The consolidation of Amazon and Zappos

Introduction

Amazon purchased all of the outstanding shares, options, and warrants from Zappos for 10 million shares of Amazon's common stock - currently worth about $807 million. In addition, Amazon will also provide $40 million in cash and restricted stock, specifically for the Zappos employees. Zappos will still operate in Las Vegas, NV and the management team will not be replaced.

The consolidation of Amazon and Zappos

The announcement from the Zappos side came from Tony Hsieh, the Zappos CEO, in an open letter to employees. The information is generally the same, although it deals more with why Zappos is excited about the deal and whether Zappos employees will still have a job (the answer: “Your job is just as secure as it was a month ago.”) (Bill, 87) Still, Tony confirms that none of the leadership (Tony Hsieh, Alfred Lin, and Fred Mossler) is leaving. (Mara, 69)

But if you're curious as to how the deal came to be, these three paragraphs from the Zappos letter are most enlightening:

“Several months ago, they reached out to us and said they wanted to join forces with us so that we could accelerate the growth of our business, our brand, and our culture. When they said they wanted us to continue to build the Zappos brand (as opposed to folding us into Amazon), (Bill, 87) we decided it was worth exploring what a partnership would look like. We learned that they truly wanted us to continue to build the Zappos brand and continue to build the Zappos culture in our own unique way. I think “unique” was their way of saying “fun and a little weird.” (Mike, 54)

Over the past several months, as we got to know each other better, both sides became more and more excited about the possibilities for leveraging each other's strengths. We realized that we are both very customer-focused companies — we just focus on different ways of making our customers happy.” (Bill, 87)

Despite the holding-hands rhetoric, the basic summary is this: Amazon reached out to them, and eventually the terms of the deal were too good to turn down. The deal isn't done yet though, and probably won't close until the fall. The other big takeaway from the letter is the emphasis that Zappos is still a separate brand that will retain its own staff and culture.

Beloved online shoe retailer Zappos had announced it will become a wholly-owned subsidiary of Amazon in exchange for almost a billion dollars worth of Amazon stock. Both of these companies are interesting because they have mastered making the connection between a quality online experience and physical delivery of tangible goods offline. (Masnick, 116)

Is this just a story of a big online shopping mall buying up a hot little online shoe store? Taking a closer look at the offline supply chain of each company indicates that there may be more to this deal. Some supply chain analysts believe that the two companies are actually radically different, but complementary, and their union could ...