Amazon to Acquire Zappos for $847 Million

By Brad Stone

Zappos A Zappos warehouse in Kentucky. The ten-year-old online shoe company has won fans with perks like free shipping and personalized service.

Amazon says it has reached an agreement to purchase the online shoe retailer Zappos.com.

Amazon says it is paying for the acquisition with 10 million shares of stock worth approximately $807 million, based on the average closing price for the 45 trading days ended July 17. In addition, Amazon said it would provide Zappos employees with $40 million in cash and restricted stock units.

Tony Hsieh, the chief executive of Zappos, has blogged about the deal here and said the company would maintain its independence within Amazon.

Asked whether Amazon plans to close its own Endless store for shoes and handbags, a spokesman, Craig Berman, replied via e-mail: “Amazon plans to continue building these stores and focusing on making the experience even better for our customers. There are no plans to shut down any existing stores based on the acquisition of Zappos.”

In an eight-minute video address, Amazon’s chief executive, Jeffrey Bezos, used a flip chart to pass along the lessons he had learned from running his company:

1) Obsess over customers
2) Invent
3) Think long term

When he finally got around to talking about Zappos, about six minutes into the video, he said, “Zappos has a customer obsession, which is so easy for me to admire,” he said. “I get all weak-kneed when I see a customer-obsessed company.”

Mr. Bezos also said he valued Zappos’ culture, brand and leadership, and that poised the company for a lot of growth ahead. “And that brings me to that final thing that I know: It’s always Day 1.” (Read more about Zappos’ culture in this November Bits interview with Mr. Hsieh.)

In a note to his employees, Mr. Hsieh said Zappos would continue to operate separately from Amazon. “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.”