Amazon Goes Shopping, Zappos Is a Good Fit

Amazon (AMZN) made a terrific move after the bell yesterday, making its largest purchase ever. It’s acquiring Zappos.com for about $890 million in stock (based on Wednesday’s closing price) plus another $40 million in restricted stock and cash. Zappos.com is the leading online shoe retailer that did a billion bucks in revenue last year and continues to grow at an exceptional pace despite a slow economy.

Considering the kind of valuations that are placed on the likes of Facebook and other social media sites that have trouble monetizing, $930 million looks like a good deal for Amazon. As for Zappos.com, you have to wonder why the company didn’t attempt the IPO route with the market improving. If the margins are thin at Zappos then perhaps this is a better deal for them... we shall see. It will be interesting to see a breakdown of the financials of Zappos.com in future earnings reports of Amazon.

I’m a big fan of Zappos.com and won’t buy shoes anywhere else. Great customer service. Free shipping both ways and a huge selection. They will continue to operate independently as a wholly owned subsidiary of Amazon with current management in place. If Amazon is smart, they’ll let keep it that way.

Both companies are big on customer service, making the purchase a good fit. Here’s a video that Bezos did for Zappos employees discussing the importance of the customer.

Disclosure: No position

Comments

[dtrader:]

If Jeff Bezos is able to act like Warren Buffett when he buy's businesses than this might be a good acquisition. The two major if's are the current management and if this creative group gets restless and begins leaving to pursue new challenges. Second, Amazon not having the experience and background to oversea the nuances and intricacies of a footwear business in an industry that can be very fickle when Zappos loses some of it's magic.

Time will tell.

Jul 23 09:18 AM

[Mary7:]

Amazon already oversees the nuances and intricacies in the footwear business. People don't realize that they own and run Endless.com, it is a natural purchase and takeover, because they already function in that world and essentially purchased their biggest competitor. Do people do no research?

Jul 23 01:00 PM