In a letter issued this week to the market by Tony Hsieh, CEO of Zappos.com, the on-line retailer is driving toward its goal of achieving $600 million in sales in 2006, which would represent a 62% increase in revenues over the $370 million achieved in 2005. Zappos.com had more than doubled its sales from 2004 to 2005. The CEO also said that the company posted a profit in the first and second quarters of this year, compared to losses last year.

Hsieh also reviewed the historical gross sales numbers for the company:

    1999: Almost nothing
    2000: $1.6 mm
    2001: $8.6 mm
    2002:  $32 mm
    2003:  $70 mm
    2004: $184 mm
    2005: $370 mm
    2006: $600 mm (goal)

In sending out the letter to investors, employees, partners, and “friends of Zappos,” the CEO hit on a number of key metrics that expressed their position in the market.

Some of the highlights include:

  • Zappos.com was ranked as the 34th highest-grossing Internet retailer by Internet Retailer magazine’s 2005 “Top 500” list.
  • The company grew its customer base to a total of over 4 million paying customers, meaning that over 1% of the US population has bought shoes from Zappos.
  • Gross sales from repeat customers have continued to increase such that on any given day, approximately 2/3 of sales are from repeat customers.
  • Total workforce grew to 800 people (approximately half are in Las Vegas and half are in Kentucky).
  • Zappos increased the number of brands offered on its web site to over 800. They now carry more than 2.5 million pairs of shoes in their warehouse, representing over 100,000 styles, with a total retail value of $200 million.
  • The company realigned the structure of its buying and merchandising team so to develop category experts in categories such as kids, running, outdoor, skate, etc.
  • To increase financial flexibility and keep pace with its warehouse expansion, Zappos closed on a $20mm warehouse line of credit with Davidson Kempner, which is in addition to the $60 mm line of credit with Wells Fargo and US Bank to finance inventory growth.

  • The company completed construction of a new warehouse, which adds an additional 625,000 square feet on top of the 280,000 square feet of their original warehouse, for a total of 905,000 square feet.

Hsieh said that while the company continue with its strategy of running the business at break-even (within 1% of net sales) in order to maximize growth, they were able to improve efficiencies throughout all of departments, and were able to “squeeze out a small profit” in both Q1 and Q2 of this year, periods when they historically experienced losses.