Fed Up With Investors? - Zappos Moves To Amazon

Perhaps fed up with its increasingly panicky VCs (see headcount reduction from last year), it seems as if Zappos has been forced to turn its back on their old investors and takes sides with Amazon.

In the official acquisition announcement yesterday:

"Amazon will acquire all of the outstanding shares and assume all outstanding options and warrants of Zappos in exchange for approximately 10 million shares of Amazon common stock, equal to approximately $807 million ...

In addition, Amazon will provide Zappos employees with $40 million in cash and restricted stock units. Subject to various closing conditions, the acquisition is expected to close during the Fall of 2009."

Zappos CEO Tony Hsieh described the partnering deal in detail in a letter to the staff:

"We plan to continue to run Zappos the way we have always run Zappos -- continuing to do what we believe is best for our brand, our culture, and our business.

From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.

We think that now is the right time to join forces with Amazon because there is a huge opportunity to
leverage each other's strengths and move even faster towards our long term vision ...

Amazon focuses on low prices, vast selection and convenience to make their customers happy, while Zappos does it through developing relationships, creating personal emotional connections, and delivering high touch ("WOW") customer service."

Zappos, who have been profitable for just a few years, have been putting investor patience to the test with their “customers are as important as costs” strategy.

One could imagine how hard it was for the founders, in particular during the best year of their history, to bend to the needs of their investors and lay off 8% of their staff.

Significant is therefore the statement from Micheal Moritz of Sequoia Capital, one of the biggest of the soon-to-be former Zappos investors:

"You now have the opportunity to accelerate Zappos' progress and to make the name and the brand and everything associated with it an enduring, permanent part of peoples' lives... You are now free to let your imagination roam - and to contemplate initiatives and undertakings that today, in our more constrained setting, we could not take on."

According to Zappos CEO Tony Hsieh, under the new custody of Amazon, Zappos wants to become a leading “soft goods company”.

The competencies between Amazon and Zappos should be clearly divided, and Amazon can hand over its experiments in the soft goods area to seasoned hands (see Endless in the USA and Javari in Japan).

Rarely have two companies complemented each other better, although it would have been nice to see each go its own way a little while longer.

Related posts:

• Zappos Exploring a Future beyond the Shoe Business
• Zappos Lays Off 8% of Workforce
• ABCNews Showcases Zappos in Video Reportage

Originally posted in German by Jochen Krisch, adapted for excitingcommerce.com by Jason Soo.