Amazon to snap up Zappos

Whoa. This was unexpected: Amazon has agreed to a stock takeover of Zappos.com, a Las Vegas-based online retailer that has become famous for its unusual corporate culture.

While Zappos started out selling only shoes, it has since expanded to other products.

"This morning, our board approved and we signed what's known as a 'definitive agreement,' in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock," a memo posted to Zappos by CEO Tony Hsieh read. "Once the exchange is done, Amazon will become the only shareholder of Zappos stock."

Until this point, Zappos was privately owned.

Amazon provided more details in an official release: The company will acquire all outstanding Zappos shares in exchange for roughly 10 million shares of Amazon common stock, which comes out to be about $807 million. Additionally, the transaction involves about $40 million in cash and restricted stock units to Zappos employees. The transaction is expected to be complete this fall.

"We think that there is a huge opportunity for us to really accelerate the growth of the Zappos brand and culture, and we believe that Amazon is the best partner to help us get there faster," Hsieh wrote in his memo, adding that he and other Zappos executives plan to stay on board. "Amazon supports us in continuing to grow our vision as an independent entity, under the Zappos brand and with our unique culture."

Zappos.com got a new look a little over a year ago, when it broadened its offerings beyond just shoes.

Hsieh has become a regular speaker on the tech and marketing conference circuit because of his offbeat way of running a company: encouraging employees to Twitter, offering prospective hires $2,000 to turn a Zappos job offer down, and placing customer service at the top of the priority list with free shipping and returns.

"As you know, one of our core values is to build open and honest relationships with communication, and if I could have it my way, I would have shared much earlier that we were in discussions with Amazon so that all employees could be involved in the decision process that we went through along the way," Hsieh wrote. "Unfortunately, because Amazon is a public company, there are securities laws that prevented us from talking about this to most of our employees until today."

Reports had circulated recently that Amazon was looking at acquiring movie rental outlet Netflix. It has a history of being quite acquisition-friendly. Last year, the company bought audiobook retailer Audible for $300 million, rare book site AbeBooks for an undisclosed amount, and book-centric networking site Shelfari (also for an undisclosed amount).

Amazon actually operates its own shoe and handbag retail site, Endless.com, which is mostly free of Amazon branding. The site launched early in 2007.

This story was last updated at 2:01 p.m. PDT.

[andrew.mager]

What about http://www.endless.com?

I wonder what will happen to it.

[Yoerusho]

I love Zappos! They always get my order to me the next day "UPS", upgraded from the lowest shipping rate. No sales tax!!!!! I hope things don't change!

[sweaty_taco]

Yup same here. Zappos bends over backwards for it's customers. They are the Nordstroms of online shoe shopping. They will let you return/exchange your shoes, regardless of how long you've had them and even if you've worn them more than not. Hopefully this wont change.

[ciaran_d]

What a huge deal! Wonder how this will affect Zappos famous customer service policy?

I saw interviews with Zappos CEO Tony Hsieh and Werner Voegels Vice President of Amazon recently on a business website recentlly. The interviews are kind of funny with what has just happened.

http://www.meettheboss.com/amazon-buys-zappos.html

[Universal_Indie_Records]

Yes because Amazon's customer support isn't all that great.

[yiang]

Yea, zappos is great i just hope their customer service quality doesn't drop.

[sting7k]

As long as Zappos under Amazon keeps their same amazing customer service then I don't care who owns it. Every time I've ordered from them I've always chosen the free shipping which they say will be 4-5 days. The longest it has ever taken is one day! Sometimes I've ordered one afternoon and it was at my house the next day. I love Zappos, their return policy is also super easy and awesome.

Keep the service and Amazon has a good investment I say.

[cindnel]

Ditto re Zappos' customer service - it's fantastic. My only fear is that Amazon will invade my shoe closet and snatch my shoes away!!

[afurry91]

I love ZAPPOS. I ordered a backpack for college from there. Got it in 3 days!

[RompStar_420]

Last time I called Amazon customer service, some guy in India picked up the phone, I couldn't understand what they were saying, and when I asked that they repeat them self, they got upset that I asked them!! ***?!?!?!?!

Anyways, I no longer buy anything at Amazon.

[Jane in KC]

Agreed - Zappo's is great! Endless has tried hard to make their service (and stock) equal Zappo's, but I've never liked them as much. In fact, the last time I ordered shoes from Endless and was promised free overnight delivery, it took four days!

I like Amazon for many things, but their service does not equal Zappo's. I hope things aren't going to change for the worse.