports sales growth of 37%, topping estimates

PUBLISHED THU, OCT 29 20203:31 PM EDT
UPDATED 12 MIN AGO
Annie Palmer @ANNIERPALMER
CNBC.com

KEY POINTS

-- Amazon reported its third-quarter results after the closing bell on Thursday, soaring past analysts’ expectations for profit and sales, which grew 37% year over year.

-- For the fourth quarter, Amazon forecast operating income to fall between $1 billion and $4.5 billion, assuming about $4.0 billion of costs tied to COVID-19.

Amazon reported better-than-expected third-quarter results after the bell on Thursday, including soaring profits and 37% revenue growth.

The stock bounced around in extended trading after Amazon provided a wide guidance range for the fourth quarter.

Earnings: $12.37 vs $7.41 per share expected, according to analysts surveyed by Refinitiv
Revenue: $96.15 billion vs $92.7 billion expected, according to analysts surveyed by Refinitiv

Amazon said sales in the fourth quarter will be between $112 billion and $121 billion, which comes out to growth of 28% to 38% from a year earlier. Analysts were expecting revenue of $112.3 billion.

The company forecast operating income of $1 billion to $4.5 billion, assuming about $4.0 billion of costs tied to COVID-19. That’s a step up from last quarter, when Amazon said it would spend more than $2 billion on coronavirus-related measures, including procuring personal protective equipment, enhanced cleaning of its facilities and wage increases.

Amazon continues to be one of the biggest beneficiaries of the pandemic, as consumers flocked to the site for essential goods, groceries and household items. Amazon is expected to face even greater demand heading into the holiday season, with shoppers likely to do the bulk of their gift buying online instead of making trips to the store.

“We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season,” Amazon CEO Jeff Bezos said in a statement.



Bezos also touted Amazon’s recent job creation and treatment of warehouse workers, which has been a subject of scrutiny in recent months. The Amazon CEO pointed to Amazon’s $15 minimum wage and challenged other large employers to “make the jump to $15.”

Amazon is one of few companies that has continued to grow its headcount amid a broader economic downturn due to the coronavirus crisis. The company now counts more than 1.12 million full-time employees across the globe, an increase of 50% year over year. That figure doesn’t include Amazon’s network of contractors and temporary workers.

Amazon’s cloud-computing unit, Amazon Web Services, generated sales of $11.6 billion for the quarter, up 29% year over year and in line with analysts’ estimates, according to FactSet. Operating income in the segment of $3.54 billion topped estimates of $3.45 billion. The segment was helped by millions of people working from home.

The company’s “other” category, which is primarily comprised of its advertising business, saw revenue of $5.4 billion, up 51% year over year. Subscription services, which includes revenue from Prime memberships, climbed 33% year over year to $6.58 billion.

Once again, third-party sales grew faster than Amazon’s first-party business. Third-party sales increased 55% year-over-year, while first-party sales grew 38% year-over-year. Sales fell 10% in Amazon’s physical store unit, which includes Whole Foods Market.

Amazon shares are up 74% this year, the best performance among the five most valuable U.S. tech companies.

Three of those companies — Apple, Alphabet and Facebook — also reported quarterly results after the bell on Thursday and all exceeded analysts’ estimates.

Amazon will hold a call with investors to discuss its third-quarter results starting at 5:30 p.m. ET.

cnbc.com

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From: Glenn Petersen10/31/2020 4:42:31 PM
   of 164198
 
Joe Biden Slams Netflix & Amazon On Taxes, Again

By Jill Goldsmith
Co-Business Editor
Deadline
October 30, 2020 4:29pm

“Let me be clear: Hardworking Americans should not be paying more in federal income taxes than Amazon or Netflix. It’s time for big corporations to finally pay their fair share,” Biden tweeted between frenetic campaign stops with this nail-biter of an election only five days away.

At a rally in Minnesota on Friday afternoon, he broadened out the thesis, one that’s key to his platform, that the wealthiest and biggest companies — some 91 of Fortune 500 companies in particular — paid “zero taxes” last year.

Amazon didn’t immediately respond to a request for comment.

A Netflix spokesperson cited the company’s financial statements, saying “Netflix paid US federal taxes in 2019 and is reporting a significantly higher effective tax rate so far in 2020.”

However, it can’t go unnoticed that many people in Hollywood, including those at the Ted Sarandos co-run streamer and the Jeff Bezos juggernaut, are big supporters of the Biden-Harris ticket and the Democratic Party overall — which may be a sign that Biden wants to show he’s not afraid to call out friends as well as enemies.

Biden’s tax spat with Amazon goes back to the summer of 2019, when he tweeted: “I have nothing against Amazon, but no company pulling in billions of dollars of profits should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth.”

Amazon fired back then with its own tweet: “We’ve paid $2.6B in corporate taxes since 2016. We pay every penny we owe. Congress designed tax laws to encourage companies to reinvest in the American economy. We have. $200B in investments since 2011 & 300K US jobs. Assume VP Biden’s complaint is w/ the tax code, not Amazon.”

The tax debate flared after President Donald Trump and the Republicans reworked the corporate tax code in 2016, slashing the corporate tax rate to 21%, from 35%.

A widely cited analysis by Washington, D.C. think tank the Institute on Taxation and Economic Policy last year analyzed 2018 financial filings of the country’s largest publicly held companies and found that dozens of them, including Amazon and Netflix but also Starbucks, Chevron, Eli Lilly and others, were able to “zero-out” federal income taxes even if they posted profits.

An element of Biden’s tax plan was even dubbed the “Amazon Rule” because he tends to single out the Bezos-run company. It set a 15% minimum tax rate on net annual income for corporations making over $100 million a year, no loopholes allowed.

It’s true that the so-called FAANG or FAAMG stocks — Facebook, Apple, Amazon, Netflix, Microsoft and Alphabet’s Google — have attracted the most attention for their tax rates, according to S&P Global Intelligence. Of that group, S&P said, Facebook was the only company to report an effective tax rate at or above the statutory rate in 2019. Netflix and Microsoft, meanwhile, reported the lowest effective tax rates last year, at 9.5% and 10.2%, respectively.

The reason Netflix popped up today in particular in Biden’s remarks wasn’t clear. Netflix is a much smaller company and more contained business than others in the FAANG/FAAMG group.

Bernie Sanders may be why. He called them out in April 2019, saying, “Amazon, Netflix and dozens of major corporations, as a result of Trump’s tax bill, pay nothing in federal taxes. I think that’s a disgrace.” In November, he singled out Netflix in a tweet:

Yesterday, Netflix said it will raise the price of its standard plan by $1 a month to $14 and of its premium plan by $2 to $18.

deadline.com

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From: Glenn Petersen11/10/2020 9:12:36 AM
   of 164198
 
EU says Amazon breached antitrust rules, opens second investigation into its e-commerce business

PUBLISHED TUE, NOV 10 20206:42 AM EST
UPDATED 18 MIN AGO
Silvia Amaro @SILVIA_AMARO
CNBC.com

KEY POINTS

-- The European Commission is challenging Amazon, saying it used independent sellers’ data to benefit its own retail business.

-- It also announced a second formal investigation into Amazon’s e-commerce processes.

-- Amazon said it disagreed with the commission’s assertions and “will continue to make every effort to ensure it has an accurate understanding of the facts.”

LONDON — The European Commission said Tuesday that Amazon breached European antitrust rules by using independent sellers’ data for its own benefit.

It has also announced a second formal investigation into the company’s e-commerce processes.

In a statement, the commission said Amazon was using the data of third-party sellers — such as order numbers, revenues and number of visitors — to inform its strategic business decisions, like reducing the price of products.

The issue arises because of Amazon’s dual role in selling products itself, and acting as a platform for independent — sometimes rival — sellers.

“Data on the activity of third-party sellers should not be used to the benefit of Amazon when it acts as a competitor to these sellers,” Margrethe Vestager, the EU’s competition chief, said in the statement.

The commission, the executive arm of the European Union, launched a probe into the online retailer in July 2019 on concerns over anti-competitive behavior.

Amazon said it disagreed with the commission’s assertions and “will continue to make every effort to ensure it has an accurate understanding of the facts.” It said that it represents less than 1% of the global retail market.

“No company cares more about small businesses or has done more to support them over the past two decades than Amazon,” the e-commerce giant said.

The commission’s second antitrust investigation will look at how the company choses which sellers offer products via Amazon Prime, its paid-for premium service. It will investigate the possible preferential treatment of Amazon’s own retail business and those that use its logistics and delivery services (known as “fulfilment by Amazon” sellers) over other sellers.

It will also look into the Amazon’s “buy box” function, which offers customers a one-click button to add a product to their shopping cart. U.S. regulators and third-party sellers have previously questioned Amazon over which products get placed in the all-important buy box. Amazon maintains that the buy-box features the offer it thinks customers will prefer overall, while factoring in things like price, delivery speed and Prime.

Vestager said that, while going through 80 million transactions and 100 million products listed on Amazon marketplace, “it became increasingly clear that there might something that we should look into further on the buy box.”

The company will have now the chance to examine the commission’s conclusions and reply in writing or via an oral hearing.

Clarification: The European Commissions has confirmed that its Statement of Objections, published Tuesday, does not constitute legal charges against Amazon.

— CNBC’s Anne Palmer contributed to this report.

Story Link

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From: Sr K11/11/2020 5:28:54 PM
1 Recommendation   of 164198
 
Of the expanded FANG (plus MSFT), AMZN had the biggest gain,11/11/2020.

That's FAANG + M, AMZN was the biggest gainer, a day after a down reaction to EU antitrust action by Vestiger.

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From: Glenn Petersen11/17/2020 6:39:19 AM
1 Recommendation   of 164198
 
Amazon jumps into the pharmacy business with online prescription fulfillment, free delivery for Prime members

PUBLISHED TUE, NOV 17 20206:00 AM EST
UPDATED 12 MIN AGO
Christina Farr
Annie Palmer @ANNIERPALMER
CNBC.com

KEY POINTS

-- Amazon is making its biggest move yet into the pharmacy space.

-- Amazon Pharmacy is designed to make it easy and convenient to order prescription medicines online.

-- There’s also a savings program and free two-day shipping for Prime Members.
Amazon is entering the pharmacy business with a new offering called Amazon Pharmacy, allowing customers in the United States to order prescription medications for home delivery, including free delivery for Amazon Prime members.

Amazon has been quietly building out its pharmacy offering for several years after ramping up internal discussions in 2017 and acquiring PillPack in 2018. The pharmacy space is notoriously complex and competitive in the U.S., and Amazon Pharmacy is built in part on PillPack’s infrastructure, including its pharmacy software, fulfillment centers, and relationships with health plans.

Amazon Pharmacy, announced on Tuesday, is Amazon’s biggest push yet into $300 billion market, and threatens the dominance of traditional pharmacies like CVS and Walgreens, as well as other large retailers that offer pharmacy services, including Walmart.

For Amazon, the announcement is well-timed. Americans are increasingly relying on getting their medicines via mail to avoid getting exposed to the coronavirus. That shift could be permanent, as more people than ever before are learning about new ways of receiving medication.

“We wanted to make it easy for people to get their medication, understand the cost and get it delivered to the home,” said TJ Parker, Amazon’s vice president of pharmacy, who previously co-founded PillPack. “The hard work is to make it easy... there were a number of complications behind the scenes.”

“We think this new benefit will add tremendous value to our members,” added Jamil Ghani, vice president of Amazon Prime. “It’s relevant as folks try to do more from the comfort and safety of their homes.”

How it works

Customers over the age of 18 will have access to the pharmacy service this week in 45 states, not including Hawaii, Illinois, Kentucky, Louisiana and Minnesota. Amazon expects to serve those states over time.

Amazon Pharmacy will accept most forms of insurance, but could offer savings for people without insurance as well. Customers can also use flexible spending accounts or health savings accounts to buy prescriptions on the service.

Before customers order medication for the first time, the site might ask them questions such as whether they’re pregnant, their date of birth, and their gender as it was assigned at birth. That information is required by law to provide pharmacy care, and it helps pharmacists to do things like confirm prescriptions.

Doctors can send prescriptions directly to Amazon Pharmacy, or patients can request a transfer from an existing retailer, like CVS or Walgreens. Amazon says it has tools to verify that a physician legitimately ordered each prescription, and to tamp down on potential fraud.

Amazon Prime customers get free two-day delivery, although shipping might take up to five days the first time a customer orders, as it takes time to transfer a medication. Customers who don’t have Prime can get free delivery within five days, or they can pay $5.99 to upgrade to two-day delivery.

The medicines on offer include a mix of generic and brand-name drugs. Customers can get access to birth control, as well as commonly prescribed drugs like insulin, triamcinolone steroid creams, metformin for controlling blood sugar, and sumatriptan for migraines.

Amazon will not deliver Schedule II controlled medications, including most opioids, and it won’t be replacing the Health & Personal Care store by offering vitamins and supplements.

Customers who have questions about their medications can reach a pharmacist or pharmacy technician at any time through online self-service or phone. Amazon will also screen for potentially problematic drug interactions for customers who are taking multiple medications at once.

Amazon’s Parker said that the storage and collection of customer health information is in compliance with federal HIPAA rules, and the company won’t share pharmacy data to advertisers or marketers without permission.

Amazon has leveraged its rich troves of customer data to build advertising into a key pillar of its overall business, and shows customers personalized ads and offers discounts based on what they have bought in the past. But consumers are likely to have a different set of expectations when they’re placing a prescription order versus browsing for a new pair of pants.
“The information and experience you have inside the pharmacy is separate and distinct from the experience that you have on Amazon.com,” Parker said.

PillPack will continue to serve customers even after Amazon Pharmacy launches. That’s because PillPack is designed for a different use-case: It delivers medicines on a 30-day schedule to a population of patients that tend to be sicker and older than average, and often require multiple prescriptions.

For Prime users: A prescription savings benefit

Amazon Prime members have access to an additional pharmacy perk called the “prescription savings benefit,” which offers a discount of up to 80% on generic medications and up to 40% on brand-name prescriptions.

Amazon negotiated those discounts through a relationship with the InsightRX savings program, which is part of Evernorth, a company that grew out of a merger between Express Scripts and insurance giant Cigna in 2018. Insurers use pharmacy benefits managers like Evernorth to negotiate drug rebates from drug manufacturers in exchange for better coverage.

Even for people who have health coverage, the Prime price might still end up being more affordable than the co-pay -- Amazon’s Parker said it happens “more frequently than people think” (although it won’t count towards a deductible).

Prime customers can also get a prescription savings benefit card to use at up to 50,000 pharmacies, including CVS, Walmart, Rite Aid, and Walgreens. This might be preferable for customers who have an urgent need for a medication and can’t wait two days for delivery.

Amazon’s Parker said the company does not currently have any brick-and-mortar pharmacies, and declined to speculate on future product offerings. But in future, the company could add pharmacies to Whole Foods and its chain of Amazon Fresh stores.

Story Link

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From: Julius Wong11/19/2020 7:57:38 AM
1 Recommendation   of 164198
 
Shakeup at Prime Air as Amazon taps new manufacturers
Nov. 19, 2020 4:01 AM ET|About: Amazon.com, Inc. (AMZN)|By: Yoel Minkoff, SA News Editor

Amazon's (NASDAQ: AMZN) drone project has already been seven years in the making, completing its first delivery in 2016 and receiving U.S. regulatory approval (Part 135 certification) to begin limited testing in August.

Now, the unit is laying off dozens of R&D and manufacturing staff as it reached tentative component deals with two external manufacturers - Austria's FACC Aerospace and Spain's Aernnova Aerospace, FT reports.

Keep in mind that Amazon brought in former Boeing executive David Carbon to run the unit in March, replacing Gur Kimchi, who had ran the operation since 2013.

"It's not meeting the lofty goals and the original vision quite yet," said David Benowitz, head of research at DroneAnalyst. Amazon is trailing what is now a highly competitive field, with rival Walmart (NYSE: WMT) set to begin trialing deliveries with San Francisco-based drone company Zipline.

According to details released in mid-2019, Prime Air will make use of a hexagon-shaped, fully-electric drone that can fly up to 15 miles and carry packages weighing under five pounds.

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From: Sr K11/23/2020 3:52:40 PM
   of 164198
 
1:17 PM

Additionally, Prime members with a myQ smart garage door opener can receive packages inside their garage, and customers can also have their packages delivered to alternative locations.

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From: Glenn Petersen11/28/2020 7:27:55 PM
1 Recommendation   of 164198
 
Can Shopify Compete With Amazon Without Becoming Amazon?

If the key to Amazon’s success has been to put the customer first, for Shopify the key has been to put the merchant first.

By Yiren Lu
New York Magazine
November 26, 2020

In March, the business of Ox Verte, an organic catering company in Manhattan, came to a standstill. Its roster of corporate clients — start-ups that offered free lunches, salespeople with round-table breakfasts — had all implemented work-from-home policies. Events and conferences were canceled for the foreseeable future. If Jessie Gould, the Ox Verte chief executive, hoped to keep her staff employed and her vendors paid, the only path through the pandemic, it seemed, was going to be retail sales. Instead of catering to offices, they would make deliveries to homes. In addition to ready-to-eat meals, they would sell grocery boxes that appealed to health-conscious consumers newly wanting (or forced) to cook. Ox Verte already had a website, but it wasn’t particularly well suited to taking individual orders, so to enable the pivot, the company put up a new online storefront using Shopify, an e-commerce platform based in Canada.

Founded in Ottawa in 2006, Shopify started out as a simple maker of e-commerce websites. Store owners, instead of having to worry about all the technical complexities that go with processing payments, managing checkout flows and working with JavaScript, could upload some pictures of their wares to Shopify, set prices, provide their bank account information and start selling. Over the next 15 years, as e-commerce grew from novelty to part of daily life, Shopify grew with it. Today, it’s a public company with a market capitalization that exceeds $100 billion. Its products include Shopify Capital, which provides funding to merchants that use its platform, and Shop Pay, a checkout process for customers, which has more than 60 million users. Last year, it surpassed eBay to become the No. 2 e-commerce destination in the United States, according to Shopify, with nearly 6 percent of sales, compared to Amazon’s 37 percent.

Unlike Amazon, which is an online marketplace where customers go to buy stuff, Shopify is a software platform visible only to merchants. You don’t go shopping on Shopify the way you do on Amazon; Shopify doesn’t list products directly on Shopify.com. Ox Verte used Shopify’s e-commerce software to handle payments and manage inventory. These features have made Shopify popular among “direct to consumer” brands that don’t want to share their profits or see their brand weakened on Amazon or other marketplaces run by a third party, like Wayfair or Walmart. “The whole spirit of the D.T.C. space is owning the relationship with the customer, having that direct line, and Shopify gives you that control much better than Amazon does,” says Paul Munford, an angel investor and the founder of the popular direct-to-consumer newsletter Lean Luxe.

Though Shopify’s operations are by nature low-profile, the company’s success has made it a linchpin in what Ben Thompson, the author of the tech newsletter Stratechery, recently referred to as the “Anti-Amazon Alliance.” (Another member of the would-be alliance, whose name recognition probably resonates more than Shopify’s: Google Shopping.) In the last few years especially, Shopify has struck up partnerships with ad giants like Facebook and taken on the kind of real-world functions that Amazon dominates. The dream for businesses that sell online has long been to have the ability to offer things like two-day shipping, easy returns, premium customer service and overall operational efficiency without having to be on Amazon’s website. Except for established juggernauts like Nike, individual businesses seem unlikely to realize that vision. But in creating software infrastructure that can be shared between merchants, Shopify has not only strengthened the competitive prospects of existing e-commerce businesses; it has also facilitated the emergence of new ones — including, as it turns out, my own.

In April, months after I started reporting this article, I left my full-time job as a software engineer with the intention of creating my own start-up. The plan had been to take some time to conduct user interviews and then figure out a product. But with the onset of the pandemic, my business partner and I saw an opportunity and decided to move immediately. We started an Asian grocery-delivery service, Mellow Groceries, that would let people shop from grocery suppliers in Flushing, Queens, many of which were only taking orders on the Chinese social-media app WeChat. And so I became a user of Shopify myself.

It’s one thing to report on software as an abstraction and quite another to actually use it as a paying customer. Our experience with Shopify was impressive. We uploaded a spreadsheet of product information — images, prices, categories — picked a template for our digital storefront and out popped a fairly sophisticated-looking e-commerce website. There was already a checkout page, which was integrated with various payment providers. Customizable purchase and shipping confirmation emails could be sent automatically to customers. When an order came in, we would get an email alert. There was a dashboard to track the behavior of visitors to the site. Within two days, we were open for business.

Like many other merchants, we were betting on the way Covid-19 was accelerating the spread of e-commerce generally to propel us specifically. It took eight years for e-commerce as a share of retail sales in the United States to grow to 12 percent from 5 percent. It took only the 12 weeks between March and June this year to reach 16 percent from 12 percent. In one sense, Amazon seems to be the biggest winner of the pandemic when it comes to shopping — the company’s stock price has been up by as much as 86 percent since the beginning of the year. But Shopify has benefited too: As supply chains evolved, wholesalers turned to retail sales and local businesses went online. (Through mid-November, Shopify’s stock price has risen 125 percent this year.) In the dark days of April and May, when even Amazon’s usual performance sputtered and those with Prime subscriptions faced delivery dates months into the future, consumers for the first time in years turned elsewhere — their neighborhood hardware store, their local fishmonger, the organic catering company that brought them lunch at the office — for e-commerce purchases. And they found that, often thanks to Shopify’s unseen capacities, the experience was actually pretty good.

Which is not to say that Shopify is the panacea for businesses that want to be online. As my partner and I would discover, while Shopify solves some challenges of starting an e-commerce store, it leaves others unresolved. In a landscape where customer attention is the scarcest resource, Shopify’s very identity as a neutral platform and invisible infrastructure is perhaps both its greatest asset and its greatest limitation.



The story of the last two decades in e-commerce has been, to a large extent, the story of Amazon’s rise, from humble reseller of books to default shopping destination and computing engine of the internet. Books have been written to explain its success, but the simplest answer lies in plain sight, in Amazon’s mission to be a place where customers can find anything they might want to buy online at the lowest possible prices. What will make customers happy? What will make them want to come back and buy again? The company has sought to address these questions again and again. When I buy something on Amazon, I know that it will be delivered for free and in a couple of days; if something is wrong with the purchase, I’ll be able to return it, no questions asked, without even a shipping label or packaging — I can just hand it over to U.P.S. All that convenience alone is worth the $119 annual Prime subscription.

The pampering of Amazon’s customers has been a boon both to them and to Amazon, securing its dominance, but the merchants — the other panel of the triptych — have not fared as well. Since Amazon first opened up its marketplace in 1999 to third-party sellers, 1.7 million of them have signed up, drawn in by Amazon’s huge customer base, sales volumes and its ability to fulfill orders. That last service, Fulfillment by Amazon (F.B.A.), means that a company doesn’t even have to store, pick and pack its own inventory.

Third-party sellers now account for about 60 percent of the commercial activity on Amazon; a big part of the reason Amazon can claim to be “the everything store” is because of these vendors. Yet their proliferation has, paradoxically, undercut what power they can exert. Individually, they have little brand recognition and little negotiating power against the marketplace. Today, if a business lists an article of clothing on Amazon for $50, Amazon gets $8.50 in commission; if the seller opts to advertise on the site, Amazon likely gets at least another $6.50. And if Fulfillment by Amazon is used, Amazon’s total cut gets closer to 40 percent. Amazon ships F.B.A. products in its own envelopes or brown boxes, highlights competing vendors on the site and charges extra for things like early reviews and dedicated account managers. Amazon monitors and collects pricing data and, until last year, prohibited sellers from offering their goods more cheaply elsewhere. (The company’s current policy says it monitors prices to prevent “practices that harm customer trust.”) One brand I had made plans to interview, upon hearing that I would be writing about the ways in which Shopify could compete with Amazon, decided it was no longer willing to talk to me. (Amazon says it has a “mutually beneficial relationship” with its third-party sellers and that “our interests are well aligned.”)

The story of Shopify’s rise, then, is in many ways a reaction to Amazon’s. It’s about a new generation of e-commerce merchants who want a shot at securing control by going out on their own. If the key to Amazon’s success has been to put the customer first, for Shopify the key has been to put the merchant first. After Warby Parker kicked off the direct-to-consumer phenomenon in 2010, Shopify has, by removing the technical barriers to entry in e-commerce, played an outsize role in fueling a boom that has since produced indie favorites like Gymshark, Brooklinen and Allbirds. (The New York Times’s merchandise store is also on Shopify.)

Now that companies like Shopify have turned software into a commodity, what distinguishes you isn’t whether you can write code, but whether you have something to say and an audience to say it to. The roles of “creator” and “influencer,” which began as ambiguous, relatively fringe side gigs, have become aspirational career paths: 86 percent of Gen Z and millennials recently surveyed said they would post sponsored content for money, and 54 percent said they would become social-media influencers. Influencers, in turn, have realized that it’s more lucrative and meaningful to promote their own products rather than someone else’s. With Shopify, celebrities like Kylie Jenner can leverage their pre-existing audiences on Instagram or Snapchat into billion-dollar e-commerce businesses seemingly overnight.

For these sorts of e-commerce brands, what’s being sold isn’t just some product with utility. It’s a feeling, a community, an identity. Shopify, being the blank canvas it is, is much more suitable for this kind of projection than Amazon, which, by virtue of being Amazon, effectively eclipses individual brands on its site. When you buy something from Amazon, you don’t remember whether it’s from Pvendor or Achiou, or some other third-party seller. You’re certainly not likely to tell your friend about it. But when you go to the Allbirds site and purchase a pair of their wool sneakers, you’re making statements, to yourself and to the world: You’re a card-carrying member of the technorati; you’re basic and proud of it.

Allbirds is one of Shopify’s biggest merchants, and it eschews selling through Amazon or other intermediaries like Foot Locker, despite the fact that doing so would be a shortcut to growth. The hits Allbirds would take to the integrity of its brand and pricing power aren’t worth it to the company. “Amazon is designed to commoditize products to the lowest common denominator of what they stand for,” Joey Zwillinger, Allbirds’s co-founder and co-chief executive, told me. “They would love to devolve us into a feature-and-benefit set and then put every knockoff in the world next to us, and then just drive everybody down to the lowest price, even if you’re sacrificing quality.”



On a snowy day in Ottawa this past winter, I visited the company’s headquarters to meet with Harley Finkelstein, Shopify’s chief operating officer at the time (he is now president). With an ebullience that matched Shopify’s soaring stock price, Finkelstein seemed to embody both the company’s wide-reaching ambitions and its Canadian wholesomeness.

Time and time again, we’ve seen that the personalities of leaders leave an imprint on the culture and ambitions of a company. Elon Musk (Tesla and SpaceX) is an intense iconoclast. Sergey Brin and Larry Page (Google) are former academics. Tobias Lütke, the chief executive of Shopify, was an early contributor to the popular open-source programming framework Ruby on Rails and a well-known enthusiast of the video game StarCraft — he recently made a public offer of an internship to the pro gamer known as SeleCT, declaring that his gaming accomplishments were “enough of a C.V.” Both Lütke, who is 40, and Finkelstein, 37, are active on Twitter, where Lütke has noted that he has rarely worked more than 40 hours a week (unlike Musk). At a time when Silicon Valley was chasing no-holds-barred growth, Shopify waited almost five years to raise significant amounts of venture capital, and despite the demands of various investors that the company move to Silicon Valley, it has remained based in Ottawa.

You get the sense, when talking to Finkelstein, that he relishes that Shopify has succeeded despite these departures from Silicon Valley orthodoxy. You can also tell how closely he and the company embrace the notion that they are the good guys. Lütke has said, “Amazon is trying to build an empire, and Shopify is trying to arm the rebels.” It’s an interesting thought, less hawkish than defensive, as though plucked from a galaxy far, far away.

Like Lütke, who came up with the idea for Shopify after creating software for an online snowboard shop, Finkelstein had firsthand experience as a merchant: During law school at the University of Ottawa in the late 2000s, he sold custom-designed T-shirts to pay for tuition — and he did so using Shopify’s software, he says, to easily “set up a beautiful, scalable online store.”

The company has come a long way in the decade since then. In the third quarter of 2020, Shopify’s gross merchandise volume was $30.9 billion, more than double what it was a year ago. About a million merchants use the platform. Most of these are small- and medium-size businesses that pay $29 a month for the basic software plus a per-transaction credit-card processing fee. But some 7,100 Shopify merchants subscribe to Shopify Plus, a premium version of the software that enables much more customization, costs in the thousands of dollars a month and now accounts for 25 percent of Shopify’s monthly recurring revenue.

In addition to providing software, Shopify has been expanding its offerings on e-commerce’s “back end” — in logistics, shipping and fulfillment. Last year, it introduced Shopify Fulfillment Network, a direct competitor to Fulfillment by Amazon. Instead of building or taking over its own warehouses, it created a network of seven existing third-party logistics providers (known in the industry as 3PLs) and retrofitted their software and hardware to closely integrate it with the Shopify platform. For Shopify merchants, this has meant a much more unified offline-online experience. And for the 3PLs, it brings them business. “One 3PL owner said to me, seven out of 10 merchants who are walking through the door are on Shopify today,” says Thomas Epting, who is the director of Shopify Fulfillment Network. “Individually, no one of them is big enough for me to want to go after, but collectively, if you deliver them to me in this easy way to fulfill, then I want that business all day long.”

In contrast to Amazon, which exercises complete control over its platform, Shopify tries to maintain a partnership ethos. In May, it partnered with Facebook to open Facebook Shops, a new feature that allows businesses to create storefronts right on Facebook and Instagram. For the announcement, Mark Zuckerberg brought Lütke on camera with him, effectively defanging what could have been viewed as a competitive threat.

And unlike Facebook itself, Shopify has successfully built a true ecosystem for developers on top of its platform, akin to Google’s Android operating system. Shopify fulfills what’s known in the software development community as the “80 percent use case,” which means it provides 80 percent of the features that merchants need and third-party developers supply the rest — building customized apps for, say, reviews, or discount codes for influencers to give away. But Finkelstein is keen to point out that while Shopify made a billion dollars in revenue last year, Shopify app developers made almost $7 billion as a community. “There’s a start-up in Winnipeg that employs 400 people,” he says, “and almost all they do is create Shopify apps.”

Through Mellow Groceries, my business partner and I got a peek into this thriving, global Shopify community online. We paid for several Shopify apps to add ZIP-code checking and shipping categories onto the site. From a teenager in a 2018 YouTube video, we learned what to do when we were getting tons of add-to-carts but no sales. (That YouTuber now has 243,000 subscribers.) On the subreddit r/shopify, I learned what the term “drop-shipping” means: It refers to an e-commerce model in which the retailer keeps no inventory but instead simply ships its products directly from its supplier to the end customer. The stereotypical drop-shipper fulfills its orders from the Chinese e-commerce site AliExpress, or even Amazon, but we too were in effect drop-shipping groceries from Flushing grocery suppliers. There is, in these online communities, an almost jubilant rejection of formal education, a sense that anything is possible if you are young, hungry and ready to hustle.

This, of course, is a particularly rosy view of entrepreneurship. The reality is that while many merchants have made money as Shopify stores, many have not. Drop-shipping, in particular, has prompted criticism for luring in the young and ingenuous — because even though drop-shippers do not handle inventory, they still have to pay upfront for any advertising or marketing. The need to reach customers has spawned a cottage industry of so-called gurus, many of whose marketing materials evoke get-rich-quick schemes. (“I’m 24, graduated college, never had a job and make 500k a year off e-commerce!”)

Similarly, a partnership ethos sounds great and offers flexibility and reach, but there are also real drawbacks in trying to align the incentives and interests of so many parties. Facebook and Shopify currently present a united front, but it’s hard to imagine, given how important commerce is to the monetization of Facebook’s platforms, that Facebook won’t eventually try to cut Shopify out of the equation. And Shopify Fulfillment Network will need to balance the customization that brands want with the standardization that is necessary to yield efficiency. Part of what enables Amazon to offer two-day delivery, after all, is that everything is shipped in the same kinds of packaging by Amazon employees trained from the same manual.

My partner and I spent our days posting blurbs on Facebook groups, talking to moms on Nextdoor, the neighborhood social-media site, and experimenting with various kinds of referral programs. Naïvely, the one thing we didn’t want to try was paying for digital advertising, in part because grocery margins were already razor thin, and if we had to pay to acquire customers, we would have lost money on every transaction. Perhaps as a result, we were never able to generate more than a handful of orders a day, far from the thousands we would have needed to break even.

We weren’t the only ones finding the direct-to-consumer food business challenging. In October, Jessie Gould wrote on Medium that Ox Verte was winding down its home-delivery service. “The world has changed dramatically,” she said, and Ox would have to as well. She planned to take some time to figure things out, but the ambition was to build a company that would provide plant-based food to an even broader audience. “For the past six years, Ox has transformed the way NYC office workers eat, and I believe that we can do the same for all American families.”

As for my business partner and I, we closed Mellow down after a month, having stumbled upon what many other Shopify merchants well knew: You need two components to build a successful e-commerce business, the software that runs the online store and the marketing to get customers to come to the store. A large part of what makes marketplaces like Amazon so attractive to merchants — why they keep selling there despite the lack of data transparency and the costs — is that it provides both components. Shopify, on the other hand, only provides the former. If you sell a product for $10 on a Shopify store, you’re paying 59 cents for payments processing and maybe a few dollars more for storage and fulfillment, but that doesn’t include any marketing. When I asked Finkelstein about this during our interview, he acknowledged it, albeit euphemistically. “There is this resourcefulness that is required,” he said. “That’s what’s exciting about commerce and retail in 2020. It’s about who can figure out how they can connect best with a potential set of customers.” The gist of his response was that building an e-commerce brand today is essentially a marketing exercise; it’s the one thing that you, as the entrepreneur, can’t outsource to Shopify.

You can, however, outsource it to the big ad networks. For most of the mid-to-late 2010s, the playbook for a direct-to-consumer brand was straightforward: a Shopify site and Facebook ads. Let’s say you spend $15 to manufacture a sweater, pay another $15 to market it through Facebook ads, then sell it for $80 on your Shopify store and pocket $50. The problem was that Facebook, like Amazon, is a landlord who knows how to squeeze blood out of a stone. By early 2020, the same brand was paying $75 per sweater to Facebook and losing money on every transaction. Even for brands that were able to keep down their C.A.C., or cost of acquiring a customer, they often found it was a strategy that didn’t scale up. As they went from spending $500 a day on Facebook ads to $5,000 a day, the digital audiences they were targeting remained roughly the same size, driving up the costs of getting consumers while also challenging their patience. “It’s the easiest time in the world to make something and build a business to 20 million” in annual revenue, says Allbirds’s Zwillinger. “Now, getting beyond that — you need to have great business strategy and great product.”

He draws a line between truly distinctive, innovative products with strong organic marketing (like Allbirds, of course) and white-label razors, toothbrushes, phone chargers and groceries gussied up in fancy packaging that constitute a good proportion of the direct-to-consumer world. The former, he believes, can make a go of selling their wares exclusively on Shopify, while the latter are commoditized products that will ultimately have to go to Amazon, because that’s where their customers are.

Brooklinen, for instance, a well-funded direct-to-consumer sheets company that runs on Shopify (and has blanketed the New York subway system with ads), began selling on Amazon as well two years ago. “We got a report that we had thousands of people searching for Brooklinen on Amazon search,” Justin Lapidus, the company’s senior vice president for growth marketing, told me. “And that more than 90 percent of those people were ending up buying other products that were not Brooklinen.” For Brooklinen, it was a worthwhile trade to give up some profit in exchange for access to a market it otherwise wouldn’t be able to tap. “A lot of people just say they only buy things on Prime,” Lapidus said.

Shopify got to where it is today by expressly not being a marketplace, by presenting an alternative direct-to-consumer model. But in doing so it has accumulated the clout, power and cash that matches that of many marketplaces and dwarfs the majority of its clients. There is a world in which Shopify could wield this status to direct traffic toward brands. There is a world, in other words, in which Shopify could become a marketplace itself.

When I raised the possibility with Finkelstein in February, he said “not now, not at the moment.” And yet, only months later, in May, Shopify started a new consumer-facing app called Shop, which it described as a “digital assistant” for customers making purchases from Shopify merchants. Built from an earlier app called Arrive, which let you track the progress of your packages, the app is, if not a marketplace then an aggregator at least. Businesses you’ve already purchased from are pinned, Instagram-stories-style, for easy access, while a section underneath displays new products and recommendations. On another tab, a recently added pandemic-era feature allows you to browse local businesses on Shopify. Because you still have to leave the app to make purchases, Shop resembles Google Shopping more than Amazon, and it lacks the convenience of a single cart. It’s a product that reflects the philosophical tug-of-war between Shopify’s original antimarketplace stance and its stated ideal of helping merchants be as successful as possible.

Because what if the way to help merchants is to bring them customers through more consolidation? In a recent post on the industry blog 2PM, Web Smith, an e-commerce pundit, bemoaned the absence of a Shopify ad during last year’s Super Bowl. The sporting event, he pointed out, would have been a great chance to highlight selected Shopify-powered brands, in a medium that would have been prohibitively expensive for any one of them individually. “Imagine a $5.7 million 30-second advertisement that sent tens of millions of Americans to marketplace.shopify.com,” he wrote, envisioning such a site. “When those potential customers, developers and consumers arrive, they’d see a curation of Shopify’s greatest brands — new and old, established and fresh.”

In talking to merchants, it becomes apparent that it isn’t so much that they dislike marketplaces inherently; it’s that they dislike the symptoms that marketplaces typically engender. Every brand would love exposure to huge amounts of passing traffic — just not if that means they have to be a serf to the feudal lord of the marketplace. For Zwillinger, an ecosystem closer to that of Alibaba’s Tmall, where companies maintain control of their brands and pricing, would be appealing, especially if consumers go there. “If you can build that market,” he said, “that truly would be the antidote to Amazon.”

The reality is that Shopify long ago ceased to be just an agnostic builder of e-commerce websites. Shopify Capital is a profit-seeking funding program that is able to provide loans and cash advances to merchants precisely because Shopify has access to a great deal more merchant data than banks do. Shopify may have an avowed aversion to kingmaking, but offering loans or advances to merchants is just that, only in another form, Smith argues. Given that it’s already happening, Shopify might as well go even further.

Indeed, Shopify’s products today range from Shop Pay, which competes against Apple, Google and Amazon Pay, to Shopify Fulfillment Network, which competes against Fulfillment by Amazon, to Point of Sale hardware, which competes against Square. Many of these initiatives are new and some will probably not pan out. Still, if even a portion succeed, they will bind Shopify merchants much more closely to the platform in a way that its core product, the site builder, which by this point is largely commoditized, does not. But if there is any reassurance for merchants that Shopify won’t become like Amazon, it’s that in this interim period Shopify needs the merchants as much as — and perhaps even more than — merchants need Shopify.

“You think about the three classic axes of business: convenience, quality and price,” says Nikhil Basu Trivedi, a venture capitalist who has invested extensively in the e-commerce space (he is a shareholder in both Amazon and Shopify). “Amazon is very difficult to beat, I think, on both convenience and price. So really the way to go off on them is by offering differentiated, high-quality products.”

In this, Shopify is aided by a shift in the culture that it helped bring about. In the future, “everyone will be doing entrepreneurial stuff, even if you don’t call yourself an entrepreneur,” Finkelstein told me. “You’ll see more people who have a great following on Twitter decide that they’re going to monetize that.” He went on to say: “The idea of having a safe job is something our parents had.” And why not? The cost of failure in entrepreneurship, he claims, is trending toward zero.

Toward the end of our interview, Finkelstein made a statement about how Shopify was the company best positioned to “own entrepreneurship” the way that Facebook owns social and Google owns search. At the time, it felt a bit too slick for me. But then I thought about it. Mellow Groceries was in many ways an expression of a certain perspective on the world that I had — that Asian groceries were hard to access in New York and that in the middle of a pandemic there were people who would pay for that access. If I had had to write the code myself for a whole website to test that idea, I probably wouldn’t have attempted it. Ultimately, I did not succeed as an e-commerce merchant, but Shopify made it possible for me to try.

Illustrations by Jaedoo Lee

Yiren Lu is a writer and software engineer in New York City. She last wrote about the Chinese super-app WeChat.

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From: Sr K11/30/2020 12:01:12 AM
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WORLD OBITUARIES

Former Zappos Chief Tony Hsieh Exalted Customer Service, Set High Bar for Rivals

Entrepreneur nurtured online shoe seller, was bestselling author and management guru


Tony Hsieh shown at a Las Vegas conference in 2017.
PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS

By
Updated Nov. 29, 2020 5:25 pm ET

Tony Hsieh, who led online shoe retailer Zappos.com Inc. for two decades, had some surprising guidance for employees: If customers wanted a shoe Zappos couldn’t supply, the representative should direct them to a rival that could.

That service, he figured, was a good way to cultivate loyal customers.

Mr. Hsieh, an internet pioneer, customer-service fanatic, management guru and bestselling author, died Friday at the age of 46 of injuries from a house fire in New London, Conn.

As a young entrepreneur, he changed the face of internet retailing with bold strokes. To overcome customer skittishness about ordering shoes without trying them on first, Zappos offered free shipping and free returns, giving customers as long as a year to send back unwanted products. Customers could order dozens of pairs of shoes and keep only those they liked—a policy that set a high bar for rivals.

Zappos.com’s Tony Hsieh offered insights on hiring practices in a 2013 WSJ interview.

The Harvard-educated chief executive, whose parents were immigrants from Taiwan, also insisted on keeping his call center in the U.S. rather than outsourcing it to an overseas supplier that might not meet his exacting standards. Instead of being compensated for handling a high number of calls quickly, Zappos employees were encouraged to spend hours on the line with a single customer if that’s what it took to reach satisfaction.

Virtually all retailers claim to offer great service, a generous assortment and competitive prices, said Mark A. Cohen, director of retail studies at Columbia University Graduate School of Business. “Most of them,” he added, “are not telling the truth.” Mr. Cohen, also a longtime Zappos customer, said the company persisted with what he called an incomparable service level.

Alfred Lin, who met Mr. Hsieh at Harvard and served as chief financial officer of Zappos in its early years, said Zappos succeeded partly because of his friend’s willingness to try things that struck others as crazy. One of those ideas was offering recent hires a month’s pay if they quit. That proved a good way of eliminating employees who weren’t highly committed, Mr. Lin said.

Lavish customer service was costly in the short run but paid off long term, Mr. Lin said. Those who returned the most shoes also ended up paying for lots of shoes and were the most profitable customers, Mr. Lin said.


A memorial image of Tony Hsieh was displayed in Las Vegas on Saturday. PHOTO: STEVE MARCUS/LAS VEGAS SUN/ASSOCIATED PRESS
Mr. Hsieh, fueled by Red Bull and Grey Goose vodka in his early days as a sleep-deprived entrepreneur, came across as shy and reserved but loved to throw huge parties. For a spell he lived in an Airstream trailer in downtown Las Vegas, where he kept a pet alpaca named Marley.

He co-founded an online ad company in his early 20s and sold it to Microsoft Corp. for about $265 million in 1998. The next year he invested in what became Zappos, nursed it through the dot-com bust and later became CEO. Amazon.com Inc. bought Zappos in 2009 for about $1.2 billion and, impressed with Mr. Hsieh’s style, let it operate as an autonomous subsidiary led by Mr. Hsieh, whose name is pronounced shay. He retired in August as chief executive of Zappos.

Phone numbers were displayed prominently on the website, and customers were encouraged to call Zappos representatives rather than email them. “The telephone is one of the best branding devices out there,” Mr. Hsieh wrote in his 2010 bestselling memoir, “Delivering Happiness.”

He was known for management experiments that struck some as visionary and others as wacky. Among the company’s 10 core values was “Create Fun and a Little Weirdness.” One of its conference rooms featured a pit filled with small plastic balls. In recent years, Zappos has tried out a management style called Holacracy that seeks to eliminate managers and let employees figure out what to do.

The oldest of three sons, Tony Hsieh was born Dec. 12, 1973, in Illinois, where his parents were graduate students. When he was 5, the family moved to the Lucas Valley area of Marin County, Calif. His mother was a social worker, and his father a chemical engineer at Chevron Corp.

At age 9, he persuaded his parents to pay $33 for a box of dirt containing at least 100 earthworms. His idea was to create a worm farm in his backyard and sell his slithering product to the public. He buried chicken wire in an effort to keep his worms from escaping and fed them with raw egg yolks. After a month, he discovered they had all escaped.

His SAT training began in sixth grade. His parents also required him to take piano and violin lessons. To make them think he was practicing, he recorded practice sessions and played them back early on weekend mornings.

His mother hoped he would go to medical school or earn a Ph.D. He preferred the idea of going into business so he would be free to do whatever he pleased.

As a teenager he delivered newspapers but quit after calculating that he was making only about $2 an hour.


Tony Hsieh, second from left, at Microsoft headquarters in 2008, with Bill Gates, center.PHOTO: STEPHEN BRASHEAR/ASSOCIATED PRESS
In the magazine Boy’s Life, he found an ad for a $50 kit that could make pin-on photo buttons and persuaded his parents to buy the device. He advertised the service and soon was making about $200 a month through mail orders. The venture persuaded him, he wrote later, that he could run a successful business with no face-to-face contacts.

Later, he spent $800 for a Boy’s Life ad offering to sell magic-trick kits for $10 apiece. He received one order and wrote the venture off as a lesson in humility.

In high school, he signed up for a Pascal computer-programming course and hung out in the computer lab. Soon he was making $15 an hour working for a programming company. To get more free time, he wrote, “I started making deals with my teachers in which they agreed to let me not attend their classes as long as I did well on their tests.” When one teacher assigned him to write a sonnet, he decided the iambic pentameter form was too much work and instead wrote 14 lines in Morse code. The teacher gave him an A+.

At Harvard, he studied computer science and generally tried to do the smallest amount of schoolwork required for decent grades while earning money through computer programming and managing a pizza supplier. He signed up for Mandarin because he already knew how to speak it.

After graduating, he joined Oracle Corp. in 1995 and was trained in database programming. Five months later, he quit to focus on a business he and a Harvard classmate, Sanjay Madan, had started to create websites for companies. Quickly bored by that business, they transformed it into the LinkExchange internet ad service, based in San Francisco, and attracted funding from Sequoia Capital.

Within two years, Mr. Hsieh was bored by that business and agreed to sell it to Microsoft. To celebrate, he took about 15 friends on a three-day Caribbean cruise.

With another friend, Mr. Lin, he set up an investment fund and business incubator, Venture Frogs. They soon heard from Nick Swinmurn, who had set up shoesite.com and aimed to create the Amazon of shoes. Mr. Hsieh thought that it was “like the poster child of bad internet ideas,” as he put it later. Who would buy shoes without trying them on? He changed his view after Mr. Swinmurn told him that 5% of U.S. shoe sales were already being done via mail order.


Tony Hsieh before the start of a meeting in 2012 in Las Vegas.PHOTO: DAVID BECKER/ZUMA PRESS

Mr. Hsieh suggested finding a snappier name for the website. Mr. Swinmurn came up with Zapos, derived from a Spanish word for shoes. Mr. Hsieh told him to add another P so people wouldn’t call it ZAY-pos. Venture Frog provided seed investment.

After Sequoia initially declined to invest in Zappos, Venture Frog put in more capital, and Mr. Hsieh began spending more time advising the shoe company. Then came the 2000 dot-com stock crash, and funding from other potential investors dried up. Mr. Hsieh decided to spend full time guiding the people he called Zapponians—and prove doubters wrong. The first step was to lay off some of the staff and cultivate the ones willing to bet their careers on online shoe sales.

To keep the unprofitable business going, Mr. Hsieh raised cash by selling his prized San Francisco loft. To give Zappos a better assortment of shoes and more reliable service, the company began holding its own inventory instead of relying on shoe manufacturers to ship the product. Sales jumped.

Zappos initially outsourced the warehouse operations. That proved disastrously unreliable, and Mr. Hsieh scrambled to set up a company-owned warehouse in Kentucky. For an e-commerce company, he concluded, warehousing and related logistics were too vital to be entrusted to outsiders.

MORE ON TONY HSIEH

Before Hsieh’s Death
Among cities identified as good places to open a call center was Las Vegas. Mr. Hsieh, a poker player who had spent time at high-stakes tables there, decided to put both the call center and the headquarters in Las Vegas so front-line customer-service people would be at the heart of the company rather than on the fringes.

In Las Vegas, Mr. Hsieh invested $350 million into revitalizing part of the city’s downtown including real estate, restaurants, retail and a tech startup fund starting in 2012. His vision included the development Container Park, a quirky shopping and entertainment center where retailers operate in converted shipping containers. Visitors are greeted by a giant sculpture of a praying mantis that shoots fire.

Mr. Hsieh was unmarried and had no children. In 2012, he told the New York Times that he enjoyed “hanging out with different people” rather than formally dating. “I’m not opposed to the idea of marriage,” he said. “But statistically, if half of all marriages end in divorce, and of the ones that remain married many are unhappily married, the odds are stacked against you.”

Friends recalled his sense of humor. After Zappos had a rash of late deliveries in 2014, he sent an apology note to customers and provided a phone number for use by anyone who suffered “undue hardship.” As for those who were merely annoyed, he said, they were welcome to call Zappos and “ask whoever answers the phone to do something weird and embarrassing, like sing ‘I’m a Little Teacup.’”

Write to James R. Hagerty at bob.hagerty@wsj.com

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