"The customer is always right" was the retailing innovation of Wisconsin-born merchant Harry Gordon Selfridge, who founded Selfridge's department store in London in 1909. This traditional business mantra, once thought to ensure good customer service, has lost some of its appeal in a retail era dominated by volume, speed and impersonal mass marketing. But Tony Hsieh, CEO of the online retailer Zappos.com, has found a way to return to the basics of keeping the customer happy. And he does it by focusing on his 1,600 employees.

"Every business depends on making sure you hire great people – passionate, smart people who are open-minded and creative," says Hsieh.

Many of today's retail clerks have minimal product knowledge and even less interest in the success of the companies that employ them. With the rise of online shopping and the increased number of overseas call centers, the challenge of creating a positive experience for the consumer only increases. But Zappos.com refuses to settle for mediocre customer relations.

The remarkable success of the company begins with a month-long training program that indoctrinates new employees into its set of 10 "core values." After a week of training, each employee is offered a "quit-now bonus" – a week's pay, plus a $2,000 bonus to resign. Two to three percent of employees take the offer, and Hsieh considers the expenditure well worth it because he knows that the remaining 90 percent are truly committed to Zappos.com. They are described by pleased customers as friendly, fun, intelligent people who listen more than they talk and go out of their way to personalize the online footwear purchasing experience.

In Hsieh's mind, each customer call is a branding opportunity in which Zappos.com has the full attention of the customer. This is why the happy, creative and loyal employee is so crucial. "We don't have scripts, and we encourage employees to let their real personalities shine when a customer calls," Hsieh explains.

Hsieh considers himself a CEO "who likes to have fun and challenge conventional wisdom" – one who stays connected to employees and customers through Twitter, where he has attracted over 10,000 enthusiastic followers. He is refreshingly straightforward, unassuming and entertaining on his company blog: customers can read his latest Power Point presentation or the fuzzy details of a photo shoot involving him and a pair of thigh-high boots. The "wow" experience Zappos.com hopes to offer its customers clearly starts with the CEO and filters outward. Hsieh zealously concentrates on the emotional side of the business, promoting the Zappos.com lifestyle as much as its product lines. He wants his employees to be so passionate about the company that they think about it during their morning showers and daily commutes.

"There is no clear separation between work and play," he says. "At Zappos.com, employees hang out with each other outside the office and a lot of the best ideas happen over drinks or dinner."

All of this feel-good company culture has earned major dividends. When Hsieh took over the business in 2000, gross merchandise sales were $1.6 million a year. In 2007 they were $840 million, and the $1-billion goal Zappos.com set for itself in 2008 is in sight.

Aside from great employees, the other key ingredient to keeping Zappos.com customers happy is the free shipping (both ways) and 365-day return policy, which takes all the risk out of buying shoes online. For people who like to try on 30 pairs of shoes before buying, Hsieh says, "We encourage him or her to order all 30 pairs!" Plus, the frequent "surprise" shipping upgrade makes Zappos.com customers fiercely loyal and willing to talk up the company.

Hsieh identifies "fun" and "weirdness" as the positive energies that drive Zappos.com. The customer service hotline even offers a joke of the day and "cool" music during wait times. After all, with 5,000 calls coming in daily, a few entertaining diversions just may be the best way to appeal to the company's diverse customer base.

"With so many brands on our website, we have $40 shoes and $2,000 shoes, so there is no typical customer," Hsieh says. "It's anyone with two feet!"