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Deal is valued at $928 million

The world of online retailers is booming with websites like Amazon.com and eBay doing well despite the weakened economy. Amazon is particularly popular with consumers thanks to low prices and fast shipping.

The online retailer today, however, announced that it is buying online shoe seller Zappos.com for a deal valued at about $928 million. Amazon is purchasing Zappos in an all-stock transaction reports Reuters.

The purchase will get Amazon into the shoes and apparel business in a big way and signals what many have known for a while. Amazon's own endless.com shoe site has been unable to generate the sales needed to compete directly with Zappos. Analyst Jeffrey Lindsay called the deal an "outstanding acquisition."

Forrester Research analyst Sucharita Mulpuru said, "This is, in some ways, Amazon throwing in the towel on footwear because they've tried to compete with Zappos."

Zappos is most known for its fantastic customer service and its policy of offering free shipping on all shoes and free shipping on returns if customers don’t like the shoes.

Zappos CEO tony Hsieh said, "A big part of the reason why Amazon is interested in us is because they recognize the value of our culture, our people, and our brand. Their desire is for us to continue to grow and develop our culture (and perhaps even a little bit of our culture may rub off on them)."

Reuters cites an anonymous source as saying that Zappos earned $40 million before interest, tax, and amortization in 2008. Amazon will acquire all outstanding shares of Zappos and assume outstanding options and warrants. Zappos gets about 10 million shares of Amazon common stock in the deal. At a current closing price of $88.79 per share, the deal is worth about $927.9 million today.

Amazon says that the Zappos management team will remain intact and Zappos will continue to operate under its own brand and as a separate entity.



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policy
By xsilver on 7/23/2009 11:01:15 AM , Rating: 2
as I'm not from the US can someone please explain:

quote:
and free shipping on returns if customers don’t like the shoes.


Does it make commercial sense or are hardly any people screwing them over on this?




RE: policy
By mjcutri on 7/23/2009 11:24:09 AM , Rating: 4
That policy is one of the reasons that Zappos was so successful. The biggest problem most people have with ordering shoes online is figuring out what size to order. With free shipping both ways, you could order a size, and if they didn't fit, return them for the correct size without any additional expense.


RE: policy
By m0mentary on 7/23/2009 10:29:15 PM , Rating: 2
Zappos is/was? very much like an online Costco in terms of return policies. Now only did they offer free shipping, but you could hold onto an item for up to a year before you couldn't return it anymore. I imagine this policy increased purchases as people who weren't sure about an item were more willing to pull the trigger. Sure some of those purchases were returned, but usually the challenge is getting a customer to buy something in the first place.


RE: policy
By xsilver on 7/23/09, Rating: 0
RE: policy
By aj28 on 7/24/2009 12:51:04 AM , Rating: 2
When factoring in shipping (and not having to pay tax), yes, the prices are very competitive. Also, along with the rest of the footwear industry, I would imagine that their margins are pretty cushy. Because they ship so much, and largely the same size boxes, I would think UPS gives them a pretty slick rates deal. After all, shoe boxes stack well...

Also, it's not like you can wear the shoes around for a year and return them. They have to be in like-new condition, which is still great if you're giving gifts or, say, purchasing a pair, trying them on in your home, then returning them for a different pair. I would be extremely hesitant about walking through mud or on coarse surfaces if you intend to get your money back.

With that said, I have successfully returned shoes to Zappos in the past, and their customer service was nothing short of excellent. In fact, if you return them for store credit, a lot of time you'll get a special deal like free overnight shipping on your next pair. If I recall correctly, they actually issued my store credit immediately, and allowed me to print the prepaid UPS slip from my home printer, which was great because I was able to order the replacements immediately and drop the old ones off at UPS that evening...

Ah, if only all businesses were run that way!*

*Although it's too bad that a lot of industries are technically unable to operate like this, and in a lot of cases the companies are in a good position to be abused due to lenient policies. Electronics comes to mind...


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