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Amazon Has Aquired Zappos for a Cool $880 Million

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Amazon.com  has purchased hot ecommerce company Zappos  for 10 million Amazon  shares or $880 million. (The Amazon release said $807 million, based on a 45-day estimate of its share price. Closing price today takes the deal to $880 million.) Zappos  employees will get $40 million in cash and restricted stock. In other words the deal is more like $920 million. And Zappos management will remain in place. Wow.

I loved Bezos’ quote that customer–obsessed companies make him “weak-kneed.”  Tony and his team inspired me.  Please, Amazon – hold that feeling - don’t crush this gem!  Below is a blog that I wrote and we published in March of this year after visiting Zappos HQ.

Enter Zappos

Written by Dan Hoffman

A recent Winning Workplaces blog titled, Transparency is a Business Model, highlighted how Rackspace practices transparency to differentiate their service. We’ve visited with Rackspace (thanks Graham and Lanham) and couldn’t agree more that they are setting a great standard for us all to live up to. Recently, we visited with a similar practitioner of this new art at Zappos. (another big public thank you to Tony Hsieh & team.)

Frankly, with employee blogs, Twitter and social media tools, there isn't much choice involved with transparency for businesses. Employees have blogs, and they tweet. Customer feedback is blasted across the net. But what's interesting to me are the companies that go to the next level and use transparency as a differentiator and marketing weapon.

Enter Zappos. They compete through transparency - more than 1/3 of their 1500 staff actively update Twitter(tweet). Their core values are all over their website, not buried on a single page. Their office feels like a temple of core values - check out their annual culture, book and I recommend the tour of their Vegas HQ. Oh, and it seems to work - they just passed $1 billion in sales. How? Well, it doesn't hurt that culture is the Tony's #1 priority. Moreover, five years ago 70 of their then 100 employees relocated - together - from San Fran to Vegas. That'll tighten up the core group, don't you think? But like many other service superstars (I recommend our client Danny Meyer's book) they draw a straight line from great culture to great service to great margins. While Zappos only does 5% of sales on the phone, my favorite Tony quote is "The phones are my #1 branding tool."

But you have to have it to flaunt it. What I've learned from Zappos, Rackspace and M5 Networks' own journey, is that the predecessor to transparency is integrity. By integrity, I mean consistency through and through; a wholly integrated strategy, that is that you can see from the inside and the outside. The story that attracts their customers is the same story that attracts and motivates their staff. For this to work, you can show warts. We've had great results setting a new standard for our industry by publicly releasing detailed system performance stats. And yes, we've had outages and bugs over the years. But while you can show failings, you can't show confusion, contradiction, and hypocrisy. The message must be simple, clear, and consistent - "Fanatical Support" (Rackspace) and "Powered by Service" (Zappos) work because they reflect the culture and market strategy, through and through. Only once you achieve that level of integrity, can you start replacing your company's walls with glass windows.