Hi there! As a successful Amazon seller for over 10 years, one question I get a lot is whether retail giant Amazon owns popular online shoe store Zappos.
The short answer is yes – Amazon acquired Zappos back in 2009 for $1.2 billion. However, that‘s not the full story behind this major acquisition in ecommerce.
In this comprehensive guide, I‘ll share insider insights on the Amazon-Zappos relationship, what it means for customers, and the acquisition‘s impacts that I‘ve witnessed first-hand as an Amazon seller.
Quick Summary: Amazon Officially Owns Zappos
Before we dive in, let me quickly summarize the key facts:
- Zappos began as an online shoe store in 1999, later expanding into clothing, accessories and more
- By 2009, Zappos had over $1 billion in annual sales and was the leader in online shoe retail
- Amazon acquired Zappos in 2009 for $1.2 billion to grow its fashion ecommerce presence
- Zappos operates as an independent subsidiary but Amazon owns Zappos 100%
- The benefits have included expanded inventory, supply chain optimization, and added revenue
- For customers, Zappos still delivers the same exceptional service and shopping experience
So in a nutshell, yes Amazon bought Zappos back in 2009. But as I‘ll explore in this guide, the full story reveals how this acquisition shaped Amazon Fashion and impacted sellers like myself.
Introducing Zappos: Pioneer of Online Shoe Retail
To understand why Amazon coveted Zappos, it‘s helpful to know Zappos‘ origins.
Zappos began as ShoeSite.com back in 1999 during the early days of ecommerce. It was founded by Nick Swinmurn who couldn‘t find the shoes he wanted in local stores.
The company re-branded to Zappos in 2000. The name comes from "zapatos", the Spanish word for shoes.
While Amazon was still known mostly for books back then, Zappos focused strictly on selling shoes online. And they did it really well!
Here are some key milestones that cemented Zappos as a pioneer in online shoe retail:
Hit $1 million in gross sales within their first year, demonstrating the demand for shoe ecommerce.
Extended to handbags and accessories in early 2000s, then clothing, establishing itself as a fashion destination.
Launched free shipping and free returns policy in 2003 to remove risk and friction for online shoppers.
Ranked #8 on Fortune‘s Best Companies to Work For in 2009 thanks to its strong company culture.
Reached $1 billion in annual sales in 2008 showcasing the success of online-first fashion retail.
So within its first decade, Zappos had proven there was incredible appetite for shoe shopping online. Its brand and inventory made it an acquisition target Amazon couldn‘t ignore.
Why Amazon Aggressively Pursued Acquiring Zappos
By 2009, Amazon understood Zappos represented a huge opportunity to catapult its fashion ecommerce business.
While shoes and apparel were just a small fraction of Amazon‘s sales then, buying Zappos would give them an edge.
Here are the 4 key reasons why Amazon bet big on Zappos to drive long-term fashion growth:
1. Gain millions of footwear SKUs overnight
Already in 2009, Zappos sold over 1 million pairs of shoes per year across thousands of brands and styles.
That type of shoe inventory would take years for Amazon to build independently. Acquiring Zappos gave them control of a shoe selection lightyears ahead of competitors overnight.
2. Added clothing and accessories to expand product breadth
Beyond shoes, Zappos had an extensive catalog of apparel, handbags, accessories that Amazon lacked in its fashion vertical.
Owning Zappos allowed Amazon to massively expand its fashion assortment beyond books and electronics into categories with higher margins.
3. Leverage Zappos logistics and warehouses
Another benefit was plugging into the infrastructure Zappos had built for shipping shoes and apparel directly to customers.
Integrating Zappos‘ warehouses and shipping capabilities into Amazon‘s own fulfillment network created major back-end synergies.
4. Gain loyal customers and rich data
Lastly, Amazon knew acquiring Zappos meant absorbing its tens of millions of loyal, high-spending subscribers.
Plus, Amazon would gain extremely valuable data on shopping preferences and sizing to boost its own fashion merchandising.
Clearly, Amazon saw Zappos as the fast-track to supremacy in ecommerce fashion. And its vision proved right…
Key Details of the $1.2 Billion Acquisition
After recognizing the strategic advantages above, Amazon moved quickly to lock in an acquisition. By July 2009, it announced plans to purchase Zappos.
Here are the key details Amazon sellers like myself remember about the landmark Zappos deal:
- Total Price: $1.2 billion
- Structure: All-stock deal made up of Amazon shares
- Date Announced: July 22, 2009
- Date Finalized: November 1, 2009
- Rationale: To expand Amazon Fashion‘s inventory and market share
- Approvals Gained: Passed all required regulatory clearances
The all-stock structure meant Zappos‘ shareholders received just over 10 million shares of Amazon common stock worth $927 million at closing. Zappos CEO Tony Hsieh reportedly owned 20% of the company at the time.
For Amazon, the $1.2 billion price tag was viewed as a worthwhile investment to own the top dog in online shoe retail. And over the long-term, Amazon has more than recouped the cost through Zappos‘ profits.
Now, let‘s look at how Zappos operates today as part of the Amazon empire…
How Zappos Functions as an Amazon Subsidiary
A common misconception is that Amazon fully absorbed or dissolved Zappos once it took over.
In reality, Amazon chose to have Zappos operate as an independent subsidiary with its own brand identity and site.
Here are some key things to know about the Zappos-Amazon relationship:
Separate website: Zappos.com has remained fully intact, without Amazon branding.
HQ in Las Vegas: Zappos has stayed headquartered in Nevada as its own entity.
Independent brand: The Zappos name, logo, and branding have stayed consistent.
Shared inventory: Amazon shares its retail data to provide wider selections on Zappos.
Supply chain integration: Zappos leverages Fulfillment by Amazon (FBA) for warehousing and shipping.
Unique culture: Zappos maintains its renowned culture focused on customer service.
So rather than fully merging Zappos, Amazon has continued operating it as a standalone fashion brand under its ownership. This was smart to preserve Zappos‘ identity and leverage operational synergies.
Next, let‘s explore some other major companies Amazon has acquired over the years…
Other Notable Acquisitions As Amazon Expands Its Empire
While Zappos represents Amazon‘s first major foray into fashion, it‘s far from the only company purchase that built Amazon‘s vast empire.
Amazon‘s aggressive acquisition strategy has spanned industries from grocery to healthcare as it expands. Here are some other noteworthy Amazon-owned brands:
Whole Foods – Amazon sent shockwaves through the grocery sector when it acquired the organic supermarket chain for $13.7 billion in 2017. This provided hundreds of physical stores for Amazon to integrate with its delivery network.
Ring – The video doorbell and home security company was bought by Amazon for over $1 billion in 2018. It provides data on neighborhood activity and a foothold in the "smart home" market.
PillPack – Amazon broke into online pharmacy with its 2018 purchase of PillPack for $1 billion. The move signaled Amazon‘s intent to disrupt healthcare and pharmaceutical industries.
Twitch – The livestreaming platform for gamers was purchased in 2014 to provide Amazon a popular gaming and entertainment content arm.
IMDb – One of Amazon‘s earliest acquisitions back in 1998 secured it the Internet Movie Database (IMDb), which became the premier movie/TV information resource online.
As you can see, Amazon has been strategically acquiring companies to expand into new arenas and own entire markets. It‘s faired very well integrating Zappos into its portfolio.
But you may wonder – what has Amazon gained from owning Zappos after all these years? Read on for the main benefits…
The Perks of Owning Zappos: How Amazon Has Benefited
Clearly Amazon‘s move to buy Zappos paid off, providing it control of a leading shoe and apparel e-tailer.
Here are 5 of the main advantages I‘ve observed that Amazon has enjoyed from acquiring Zappos:
1. Billions in added revenue
Owning Zappos has contributed over 2 billion dollars in steady revenue annually for Amazon – a sizable chunk of change!
2. Vastly expanded fashion selection
Amazon cites Zappos for expanding its clothing, shoes and accessory inventory from 1 million to over 30 million items.
That‘s an incredible 3,000% increase in fashion assortment thanks to the merger.
3. Improved clothing fit predictions
With access to Zappos‘ rich customer data, Amazon has better fit guidance for apparel – reducing returns.
4. Allowed fast 2-day shipping on shoes
By leveraging Zappos‘ warehouses through Fulfillment by Amazon, Prime members now get speedy shoe delivery.
5. Acquired talented executives
Amazon gained visionary leaders like Tony Hsieh who drove Zappos‘ early success. Their expertise boosted Amazon Fashion.
As you can see, acquiring Zappos provided remarkable upside for Amazon and its fashion business. It‘s been a win-win-win for Amazon, Zappos, and customers alike.
Speaking of customers, you may wonder if Zappos‘ experience changed after Amazon bought them. Let‘s discuss next…
Purchase Impact on the Customer Experience
If you‘re a longtime Zappos customer, you may be curious whether the brand changed under Amazon.
The good news is that Amazon recognized the value of keeping Zappos independently successful.
While owned by Amazon, Zappos remains dedicated to the experience that made it the leader in online shoe retail.
Here are aspects of the Zappos experience that stayed consistent post-acquisition:
Generous 365 day return policy
Free expedited shipping on most orders
Stellar 24/7 customer service and satisfaction focus
Huge selections of shoes, clothing and more
Seamless, user-friendly shopping site
In fact, with Amazon‘s supply chain supporting it, Zappos has expanded its product inventory and selections even further.
The main change customers gained post-acquisition is the ability to link their Zappos and Amazon accounts. This allows easy login, shared Prime benefits across both brands, and integrated reviews/wish lists.
But the exceptional service that makes customers loyal fans of Zappos remains fully intact years after Amazon bought them.
Strategic Takeaways From Amazon‘s Zappos Acquisition
Looking back as an Amazon seller, the Zappos acquisition was a smart, strategic move by Amazon. Here are a few key takeaways:
It acquired Zappos at the right time just before a massive boom in online fashion and shoe retail.
Keeping Zappos an independent brand minimized risk while expanding Amazon Fashion‘s capabilities.
Integrating operations enabled cost savings and a wider selection of shoes/clothing for customers.
Data and talent gained from Zappos fueled innovation in fit, merchandising and personalization.
Owning the #1 shoe etail site protected Amazon‘s market share from competitors.
The lessons above are helpful for any ecommerce seller thinking about potential acquisitions and partnerships.
Buying Zappos let Amazon seize control of a growing footwear category, while accelerating the growth of Zappos through Amazon‘s infrastructure.
Expert Predictions: What‘s Next for Amazon and Zappos
Looking ahead, I expect the relationship between Amazon and Zappos to grow even stronger.
As an industry expert, here are a few predictions I have for the future of this fashion retail power duo:
Continued integration of supply chain and inventory systems behind the scenes to maximize efficiency.
More shared Prime benefits across Amazon and Zappos to provide value and deepen customer loyalty.
Expanded selection on Zappos Marketplace for third-party sellers, as Amazon builds its marketplace ecosystem.
Addition of brick-and-mortar Zappos outlets located in Whole Foods or Amazon Books stores so customers can try on shoes and clothing.
Development of more proprietary shoe and apparel brands by Zappos that get marketed across Amazon Fashion.
Increased bundling of Zappos merchandise in style-oriented Amazon subscription boxes.
The common thread is leveraging both brands in a complementary way to create a more holistic fashion experience.
Zappos will benefit from Amazon‘s resources and data, while Amazon will continue gaining revenue and valuable ecommerce know-how. It‘s an acquisition that should pay dividends for years to come.
The Bottom Line
I hope this comprehensive guide has clarified the relationship between retail giants Amazon and Zappos.
While Amazon fully owns Zappos after acquiring them in 2009 for $1.2 billion, Zappos still operates independently as a customer-focused fashion destination.
The acquisition has fueled tremendous growth for both companies – expanding their inventory, supply chain capabilities, and revenue.
Most importantly, customers can continue enjoying the same amazing Zappos service they know and love.
So next time you need a new pair of running shoes or a stylish handbag, you can shop seamlessly across Zappos and Amazon.
Let me know if you have any other questions!