A good fit: Amazon gobbles up Zappos
Amazon said Wednesday that it is acquiring Zappos in a deal worth $847 million. The CEOs of both companies portrayed the deal as an e-commerce learning adventure where both sides can learn from each other and leverage strengths.
The combination is an interesting one. Zappos.com, which primarily peddles shoes, has a strong following among customers. The company had plans to expand into new markets, and at some point, would compete with Amazon in more categories. Amazon's answer: just buy Zappos.
In a statement, Amazon chief Jeff Bezos said the companies "see great opportunities for both companies to learn from each other."
In a letter to employees, Zappos CEO Tony Hsieh said that Amazon reached out to the company several months ago to "accelerate the growth of our business, our brand, and our culture."
"We realized that we are both very customer-focused companies -- we just focus on different ways of making our customers happy," Hsieh said.
Amazon added that Zappos' management will remain. Zappos will operate as an independent unit based in Las Vegas, albeit with fewer worries about expanding distribution and fulfillment operations.
Hsieh said:
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. 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.
And in his letter to employees he added:
Today is a big day in Zappos history.
This morning, our board approved and we signed what’s known as a “definitive agreement”, in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock. Once the exchange is done, Amazon will become the only shareholder of Zappos stock.
Over the next few days, you will probably read headlines that say "Amazon acquires Zappos" or "Zappos sells to Amazon". While those headlines are technically correct, they don't really properly convey the spirit of the transaction. (I personally would prefer the headline “Zappos and Amazon sitting in a tree…”)
We plan to continue to run Zappos the way we have always run Zappos -- continuing to do what we believe is best for our brand, our culture, and our business. From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.
We think that now is the right time to join forces with Amazon because there is a huge opportunity to leverage each other's strengths and move even faster towards our long term vision. For Zappos, our vision remains the same: delivering happiness to customers, employees, and vendors. We just want to get there faster.
The only quibble about the Zappos purchase would be the price. Amazon is paying less than 1x revenue for a company that's growing at a rapid clip.
Also see:
- Want To See (And Talk About) What Your Friends Are Buying? Zappos will help
- Shopping together, online: Into a closet vs. real-time
- Social media: Pondering the corporate ROI
- The Real Case in Social Media: Zappos CEO Not All Atwitter About Twitter
- Enterprise 2.0 Case Study: Following Zappos
- Happy Birthday, Zappos: A Billion-Dollar Business Built on ... Culture?
- Jeff Bezos, meet Tony Hsieh. Zappos Moving into Electronics. And More.