This is probably the biggest news in affiliate marketing and retail of the year. Zappos has signed a definitive agreement in which all of the existing shareholders and investors of Zappos will be exchanging their Zappos stock for Amazon stock. Once the exchange is done, Amazon will become the only shareholder of Zappos stock (subject to government approval). Based on Amazon’s closing price of $88.79 (as of July 22, 2009), the deal is valued at about $927.9 million.
It was emphasised in Zappos’s CEO letter that the Zappos brand will remain intact and that “Amazon are not looking to have their folks come in and run Zappos unless Zappos ask them to”.
…this was not an easy decision. Over the past several months, we had to weigh all the pros and cons along with all the potential benefits and risks. At the end of the day, we realized that, once it was determined that this was in the best interests of our shareholders, it basically all boiled down to asking ourselves 2 questions:
1) Do we believe that this will accelerate the growth of the Zappos brand and help us fulfill our mission of delivering happiness faster?
2) Do we believe that we will continue to be in control of our own destiny so that we can continue to grow our unique culture?
After spending a lot of time with Amazon and getting to know them and understanding their intentions better, we reached the conclusion that the answers to these 2 questions are YES and YES.
The Zappos brand will continue to be separate from the Amazon brand. Although we’ll have access to many of Amazon’s resources, we need to continue to build our brand and our culture just as we always have. Our mission remains the same: delivering happiness to all of our stakeholders, including our employees, our customers, and our vendors. (As a side note, we plan to continue to maintain the relationships that we have with our vendors ourselves, and Amazon will continue to maintain the relationships that they have with their vendors.)
The news was a total surprise as there was nothing heard about the deal before this at all. Shoes were what Zappos were really good in selling although they did branch out to other items in recent years. Did Amazon’s Endless.com (selling shoes only) sort of eat-up a piece of Zappos.com marketshare that triggered this deal to happen sooner than later?
A comparison on web traffic for both Zappos.com and Endless.com using Alexa (an amazon company, again!) shows the following chart.
Zappos.com was constantly in the top 1000 most visited site while Endless.com was constantly in the top 5000. This goes to show that although Zappos web traffic growth might not have been as great as Endless’, it is still constantly leading the way. In fact, Zappos surpasses the $1 billion mark of gross merchandise sales in 2008 last year alone. Together, Endless and Zappos will certainly dominate the buying shoes online niche.
Amazon has been doing really good in terms of coming up with innovative technology (especially the Amazon Web Services and Kindle) and continue to grow year over year (unlike ebay). Zappos decision to sell itself while it’s still at the top is probably a good move and would be beneficial for both companies.