Posts tagged with: Amazon

$800 Million Culture: Amazon buys Zappos

posted by   Ian Wyatt   |    July 27, 2009

Posted in   Entrepreneurship   |   Comments

Last week I saw on my Twitter feed that Zappos CEO Tony Hsieh had announced that the online footwear company would be bought my Amazon.com (Nasdaq: AMZN) in a deal valued at $800 million.

In-line with the company's culture, Tony posted a letter to employees on his personal blog that announced the big news. The announcement came after Tony posted two quotes to his Twitter feed @zappos earlier in the day:

     - "Some see things as they are and ask why. Others dream things that never were and ask why not." -George Bernard Shaw
     - "Change is the law of life. And those who look only to the past or present are certain to miss the future." -JFK

Zappos is more than an online footwear retailer. It is a high growth, entrepreneurial company that has mastered the art of building a world class culture. The company states that it is in the service business, and happens to sell footwear. And the company's tag line, "Powered by Service" further highlights the importance of customer service. A 24-hour call center, free shipping, and 365 day return policy backup this claim.

My fellow Entrepreneurs Organization / MIT Entrepreneurial Masters Program classmate David Hauser of Grasshopper posted sketch notes from a presentation Tony gave at South by Southwest, or SXSW.

Among fellow entrepreneurs and the press, the Zappos culture is regarded as one of the best. And as the company has grown, it has been able to sustain a small company atmosphere and culture like few companies are able to do with scale.

Zappos 2008 revenues are estimated to be $1 billion, and the company is profitable. The company is the dominant player in the online footwear category, with a 20% market share.

The purchase of Zappos for $800 million is a multiple of 0.8-times estimated 2008 sales. Amazon shares rose on the news of the acquisition, gaining 5.7%. Amazon currently trades at a multiple of almost 2-times 2008 sales, making the Zappos acquisition a relatively inexpensive, all-stock transaction.

Amazon is looking at the Zappos acquisition as more than just another $1 billion in revenues. Zappos sales will be a small portion of Amazon's projected sales of $22.6 billion in 2009. Jeff Bezos has "long admired Zappos" due to the company's customer-centric culture. With Amazon planning to allow Zappos to continue to operate independently, Bezos and the Amazon team are placing a high value on the culture and leadership at Zappos. You can watch video from Jeff Bezos about Amazon and Zappos by clicking here.

Congrats to everyone at Zappos for building such a great company and achieving a very successful exit. Zappos is always my first place I look when re-stocking my New Balance 992's.