End Game:Zappos.com brings a growing headquarters — and a healthier brand of fun — to downtown Las Vegas.
5/29/11 7:40 PM
THE MAGAZINE OF CORPORATE REAL ESTATE STRATEGY & AREA ECONOMIC DEVELOPMENT
Web Exclusives
Site Selection magazine
Development Alliance
OnSITE Travel
IAMC
Directories & Tools
Location Assistance
About Us
April 2011
Project Watch
LOOKING FOR A PREVIOUS STORY? CHECK THE ARCHIVE .
Main Story
Comments
From Site Selection magazine, April 2011
Like
Sign Up to see what your friends like.
End Game
Zappos.com brings a growing headquarters — and what some might
call a healthier brand of fun — to downtown Las Vegas.
Related Articles
SO MANY CHANNELS: A contact center
industry leader offers a view of where the sector is
turning next. (Jan 27, 2011)
NEVADA: The Silver State’s Silver Lining (Oct 28,
2010)
WORLD CALL CENTERS: Coming Home (Feb
4, 2010)
Most Popular Articles
BIOMASS: Pellet Run (May 25, 2011)
Zappos.com will move into the former City Hall in downtown Las Vegas (left), while city government will move into a new City
Hall (right) by April 1, 2012.
NO DOUBTING 'THOMAS': A new locomotive
factory from GE gets the Texas fast-track
treatment. (May 26, 2011)
City of Las Vegas
SUSTAINABLE BUILDINGS: Run to Daylight
by Dean Barber
(May 25, 2011)
NORTH AMERICAN AUTOMOTIVE: Steep
I
n his book "Delivering Happiness," Tony Hsieh, the young, energetic
and imaginative CEO of the online clothing retailer Zappos.com, tells
about the decision to move corporate headquarters out of his
hometown of San Francisco. The high cost of living and culture were
the primary reasons. "Working in a call center just wasn't something
that people in the Bay Area wanted to do," Hsieh wrote in his book
published last year.
In late 2003, the four-year-old company shortlisted its possible moves
to Phoenix, Louisville, Portland, Des Moines, Sioux City, and Las
Vegas.
Hill to Climb (May 26, 2011)
GREATER TOPEKA, KANSAS: The Topeka
Triangle (May 25, 2011)
HYDROPOWER: The Toughest 10K Ever (May
25, 2011)
THE 2010 GLOBAL BEST TO INVEST
RANKINGS: The Site Selection editors are
pleased to present the third annual Global Best to
Invest rankings. (May 12, 2011)
COVER STORY: Top Deals of 2010 - Action and
Reaction (May 2, 2011)
"In the end, we decided that Las Vegas would be the best move for the
http://www.siteselection.com/ssinsider/pwatch/End-Game.cfm
Page 1 of 5
End Game:Zappos.com brings a growing headquarters — and a healthier brand of fun — to downtown Las Vegas.
5/29/11 7:40 PM
company," Hsieh wrote. "It wasn't the cheapest option for us, but we
thought it would make our existing employees the happiest." (The
Louisville area has welcomed distribution facility growth from the
company in Shepherdsville.)
Happiness is a reoccurring theme at Zappos, an integral part of the
corporate culture of a company that moved to the Las Vegas Valley in
2004 with 70 employees and now employs 1,200. In 2008, Zappos
posted $1 billion in sales, and in 2009, the company revised its vision
statement: "Zappos is about delivering happiness in the world."
But the story does not end there. In some ways, this is where it starts.
Because of projected growth at Zappos and Hsieh's insistent pursuit of
happiness in the Zappos culture, there will be yet another move for
corporate headquarters.
The news of the deal broke on Nov. 29, 2010 after months of quiet
negotiations: Zappos would move its corporate headquarters from
Henderson, a neighboring town to Las Vegas, to the current City Hall
site in downtown Las Vegas. The deal would include the current City
Hall campus and nearby city-owned properties, comprising 17 acres
(just under seven hectares) in all. On Dec.1, the city council gave its
stamp of approval, accepting a $25-million offer by Resort Gaming
Group (RGG) to buy the city-owned properties with the intent of developing it as the corporate campus
for Zappos.
As part of the deal, the city will move into the new building, now under construction, by April 1, 2012,
while Zappos will likely move into the old City Hall after extensive renovation in late 2012 or early 2013.
In a city known for gaming, this one is being proclaimed by Las Vegas Mayor Oscar B. Goodman as a
"game changer."
Knowledgeable observers agree. With the infusion of creative-class new blood from Zappos, the betting
is that downtown Las Vegas will become transformed into a vibrant traditional downtown where diverse
businesses will be located. Right now, it cannot be described that way.
Says Scott Adams, chief urban redevelopment officer for city: "Building a traditional downtown can
serve as a focal point for the diversification of our economy."
In announcing the deal alongside Hsieh, Mayor Goodman said, "Today is a transaction that is going to
forever affect the social fabric of our community. The way we think about ourselves and our inner core
will be different from this moment forward."
He continued, "There are certain watershed moments that a city may celebrate and consider while
evaluating the historical perspective. This is one of them."
In a prepared statement, Andrew Donner, the CEO of RGG, echoed the sentiments of Mayor
Goodman:"We believe this project will have more impact on downtown revitalization than any other
development to date."
Zappos today employs about 1,200 people in Henderson. Company officials say by the time the move
takes place, Zappos will have an estimated 2,000 employees, all of whom will be together in downtown
Las Vegas.
Where People Want to Be
His book, his friends and press reports would indicate that Hsieh (pronounced "Shay") is very much a
non-typical CEO running a non-typical company. In 1998, at the age of 24, Hsieh sold LinkExchange,
the company he cofounded, to Microsoft for $265 million after two and a half years in business.
http://www.siteselection.com/ssinsider/pwatch/End-Game.cfm
Page 2 of 5
End Game:Zappos.com brings a growing headquarters — and a healthier brand of fun — to downtown Las Vegas.
5/29/11 7:40 PM
He then joined Zappos as an investor and advisor, eventually becoming CEO. After debuting as the
highest-ranking newcomer in Fortune's annual "Best Companies to Work For" list in 2009, Zappos was
acquired by Amazon.com in a deal valued at over $1.2 billion on the day of closing.
In his book, Hsieh identifies the inglorious start of his entrepreneurial journey as a nine-year-old: "My
path began on a worm farm." (The worms escaped and no money was made.)
Since the worm farm days, Hsieh now finds himself at the helm of a company that he considers family.
Company culture — encouraging employees to connect with others through "serendipitous
interactions," both at the workplace and away from the workplace — remains a top priority.
"Our belief is that if we get the culture right, most of the other stuff — like delivering great customer
service and building a long-term enduring brand and business — will be a natural byproduct of our
culture," Hsieh said at the time of the City Hall move announcement.
Observers say it is precisely the Zappos corporate culture that could have far-reaching ramifications for
downtown Las Vegas.
Michael Cornthwaite, the owner of the Downtown Cocktail Room who describes himself as a friend of
Hsieh, says the Zappos CEO wants his company to have a transforming effect on the downtown, but in
a humble way.
"Tony is going to be the primary catalyst in a massive change in the dynamic of Las Vegas, from being
a sin city, debauchery mecca to being a tourist destination but also a respected business center,"
Cornthwaite said. "But he understands that a lot of ground work has been laid in the downtown over the
past 10 years. Instead of him coming down here and taking over, he is being very inclusive and very
smart about his approach in utilizing people who understand how to get things done down here."
Cornthwaite describes himself as a "downtown oracle" who knows how to navigate the politics of
change and has provided counsel to Hsieh.
"It's not all about business and money and increasing the bottom line for him," Cornthwaite said. "A lot
of it has to do with quality of life and happiness and community. I think he realized over time that he
could have an impact on this area. I believe in him."
Indeed, because of the pending downtown move, the company has modified its brand. Formerly it was
the "The Three Cs": clothing, customer service and company culture.
"Now we have added a fourth C: community," says Jamie Naughton, a top-ranking Zappos executive
with the job title "Speaker of the House" who is in charge of the move downtown.
"This seemingly easy move to downtown has taken on a life of its own and it has become a purpose for
us, which is to help revitalize a community in which we will all live and raise our family," she says. "We
see the potential of the downtown. It started as a way to grow our culture. We really want to offer an
environment in which you have the ability to work and play."
The fact that Las Vegas has spent much of its history focusing on how to maximize tourism and gaming
has meant "not a whole lot of thought on how you create a city where people actually want to live," says
Naughton.
That has been changing with recognition that gaming, while important, cannot be the cure-all. Indeed,
for Vegas and its downtown to become a well-rounded better place to live and offer quality jobs,
economic diversification is an absolute necessity.
After the Storm, Time to Transform
One could argue that Las Vegas was ravaged by the recent recession, more so than any other place in
the United States. The median home price in the Las Vegas area has tumbled to $138,000 from
$317,000 in 2006. Las Vegas again topped the foreclosure ranking in the first quarter of 2011 with
http://www.siteselection.com/ssinsider/pwatch/End-Game.cfm
Page 3 of 5
End Game:Zappos.com brings a growing headquarters — and a healthier brand of fun — to downtown Las Vegas.
5/29/11 7:40 PM
26,275 homes entering the process.
Moody's Analytics doesn't expect Las Vegas single-family-home prices to bottom until mid-2012. With
thousands of homes headed to foreclosure, local economists say the economic storm is not over — that
it will take at least three years for the market to absorb the excess homes.
"The local economy is better than it was a year ago, but it is far from good," says Jeremy Aguero,
principal analyst with Las Vegas-based Applied Analysis. "We lead the nation in almost every category
of economic instability, including unemployment, bankruptcies, foreclosures and housing price
declines."
The bright spot is a substantial pickup in visitor metrics — improvements in tourist volume, spending
and future bookings. But most residents understand that the opening of another mega-resort will not
bring about needed change.
According to the 2011 Las Vegas Perspective, an annual report of the city's demographics, economic
and cultural statistics, nearly 65 percent of Las Vegans feel that attracting non-gaming business is "very
important" to the future of Las Vegas. More than 86 percent agreed that non-gaming businesses should
be promoted.
And that, in a nutshell, is what Zappos represents.
"Zappos validates everything we have been doing to this point," says the city's Scott Adams. "It says
that all this investment that we have made over the past decade was correct and has led to the end
game, which is attracting business which will ultimately grow and diversify our economy."
Iain Vasey, who formerly worked for the City of Las Vegas and now heads business development for
the Baton Rouge Area Chamber, says the Zappos deal confirms a correct policy toward downtown
redevelopment, as envisioned by Mayor Goodman and city planners.
"It would have been so easy for them to keep expanding out into the desert, but they have refocused
their energies into redevelopment instead of sprawling development, and it has paid off very well for
them," Vasey says. "Zappos may be the biggest deal right now in the West."
Because of its cutting-edge technology and the creative class of mostly younger workers that it will
bring to the downtown, Zappos stands in stark contrast to legacy downtown businesses.
"We very well may be looking at the first step of changing downtown Las Vegas forever," says Aguero.
John Restrepo, with Las Vegas-based RCG Economics, agrees that Zappos "will set a new tone for
downtown development."
"The hope is that this will create more demand for urban housing and for restaurants and for stores in
the downtown area. We can foresee Zappos attracting suppliers, vendors and allied companies," he
says.
Serendipity Central
Indeed, press reports would suggest that Zappos CEO Hsieh is taking on an evangelist role, telling
business friends about the benefits and the potential to be realized in the downtown.
In order to make the downtown a more attractive place for business investment and living, Hsieh
has donated $2 million to the Smith Center for the Performing Arts, a planned multi-theater
complex now under construction. The $475-million complex will offer a blend of performances by
local arts groups, including the Las Vegas Philharmonic and Nevada Ballet Theatre, as well as
first-run touring attractions. Upon its planned opening in early 2012, the facility will be the first
regional performing arts center in the Las Vegas Valley.
Hsieh is also rattling off ideas for creating a community kitchen downtown, a company-sponsored
K-12 charter school, a high-tech business incubator, and more housing downtown for Zappos
employees.
http://www.siteselection.com/ssinsider/pwatch/End-Game.cfm
Page 4 of 5
End Game:Zappos.com brings a growing headquarters — and a healthier brand of fun — to downtown Las Vegas.
5/29/11 7:40 PM
"Our goal is not for our employees to just work downtown but also to have them want to live there,
so that they are constantly feeding into that downtown economy," says Zappos exec Naughton.
By living and working together, more of Hsieh's hoped-for "serendipitous interactions" will take
place.
Economist Restrepo says the Zappos investment in Las Vegas demonstrates that the city has a
serious business side to it, and should be considered as a viable place for doing business like
Phoenix, Salt Lake City or Seattle.
"Yes, there is the Vegas where you can blow off steam as portrayed in the movie, 'The Hangover,'
but then there is another Vegas, where serious business can get done, and where there are
business advantages over other places," he says. "It's really a tale of two cities in many ways."
Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and
economic development consulting firm in Red Oak, Texas — www.barberadvisors.com .
E-mail your comments or inquiries directly to [email protected]
Click the Bookmark button and share with your friends!
Site Selection – The magazine of Corporate Real Estate Strategy & Area Economic Development.
Top of Page | Letter to Editor | Site Selection Online | SiteNet
Site Selection online is a worldwide service of Conway Data, Inc. ©1983-2011, all rights reserved. Data is from many sources and not warranted to be accurate or current.
For contact information visit our staff page or send general information queries to Annie Munza . Send direct technical inquiries or comments to [email protected] .
http://www.siteselection.com/ssinsider/pwatch/End-Game.cfm
Page 5 of 5