Online mega-retailer Amazon.com has announced a deal to acquire online footwear retailer Zappos.com in a deal worth upwards of $850 million—although the exact amount depends on Amazon’s stock valuation when the deal closes. Under the deal, Amazon is buying up all Zappos stock in exchange for 10 million shares of Amazon.com stock, plus $40 million in cash and restricted stock units. The deal is expected to close during the third quarter of 2009.
“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 Zappos CEO Tony Hsieh, in a statement. “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.”
Zappos is based in Las Vegas, Nevada, and was founded in 1999. The company developed a reputation as a cheeky online online footwear retailer—it refers to all its executives as “monkeys”—creating a unique attitude and brand that has allowed the business to thrive even as other online retailers have struggled. Part of Zappo’s success was based on offering free shipping on deliveries as well as returns, making the process of buying footwear online—where users obviously can’t try things on—comfortable for everyday consumers.
Zappos currently has about 1,300 employees and stocks footwear, accessories, and other items from more than 1,300 brands. In 2008, Zappos earned about $40 million on revenues of $625 million. Amazon says it plans to leave the Zappos management team in charge, and continue to run Zappos as a separate brand from Amazon.com.
Although Amazon has expanded its business from its initial focus on books to all manner of products and items, the company has not yet found great success in fashion and accessories; industry watchers seem upbeat that Amazon’s acquisition of Zappos will give it a solid entry into the online apparel world, enabling it to build on an existing established brand rather than trying to create something of their own from the ground up.