Zappos.com has laid off 8% of its workforce and may close some of its retail locations in Nevada and Kentucky. According to an e-mail to employees that was posted on the company's blog, Zappos CEO Tony Hsieh said, “This is one of the hardest decisions we've had to make over the past 9.5 years, but we believe that it is the right decision for the long term health of the company.”
“I know that many tears were shed today, both by laid-off and non-laid-off employees alike,” he continued. “Given our family culture, our layoffs are much tougher emotionally than they would be at many other companies.”
In his letter, Hsieh said Zappos had projected to break the $1 billion mark in sales in 2008, and though sales are still expected to be higher than in 2007, he said the company will not reach its goal and that investors last month directed Zappos to begin cutting costs.
Hsieh said that laid-off employees will be paid through the end of the year, and employees who have been with the company for three or more years will receive additional pay. He also said Zappos will pay for six months of health coverage for all laid-off employees.
“In doing all of this to take care of laid-off employees, we expect that it will actually increase, not decrease, our costs for 2008, but we feel this is the right thing to do for our employees,” Hsieh wrote. “It will put us in the position of having a lot more financial flexibility in being able to respond to potential changes in the economy in 2009.”
Despite the downturn, Hsieh said he remained confident in Zappos' long-term profitability as online sales continue to grow overall and Zappos strengthens its position as market leader in online shoe retail.
Hsieh wrote, “E-commerce growth has slowed compared to its growth rate a year ago, but the good news is that even in this tough economic environment, ecommerce overall is still growing. Within the footwear category, we are the online market leader. When times are tough, the strongest players in any market have an opportunity to gain even more market share, even if overall growth may be slower.
“Historically, we have actually grown faster than the overall ecommerce market, and we anticipate for that to continue in 2009. For the rest of 2008 as well as for 2009, we anticipate continuing to grow year over year. Our current forecasts are that we will continue to be profitable and cash flow positive, as long as we are proactive instead of reactive in managing our business and financials.”
According to the Las Vegas Sun, it was not immediately clear how many local workers were laid off or which stores would be closed. Zappos operates three outlet stores in the Las Vegas Valley, including one in Henderson near the Galleria at Sunset mall.
