A New Phoenicia

At last Thursday’s SIC conference, Tricia Duryee asked why online real estate companies have prospered in Seattle. One panelist cited low home prices, which let young entrepreneurs buy homes they could never afford in Silicon Valley, and from there begin to wonder how real estate could be better. Another suggestion was that HouseValues’ roaring 2004 IPO drew the rest of us into the game.

I said one factor had to be that Redfin invented map-based listing search, which rocked Seattle for a few years before we raised capital to expand. Another panelist cited the theory that industries clump together because the industry’s craftspeople clump together. Even though this panelist himself recognized that building an online real estate website requires nothing more specialized than general website-building skills, it got me thinking about the skills Seattle has that no one else does.

What great companies have been built here? Any list would have to include Amazon, Starbucks, Costco and Nordstrom. All are still run by their founders or founding families. And all of those people are great merchants, with a fanatical commitment to perfecting the customer experience in every last detail. This is a very specialized skill indeed.

It’s amazing, when you think about it, how many of the world’s greatest merchants live within two miles of where I’m typing this note. Jim Sinegal is notorious for stalking the Costco floor, correcting his staff on the price history and sales volume for a key lime pie, dismissing banners and other marketing sass with the refrain, “we don’t need that sh** here.” This mentality has made Costco grow revenues faster even than Microsoft, but whom do Seattleites talk about more?

The Nordstrom family is famous for happily accepting a customer’s return of car-tire snow chains when the store doesn’t even sell chains. This is the reason that Nordstrom is perhaps the only great retailer to remain relevant and revered during the e-commerce revolution.

And then there is Howard Schultz, who was the first to figure out that the reason a mom would load three kids into the car for a coffee-shop trip wasn’t just the coffee, but how the shop made her feel when she met her friends there. To this day, whenever Starbucks executives go into the field they carefully inventory every detail about each store: its parking lot, its sign, its bathrooms.

I don’t even have time to talk about Mark Vadon, the co-founder of Blue Nile, who is a beautiful beast of a merchant. But we have to account for Jeff Bezos, the “giant-brained alien” with “a tangential interest in human affairs” who runs Amazon. No one has been more relentlessly focused on perfecting a website or an entire operation than Bezos, the Captain Ahab of customer experience. The result is an army of engineers with an unusual passion for understanding the customer themselves, who could start their own Amazons if there weren’t making so much money at Amazon itself.

I have learned from chance encounters with folks at all of these companies; a lunch with a Nordstrom bra salesperson gave me a way to think about field bonus plans that put the customer first.  An hour with Costco’s CFO convinced me to focus on maximizing customers and profits, not profits per customer.

Thirty minutes each with Blue Nile’s two co-founders were what first woke me up to the idea that even a website-company should answer the phone on the first ring. Coffee with Starbucks’ COO reminded me to focus on how the experience felt, not just what the company did. None of these meetings would have occurred outside of Seattle.

Consider the common attributes of these businesses, and ask yourself if this could become the DNA of 100 new Seattle-based startups:

  • culture-based service, where everyone from engineers to accountants takes the customer’s point of view
  • value-driven, where disruptive economics, relentless cost-discipline and scale save consumers money
  • commerce-oriented, with an instinct for getting consumers to whip out their wallet, not just spend time on a website
  • operationally-intensive: unafraid to have cars, call centers, distribution points, employees in many cities

The reason this can be our thing, the thing that we put into the water from which everyone here drinks — is that many places don’t even want it to be their thing. A new vogue for customer-service notwithstanding, Silicon Valley has long preferred high-margin media businesses that scale as easily as you can spin up new servers. Manhattan and LA are even less likely to get down and dirty with the customer.

And yet we still wonder how Seattle can become more like Silicon Valley. Having started a Silicon Valley company, I can promise you it will be a long struggle to keep up with the hyper-kinetic restlessness, the elaborate network of ideas that draw companies like Box.net from Seattle to the Valley.

But the Valley will never have the blue-collar commitment to customer service that Seattle does, or our best companies’ niggling attention to detail. If you don’t believe me, just ask Tony Hsieh, who had to move Zappos from the Bay Area to create the service-driven culture that made Zappos famous. “Anyone in San Francisco who took a job in customer service,” he once explained to me, “just saw it as a stop-gap until he could find something supposedly ‘better.’” It isn’t a coincidence that many Zappos folks now work in Seattle too; it is a law of gravity.

As commerce becomes popular again in mobile and web-based businesses, my hope is that more Seattle startups will follow in these great merchants’ foot-steps. Every region has to be true to itself. LA startups aren’t going to build new databases or web infrastructure; they’re going to build new entertainment companies like Hulu. Finance will probably be re-invented in Manhattan, not Menlo Park. And customer-service companies belong in Seattle. It isn’t our only heritage, but it’s certainly one we can recognize and embrace.

Discussion

  • John

    For a company that focuses on customer experience, I wish Amazon would focus as much on their search experience as they do on their customer service.  I'm a search then browse type user and their search results are atrocious.  I would say only 20% of the results have a direct relation to what I'm looking for.  The rest are only tangentially related so it makes hit difficult to use their sorting features.  It's ironic that their search is so bad because search is one of the first things a user does on Amazon.  Sadly, many other sites have followed Amazon's horrific search model.  So I may as well use Amazon since the rest of the experience it better.  It's like choosing a between a bunch of bad restaurants.  They may all be bad, but at least one of them doesn't give you the runs afterwards.

    • http://blog.redfin.com GlennKelman

      Maybe part of it is that many sites recognize Google is increasingly be used as the way to search their content…

  • http://twitter.com/crashdev Chris DeVore

    Another great piece, Glenn — food for thought for all of us slugging it out to make Seattle a better place to build a business. Thanks for the idea-bomb!

    • http://blog.redfin.com GlennKelman

      Wow, thanks Chris! Means a lot coming from you…

  • Ironmike

    Nice bit.  I have long believed that it's not just a matter of separating the customer from his money, but helping him to find the product which makes him happiest to part with it.  This is where customer service earns it's keep, not only with customer experience, but with real cash value delivered.

  • Doug Miller

    I'm the Executive Director of CAARE (a 501(c)3 non-profit) dedicated to consumerism in residential real estate.  We're preparing a LIST of buyer brokers who will rebate part of their commission.  How do I get Redfin involved?  Thanks.

    Doug Miller dmiller@caa:disqus re.org  http://www.caare.org/thelist

  • No frills

    “A lunch with a Nordstrom bra salesperson gave me a way to think about field bonus plans” –  REALLY?