Amazon Buys Zappos | Hacker News Reader

Amazon Buys Zappos

techcrunch.com

139 pointstransburgh40 comments

Here's the CEO's letter to employees, which has a little more info: http://blogs.zappos.com/ceoletter

A lot more info! If only more people would upvote the original source.

The video from Jeff Bezos is also worth watching (though there's not many details of the deal): http://www.youtube.com/watch?v=-hxX_Q5CnaA

I'm with you.

Thanks for providing the ceo letter link. There's an HN link right below this one on the front page, I'd upvote that one.

As for the purchase, I hope they continue to have their customer tours in Vegas. I was planning to take it one of these days.

Amazon bought zappos because zappos is a top notch shipping, fulfillment, and logistics company. That happens to sell shoes but they can easily transition to something else like how they experimented with accessories and even computer goods. Amazon made a cheap deal to buy a younger smaller amazon to add to their existing expertise.

Tony Hseih is amazing to me. LinkExhange sold to Microsoft when he was in his mid 20's and now this. Amazing.

actually i would suspect that Amazon partnered with zappos because zappos has a great company culture and brand, and amazon are having problems retaining theirs as they get bigger.

I am sure amazon doesn't need help doing supply chain - in fact I am certain there'd be significant savings to have amazon fulfill zappos' orders.

Amazon could definitely use Zappos' brand recognition in the shoes/fashion market. Amazon tried entering that market under its "Endless.com" brand: http://www.endless.com/ (I don't know how successful it's been.)

Amazon would love to grow into every vertical market, but in branding terms many people still think of them as selling books and media, and maybe electronics. Buying a recognized brand is a significant shortcut, especially if that company can benefit in turn from Amazon's technical infrastructure.

Full disclosure: I worked for Amazon from 2005 - 2008.

i cant imagine Amazon would pay $840m just for zappos' culture and brand

The actual letter from the CEO mentions that Amazon may be using Zappos' warehouse space, which is "closest" to the UPS Worldport.

(Incidentally, Louisville may be UPS' hub, but my Amazon packages arrive fastest when they ship from the Indiana warehouse.)

Amazon bought zappos because zappos is a top notch shipping, fulfillment, and logistics company.

But so is Amazon, and they even already resell this as a service.

Honestly, I thought Amazon and Zappos were the same company for a while. They both fulfill orders reliably, they both have good customer service, and their pages look a lot alike. Now they are, so technically I was just predicting the future. (Now to get a blog!)

Yeah, I predicted this to happen in some blog comment two years ago. Amazon is great in doing what they do, I think what they would pursue now will be companies like them that are already well represented and branded in a certain segment and niche.

Shoes are a good segment and niche. It doesn't spoil so it can be inventoried, it's fashionable so it can garner high markups, and it's compact and not hard to handle.

This was a cheap buy to pick up a brand, marketing, warehouses, labor, and management talent. I think a real game changer would be if Amazon bought Newegg.

What would Newegg add for Amazon?

Admittedly, Newegg is the first thing that comes to mind when I want computing hardware (i.e., a motherboard or something), but Amazon apparently has all that stuff too. I just did a search and found that most of what I would need to build a computer is available via Amazon Prime.

Hmm, now I want a new computer :)

The massive supplier relationships and pricing information and logistics and the west coast / east coast warehouses / fulfillment centers that rivals Amazon's operations.

Uhm, fashion is one of the hardest things to deal with. Fashion inventory is almost worthless a season or two after it launches.

What zappos sells are what are labeled FMCG - fast moving consumer goods. In this instance, you want almost no inventory, but extremely effective supplier partnerships and delivery cycles. What they have is a really engaged consumer community who can help them predict what they might want to buy soon.

If they use the metrics efficiently enough, they can stock the really popular lines and get-the-numbers-right on the slower but better margined products.

If you could run zappos/amazon scale and drop ship from manufacturer... well - that's the goal. (See timbuk2 et al for more).

Are shoes "fashion"? I would not be able to tell the difference between a shoe from 10 years ago versus one from today (and somehow, I've accumulated a lot of shoes; running, cycling, sneakers, sandals...). I am sure some of Zappos' customers care about the latest and greatest, but many probably don't.

The shoes I'm wearing now were purchased on Zappos and the design dates back to 1966. Fashion can have staying power.

It would become even harder for Amazon to claim they have no duty to collect sales taxes on sales to California addresses if they owned California-based NewEgg.

I find it vaguely surreal that I work at Amazon, yet I read about this on TechCrunch before I found out "officially".

Welcome to the world of publicly traded companies.

This deal feels right. Both companies seem to be committed to customer service as their number one goal. Based on what I've been reading about Zappos, Tony & Co deserver this. Great company, great management, great culture, great news!

Except for that whole deleting e-books of customers' Kindles without telling them thing, I agree.

EDIT: I'm curious about the downvotes. I think deleting books of customers' Kindles is in direct opposition to customer service being their number one goal. I have a feeling Amazon isn't all that interested in customer service and I don't remember any super positive things about Amazon culture. What am I missing?

It was a horrible mistake. But they have said that they will never do it again. Looks like they have learned their lesson. You can give them a pass for now ?

Yes, in the short term it sucks that they deleted e-books, but they are doing it to make sure that in the long term, they can continue to provide a wide variety of e-books to their customers. They have to keep the publishers happy to do this.

Doesn't it feel like a pretty low-ball deal for Zappos? Only $40M in cash and only $850M overall. I get that they're a lower margin business, but still... I'm SHOCKED that they didn't get more out of it.

Well, what would you assume is fair and why?

You realise this is nearly a 1 billion dollar deal for a fledgling clothing shop, right?

They're ten years old and doing over a billion in gross sales annually. Hardly fledgling.

If they're netting 15% (a number often used for retail) of the billion a year they take in, that's a $150,000,000. So... it's not that low.

Congrats to Tony on his second acquisition. (He sold LinkExchange to Microsoft for $265M in 1998)

It seems a good fit, but I always do worry when great grassroots-type great-culture great-customer-service company gets acquired by a much larger company (even if it's Amazon, which is much better than others - I worked there, I know). It's very hard to avoid the intermixing, and the bad things flow much better than the good.

I wonder what the profit is like over at Zappos. We know that they did $1.1ish Billion in revenues but profit figures may be much lower (I've heard as low as $50M pre-tax). My guess though is that Amazon's shipping chain will allow Zappos to lower their costs, increasing EBIT. Still though, does not seem like a cheap deal.

At least Amazon will be able to leverage the Zappos brand should they decide to expand more into Apparel. This would probably work out well in the long term.

Congrats to Zappos. This deal seemed to fly under the radar. I think this is good buy for Amazon as long as they're leaving management in place.

I recommend zappos to everyone. I haven't bought footwear anywhere else for at least the past 5 years. It seems bizarre it took so long for an online retailer to figure out a great barrier for online shoppers is the return shipping if the item doesn't work out. They got my loyalty based on that even though their prices aren't the absolute cheapest on the net.

the negative quantity mistake is pretty funny

Good for them, they are two of my favorite online retailers.

Agreed, I hope that even though they will be run as two separate companies they will maintain the corporate culture of zappos even under pressure.

Sounds like a very good partnership for both parties

My first thought when I read this announcement was if my Amazon Prime would work with Zappos eventually.

It sure would be nice, but I'm not counting on it.

Too bad zapazon.com is already taken. :)

"They sell fuckin shoes! People were selling shoes before them" - dhh.

That quote really struck a chord with me from his talk in 2008. It is quite possibly one of my favorite quotes ever.

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