Amazon Buys Zappos

Discussion
Jul 23, 2009
George Anderson

By George Anderson

Two darlings
of the internet are joining together. Amazon.com announced yesterday
that is has reached an agreement to buy Zappos.com, the online footwear
and clothing retailer that has created rabid loyalty among its customers
and employees.

“Zappos
is a customer focused company,” said Jeff
Bezos,
founder and CEO of Amazon, in a press release. “We
see great opportunities for both companies to learn from each other
and create even better experiences for our customers.”

Amazon’s
deal includes keeping the Zappos’ management
team in place to continue operating the business independently. Zappos’
headquarters will stay in Las Vegas, NV after the deal closes in the
fall.

“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.”

Discussion
Questions: 1. What will the Zappos’ acquisition mean for Amazon.com?
2. What will the deal mean for Zappos? 3. What will it mean for competitors
of the two companies?

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15 Comments on "Amazon Buys Zappos"


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Joel Warady
Guest
Joel Warady
11 years 9 months ago

Amazon has always salivated over the loyal customer following that Zappos has developed. So much so that Amazon developed their own shoe store to compete head to head with Zappos. That being said, Amazon was never able to gain the traction that they needed to truly compete with Zappos, and Zappos continued to walk all over them.

If you can’t beat them, join them, and that is what Bezos is doing. Amazon offers really good customer service, and Zappos offers great customer service. Amazon has a great distribution system next to Zappos’ really good system. Seems like a match made in heaven.

Let’s hope that Amazon learns a thing or two from Zappos management as part of the transaction. It will make for an overall stronger company.

And their competitors; well, I wouldn’t want to be in their shoes.

David Dorf
Guest
11 years 9 months ago

Jeff Bezos’ explanation on YouTube (http://bit.ly/17n1Lm) was very good. Both Amazon and Zappos focus on the customer and aren’t afraid of innovations that take time to be profitable. I think the acquisition will help Amazon improve its customer service (see http://blogs.oracle.com/retail/2009/ for an example), and increase its presence in fashion. The upside for Zappos is access to the vast Amazon customer base and analytics. This is a great match.

Rick Moss
Guest
11 years 9 months ago
On the issue of company culture, it’s always a bit sad to see the special qualities of an entrepreneurial company slowly but surely fade away after an acquisition. In his open letter to employees, Zappos CEO Tony Hsieh answered his own question: “Will the Zappos culture change?” “Our culture at Zappos is unique and always evolving and changing, because one of our core values is to Embrace and Drive Change. What happens to our culture is up to us, which has always been true. Just like before, we are in control of our destiny and how our culture evolves.” But, interestingly, a bit later he apologizes for springing the announcement on the employees. “As you know, one of our core values is to Build Open and Honest Relationships With Communication, and if I could have it my way, I would have shared much earlier that we were in discussions with Amazon so that all employees could be involved in the decision process that we went through along the way. Unfortunately, because Amazon is a public… Read more »
Anne Howe
Guest
11 years 9 months ago

I just spent time with the Zappos COO at the Shopper Insights Conference. Their new positioning of delivering happiness may sound like “me too” strategy given the positivity focus in play today, but it’s rock solid.

As a long-time customer, I think the model and the culture work well because there of 100% passion and involvement from the top down, and 100% openness to honest feedback from employees and customers. The model of total transparency and focus on delivering more than what the shopper is currently seeking is a strong point of synergy between Amazon and Zappos, and that’s what potentially makes this a powerhouse opportunity. From the shopper POV, they each deliver now, but when they learn and deploy each other’s best solutions across both entities, they will in fact deliver more happiness to more shoppers.

Max Goldberg
Guest
11 years 9 months ago

The Amazon-Zappos merger is good for both companies. It gives Amazon a well-established brand that mirrors its philosophy on customer service. It gives Zappos a deep-pocketed parent that will not try to change its unique corporate culture.

Amazon is becoming the online Walmart. Look to see similar deals in other categories in the future.

Carol Spieckerman
Guest
11 years 9 months ago
This is a great move for Zappos and well-timed. Zappos’ forays into apparel, handbags and other categories to me torqued the already bursting-at-the-soles site even further and, as much as Zappos’ bar-raising customer service and shipping bennies have been lauded and copied over the years, I’ve seen little change in the website or upgrades in the actual shopping experience. By contrast, Amazon’s competing Endless shoe site offers a much more refined shopping experience (and evidently will continue to do so. Much to my surprise; no plans to shut it down). Among the pure shoe players, Zappos is a giant and they single-handedly turned brand breadth, free shipping and expediting into table stakes. With Amazon’s backing, small and emerging sites (such as Gap’s Piperlime) will have an even more difficult time differentiating. As easy as it is to focus on the philosophical synergies between the companies, I see an important difference lurking beneath the surface; one that justifies keeping the companies as independent entities. A while back, Jeff Bezos gave his take on the distinct difference… Read more »
Bill Robinson
Guest
Bill Robinson
11 years 9 months ago

This one seems like a perfect marriage. But you can never tell how a marriage will go until both parties endure the rough spots. I’m always skeptical when the acquiring party says the acquired unit will run independently. There will be so many overlapping and redundant elements: IT, customer service, distribution, legal, advertising, etc. etc.

The bigger test is cultural. If history holds true, there will be many subtle, or not so subtle, challenges to Zappos’ “The way we do things.”

Until the realities of culture-clash and consolidation set in, this collaboration of two great Internet commerce pioneers looks like a winner.

Phil Rubin
Guest
11 years 9 months ago

This is an obvious match of two CEOs and two cultures that focus obsessively on customers. Yes the world is imperfect and Zappos ideally would have looped its employees in earlier but even with a culture like theirs, there are laws in place when dealing with public companies.

It’s hard to see how this can’t be good for both companies given their business models, customer experience and opportunity for growth. How refreshing to see a deal like this that just makes sense.

Robert Heiblim
Guest
Robert Heiblim
11 years 9 months ago

Two companies extremely focused on the consumer. They mean it. Both companies do not just state this, they live it. Having worked with many retailers, it is striking the difference in attitude that penetrates all levels of these organizations. In this marriage it is all gain. Zappo’s gets scale and infrastructure and Amazon adds more to the customer facing side. With shared values, shared experience is effective and can be effected. Look to Amazon giving “better phone” and Zappos’ unit operating improvements. A great match.

Roger Saunders
Guest
11 years 9 months ago

Ideal time for both companies to bring their common and unique strategic/executional capabilities together, and yet let one entity operate autonomously.

Right price for both parties.

Strategy makes sense.

Execution remains independent, with opportunities to blend down the road.

Structure is right, as Amazon is keeping management in place

IT ALL COMES DOWN TO CULTURE — If they work well together, they grow exponentially. If not, it’s a costly mistake for Amazon, the Zappos management team goes away rich, and a good deal of jobs will disappear in Las Vegas.

Billy May
Guest
11 years 9 months ago
It’s a win – win – win all around. 1. Zappos gets access to Amazon’s incredible IT team and infrastructure (it’s much more technology than retail); 2. Amazon gets access to a booming apparel business that it has traditionally struggled to penetrate;3. Consumers get great service and great selection all around. Tony’s been resolute in saying he believes there are 3 dimensions upon which retailers compete: selection, service, price. To be successful, you have to succeed at 2 of 3. For Zappos, it’s service and selection. For Wal-Mart, it’s price and selection. For Costco, it’s service and price. The reason Zappos bought 6pm.com was as a clearance vehicle–selection and price, but limited service. But for Amazon, they want to win at all 3, and are doing so in almost every category–with the exception of the apparel business. You see, apparel is a category that is tremendously brand driven, and there are a number of leading brands that won’t touch Amazon with a 10 foot pole. Not only will the brands not touch them, but the… Read more »
Rick Boretsky
Guest
Rick Boretsky
11 years 9 months ago

Zappos is such a wonderful story and I hope it continues to be. As Bill Robinson states, you never know how such a marriage will work out. Different cultures, different leadership styles, can make for a difficult transition. But on paper it seems like a great match. Hopefully Jeff will let Tony do what he does best and it should work out.

Dave Wendland
Guest
11 years 9 months ago

Make no mistake, Amazon.com is a retail contender despite its unique DNA. I believe the company has the ability to become the online equivalent of Walmart.

As someone alluded to earlier in this discussion, I agree that it shouldn’t surprise anyone as they seek other targeted categories to be brought under its broad wingspan.

Amazon.com has the vision and the capital to make this happen.

William Cusick
Guest
William Cusick
11 years 9 months ago

I agree that this is the marriage of two dynamite companies.

That said, I wonder about the risk for Zappos. For Amazon, they’re picking up a high-quality company, culture and brand. But it this acquisition does what Tony says he wants–allows Zappos to grow and achieve more faster, I wonder more of what? Their mission is to “provide happiness” to customers, employees and vendors. I just haven’t seen many companies that can grow at an aggressive rate and retain that sort of philosophy. (See Google for a current example).

Zappos is special in how it approaches true, emotional connections to customers, which has tremendous business value. It will be interesting to see if it can stay special.

Billy May
Guest
11 years 9 months ago

As a follow-up and validation point to my earlier post, direct quote from Amazon CFO Tom Szkutak on today’s earnings call: “…this is not about synergies. This is about growing in categories that we think are interesting.”

What categories? Footwear and apparel.

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