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Amazon Goes Shopping, Picks Up a $807M Bargain Called Zappos

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ky_warehouse1_0Amazon (s AMZN) said this afternoon it’s agreed to buy specialty shoe e-tailer Zappos for $807 million in cash and stock. It’s a smart move as it will allow Amazon to become even more synonymous with e-commerce. Funnily enough, it was just a few weeks ago that I was wondering if Amazon would be launching any more specialty stores. Indeed, they are going vertical — though I didn’t expect them to spend so much money to buy Zappos. Under terms of the deal, Zappos employees will get about $40 million in cash and restricted Amazon stock, and the entire Zappos management team will stay on.

Zappos, while in the commodity business of retail, has carved itself a nice (and fast-growing) niche by focusing on shoes. According to the Las Vegas Sun, Zappos’ hometown paper, the company reached its goal of a billion dollars in sales in 2008, 10 years after it was started by Nick Swinmurn. The sale is yet another smash hit for white-shoe Silicon Valley venture fund, Sequoia Capital. Zappos’ customer service reputation reminds me of Nordstrom, the big department store chain.

“We are joining forces with Amazon because there is a huge opportunity to utilize each other’s strengths and move even faster towards our vision of delivering happiness to customers, employees and vendors,” said Tony Hsieh, CEO of Zappos. “We will continue to build the Zappos brand and culture in our own unique way, and we believe Amazon is the best partner to help us do this over the long term.”

I am a big fan of both Jeff Bezos and Tony Hsieh, because they belong to that rare breed of company CEOs who put the needs of the customers (and their happiness) above everything else. Hsieh has been a fixture at various tech industry events but I’ve never met him, I’ve just enjoyed his talks and his posts on the Zappos blog. In an email to his employees today, Hsieh says something that all startup founders — myself included — would be well-advised to remember: “What happens to our culture is up to us…we are in control of our destiny and how our culture evolves.”

Here is what Amazon CEO Jeff Bezos had to say about the news:

12 Responses to “Amazon Goes Shopping, Picks Up a $807M Bargain Called Zappos”

  1. Wow. This is the first I’ve heard of this–everything I’ve read, including an article in Inc, made me think Zappos would stay independent for a while. That’s quite a payday though. Impressive.

  2. i think Jeff overpaid on this one, and who knows if the “culture fit” will work out long-term? BUT, i must say i wish every CEO ran their company with the core values Jeff Bezos has laid out. & he hires well too.

  3. Not a huge bargain considering that Zappos’ cost structure prevents it from ever being profitable. And the revenue figure is grossly overstated (by as much as 2x) since it includes returned items.

  4. Not a huge bargain considering that Zappos’ cost structure prevents it from ever being profitable. And the revenue figure is grossly over-stated (by as much as 2x) since it includes returned items.

  5. austinandrew

    Interesting also because Amazon tried to compete with Zappos with its offering. At the end of the day Amazon was probably worried about how Zappos was moving away from shoes into other offerings…kind of like how Amazon moved from books to everything from a to z.

  6. Having an Amazon box show up at my door evokes similar feelings as when an Zappos box shows up. I’ve returned items to both retailers and had very positive experiences. It certainly feels like a natural fit.

    I hope Zappos keeps their distinctive white boxes and all the other quirks that make them such a lovable company!