Amazon acquires online footwear retailer Zappos for $1 billion

Online giant Amazon.com has acquired digital footwear retailer Zappos for $1 billion, in one of the biggest online retailing deals since the dot-com boom.

The deal has been seen by some as a move by Amazon into social media, as Zappos is infamous for spending hundreds of thousands per year on social networking tools such as blogs and streaming video features for its site.

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

Zappos, which mainly sells niche market shoes but also handbags and accessories,
has gained notoriety for its emphasis on corporate culture. Its employees are given two weeks of call centre training at full salary, after which they are offered $US2,000 to leave the company if they wish.

It also became known for its 365-day return policy, a 24/7 call centre and a low emphasis on profits. The company’s revenue has jumped from $US1.6 million in 2000 to a projected $US1 billion for the past financial year, but the company only produces “small profits”, according to chief executive Tony Hsieh.

“We are joining forces with Amazon because there is a huge opportunity to utilise each other’s strengths and move even faster towards our vision of delivering happiness to customers, employees and vendors,” said Hsieh.

“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.”

Under the deal, Amazon will acquire all outstand shares and assume all outstanding options and warrants of Zappos in exchange for about 10 million shares of common stock in Amazon, equal to about $US807 million based on an average closing price for the 45 trading days ending 17 July 2009.

Additionally, Amazon will pay Zappos employees with $US40 million cash and restricted stock. The Zappos management team will continue to operate as is, while the site’s headquarters will remain independent of Amazon, in Las Vegas.

Zappos is likely to replace Amazon’s own shoe retailer, endless.com, which is rumoured to be losing money, while Amazon is expected to see some of Zappos’ eight million customers move onto its own database as well.