October 12, 2005, 12:00 AM

Why Zappos wants $1 billion in web sales by 2010

With 2005 e-commerce sales expected to be in the range of $350 million, Zappos is on track to become a $1 billion web retailer within five years, says CEO Tony Hsieh.

Mark Brohan

Research Director

Online shoe retailer Zappos.com Inc. makes no bones about its long-term goal of generating $1 billion in annual sales. By the end of 2005, the company will be at least one-third of the way there.

For the past several years, Zappos, No. 45 in the Internet Retailer Top 400 Guide to Retail Web Sites, has been among the fastest growing web retailers and the trend is continuing. For 2005, Zappos expects annual web sales of about $350 million, up 90.2% from web sales of $184 million in 2004, the company says.

“The primary driver of our growth has been repeat customers and word of mouth,” says CEO Tony Hsieh. “We focus the company on providing the absolute best service and shopping experience and let word of mouth be our marketing. By doing so, we`ve historically been able to more than double sales year over year for all six years of the company`s existence.”

Earlier this year Zappos acquired $15 million in new equity funding from Sequoia Capital to help maintain sales and grow the business. But the company isn’t planning any major changes for Q4 or early in 2006. “We aren’t planning anything revolutionary,” Hsieh says. “We will just keep doing what we`re doing, stay focused on the customer and make sure the entire company continues to be about service.”

Zappos originally planned to be a $1 billion web retailer by 2010 and that top line figure remains the company’s goal. “Our original goal was to hit it by 2010, but we`re hopeful and optimistic that we can hit it sooner,” Hsieh says.

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