E-commerce Site Zappos.com Enjoying Best Year Ever

This is a rush transcript from "Your World With Neil Cavuto," December 22, 2008. This copy may not be in its final form and may be updated.

ALEXIS GLICK, GUEST HOST: Well, forget less is more. More is better to my next guest, his Web site raking in as much as $1 billion in sales this year, while other retailers are struggling. Zappos.com selling everything from boots to bags.

Tony Hsieh is the CEO. And he joins us now.

Hi, Tony. Good to see you.

TONY HSIEH, CEO, ZAPPOS.COM: Good seeing you.

• Video: Watch Alexis Glick's interview

GLICK: So, you guys are on fire this year. What is going on?

HSIEH: Well, there's basically three reasons why we have grown.

Last year, we did about $840 million in gross merchandise sales. And, this year, we're on track to do about $1 billion in gross merchandise sales.

And it is really three things.

But have you shopped with Zappos.com before?

GLICK: You know, I have not. But I have a lot of friends who do. And one of the things I understand that you guys are really, really good at is — is customer service, and the fact that you are kind of a word-of- mouth-driven Web site.

Is that fair to say?

HSIEH: Yes, definitely. So, that is actually the first reason, is, most of our business has been driven by word of mouth and repeat customers. And the second reason is because we have expanded into other product categories, besides just shoes. So, a lot of customers are discovering that we also sell clothing and have a really good selection of that, and bags, even kitchenware and housewares.

And then the third reason that we have been growing so quickly is because of our pushing the free shipping for the holidays.

GLICK: Right.

HSIEH: So, actually, people can — can order as late as 1:00 p.m. Pacific tomorrow, and, with free shipping, still get it by Christmas Eve.

GLICK: Still get it in 24.

And I understand that — that you guys — part of your success here is knowing what the inventory situation is going to look like. And a lot of retailers are addressing that issue. I understand you can return 365 days a year.

How do you do that in this climate, knowing that we are in a difficult period?

HSIEH: Yes.

So, we offer free shipping both ways. So, a lot of customers will order 10 pairs of shoes, try them on with 10 different outfits, and then ship them back to us, the ones that they don't like. And, you know, that is very expensive, but, for us, we really just view that as our marketing investment, and really let the customers do the marketing for us.

GLICK: Wow.

All right, Tony Hsieh, you might have a new customer. It sounds like a great plan.

Zappos CEO, thank you so much. Great having you on the show.

HSIEH: Thank you.

Watch Neil Cavuto weekdays at 4 p.m. ET on "Your World with Cavuto" and send your comments to cavuto@foxnews.com

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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