Amazon buys customer-focused Zappos for $880 million

Today, Amazon announced that it will be acquiring popular Internet clothing and footwear store Zappos.com for approximately $807 million. The closing price of Zappo's stock will actually drive the deal up to around $880 million when it closes this fall. Additionally, Zappos employees will receive $40 million in cash and restricted stock. The company was voted #23 in Fortune's Hundred best companies to work for in 2009 poll.

Zappos will retain the same management team that's helped the brand get as popular as it has. The company's CEO, Tony Hsieh issued a statement today saying, "Over the next few days, you will probably read headlines that say 'Amazon acquires Zappos' or 'Zappos sells to Amazon'. While those headlines are technically correct, they don't really properly convey the spirit of the transaction. (I personally would prefer the headline 'Zappos and Amazon sitting in a tree...') 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."

Amazon CEO Jeff Bezos, in a YouTube video presentation this afternoon talked about putting customers before competitors, and Zappos has built its reputation as one of the most efficient Web retailers by taking the same approach.

"Zappos is a company that I've long admired, and for a very important reason," said Bezos, "Zappos has a customer obsession...which is so easy for me to admire. It is the starting point for Zappos. It is the place where it begins and ends, and that is a very key factor for me...I get all weak-kneed when I see a customer obsessed company, and Zappos certainly is that."

Hsieh said, "One of the great things about Amazon is that they are very long term thinkers, just like we are at Zappos. Alignment in very long term thinking is hard to find in a partner or investor, and we felt very lucky and excited to learn that both Amazon and Zappos shared this same philosophy."

Zappos' reputation for incredible customer service (it accepts returns for 365 days) began a few years ago, at about the time that a New York Times blogger referred to the retailer as "Customer Service Heaven" following a foul-up on an order for sandals. Subsequently came this story from an independent blogger whose mother ordered shoes from Zappos shortly before passing on. Not only did Zappos arrange for UPS to pick up her unopened order, but it sent flowers to her son.

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