When it comes to shopping for shoes online, two names immediately come to mind – Amazon and Zappos. While Amazon is an e-commerce behemoth that sells everything under the sun, Zappos has built its reputation as the go-to destination for footwear. But many consumers may not realize that these two retail powerhouses are actually closely intertwined.
Back in 2009, Amazon acquired Zappos in a blockbuster $1.2 billion deal that sent shockwaves through the business world. At the time, it was Amazon‘s biggest acquisition ever. But now 13 years later, many shoppers may be wondering – is Zappos still owned by Amazon today? And how has that relationship evolved and impacted both companies?
As someone who has followed the retail industry closely for over a decade and has a picky eye for e-commerce, I‘ve seen firsthand how the Amazon-Zappos union has played out. In this in-depth guide, I‘ll share my expert insights and analysis on what‘s transpired since that momentous deal. Whether you‘re a Zappos loyalist, an Amazon fanatic, or just a curious consumer, understanding the dynamics between these two companies can shed light on the past, present and future of online shopping. So let‘s dive in!
A Brief History of Zappos
First, let‘s rewind the clock and look at Zappos‘ scrappy beginnings. The company was founded in 1999 by Nick Swinmurn, who initially called it ShoeSite.com. The premise was simple but powerful – make it easy for people to find and buy shoes online, with a wide selection and an emphasis on incredible customer service. Within a few months, Swinmurn rebranded to Zappos, a catchy name derived from "zapatos," the Spanish word for shoes.
In the early 2000s, Zappos quickly gained traction with shoe-loving shoppers. The site offered free shipping both ways, a generous 365-day return policy, and 24/7 customer service. Zappos invested heavily in wowing shoppers and creating an emotional connection with the brand. The company moved to Las Vegas in 2004 to tap into the call center talent pool there.
Zappos‘ growth in the mid-2000s was explosive. Revenues soared from $1.6 million in 2000 to over $1 billion by 2008. It expanded beyond shoes to also sell clothing, handbags, accessories and more. Zappos made the Inc. 500 list of fastest-growing companies and was lauded in the business press for its unique culture and customer-centric mindset.
Although Zappos was a rocket ship of growth, the company was still not profitable, as it invested heavily back into operations and customer acquisition. There was growing speculation that Zappos would look to be acquired by a larger player. That‘s when Amazon came knocking.
Why Amazon Bought Zappos
In 2009, Amazon founder and CEO Jeff Bezos saw an incredible opportunity in Zappos. Bezos had long admired the company‘s obsessive focus on making customers happy. He once said that "Zappos has a customer obsession which is so easy for me to admire."
So why exactly did Bezos want to shell out over a billion dollars to buy Zappos? Here are a few key reasons:
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Instant credibility in shoes and apparel – While Amazon sold some footwear, Zappos was the undisputed online market leader. Swinmurn once said that Zappos had an "unbeatable selection" of over 3 million shoes. Acquiring Zappos would immediately vault Amazon to the top of the category.
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A customer service powerhouse – Zappos‘ relentless focus on customer satisfaction was legendary. CEO Tony Hsieh wrote a bestselling book about it called "Delivering Happiness." Amazon wanted to learn from Zappos‘ secret sauce.
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Unique company culture – Zappos had developed an offbeat, employee-centric culture with core values like "Create fun and a little weirdness." Bezos saw value in preserving that culture while exposing it to Amazon‘s vast resources.
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Growth and synergies – Zappos was growing over 20% per year but still not profitable. Bezos believed that combining Amazon‘s scale and efficiency with Zappos‘ brand and category expertise could propel growth to new heights.
So in July 2009, Amazon announced the acquisition of Zappos for 10 million shares of Amazon stock, worth about $1.2 billion at the time. Crucially, the deal allowed Zappos to continue operating as an independent entity under CEO Tony Hsieh, with its unique culture intact.
Under the Hood: The Zappos-Amazon Relationship
Fast forward to today, and many consumers may not even realize that Zappos is an Amazon subsidiary. That‘s because, as agreed in the acquisition, the two companies still maintain separate brands, websites, and even leadership teams. If you buy shoes on Zappos.com, you won‘t find your order history on Amazon.com and vice versa.
But behind the scenes, the relationship between the two companies has steadily deepened over the past 13 years. Here‘s a look at some of the key dynamics that have developed:
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Shared resources – Zappos has plugged into Amazon‘s globe-spanning fulfillment and logistics network to turbocharge its shipping speeds and geographic reach. A Zappos executive called it "jet fuel" for growth.
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Technology collaborations – Zappos and Amazon have found opportunities to collaborate on e-commerce tech, including Amazon Pay integration, product reviews, and recommendation algorithms. But Zappos has kept its core technology stack independent.
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Cross-pollinating talent – There‘s been a steady trickle of executives and employees moving between the two companies. Perhaps most notably, former Zappos COO Jeff Espersen became VP of consumables at Amazon. Amazon has hired several Zappos veterans to inject more of that customer-centric DNA.
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Fulfillment synergies – Zappos has taken advantage of Amazon‘s robotics technology and increasingly automated fulfillment centers to get orders out faster. Some Zappos orders are even fulfilled from Amazon warehouses for efficiency.
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Protecting the cultures – By most accounts, Amazon has respected its promise to let Zappos maintain its quirky, autonomous culture. Zappos still has a giant ball pit in the lobby, wild company parties, and nap rooms to embody its "work hard, play hard" ethos.
According to Zappos brand marketing director Jeff Espersen, Amazon‘s approach has been "really smart – to not come in and stomp all over everything, but to let Zappos continue to grow."
Zappos by the Numbers: Sales and Growth
So just how big has Zappos become under Amazon‘s umbrella? While the private company doesn‘t disclose detailed financials, here‘s what we do know:
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Surpassing $2 billion – By 2015, Zappos had reached over $2 billion in annual gross merchandise sales and was profitable, according to Fortune. That put Zappos‘ valuation at 2-3x what Amazon paid in 2009.
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50 million pairs of shoes – A Recode report found that by 2019, Zappos was selling 50 million pairs of shoes annually, a staggering figure. For context, Foot Locker sold 102 million pairs across 3,000 stores that year.
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10,000+ brands – Zappos now carries over 10,000 shoe brands, along with thousands of clothing, bags, and accessories labels. It sells over 50,000 styles of shoes alone.
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#20 largest apparel retailer – By sales, Zappos has become a top 20 U.S. apparel and footwear retailer, surpassing brands like Levi‘s, Under Armour, and Ralph Lauren.
So while Amazon does not break out Zappos‘ sales in its reporting, it‘s clear that the shoe seller has become a multi-billion dollar powerhouse over the past decade, even as it maintains its independence and culture.
The Cons of Independence
That‘s not to say the Zappos-Amazon relationship has been perfect. Some experts argue Zappos has missed out on key opportunities by staying at arm‘s length. Here are a few potential downsides of Zappos‘ continued independence:
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Duplicate costs – By maintaining separate HQ, fulfillment, and technology operations, Zappos has been unable to fully benefit from Amazon‘s massive economies of scale and investment in things like robotics and AI.
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Customer confusion – The separation between Zappos and Amazon account systems and histories can frustrate customers who shop across both platforms and expect a seamless experience. Loyalty programs are also siloed.
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Missed synergies – Zappos and Amazon could benefit from pooling more data to better understand customers and their purchase patterns. Zappos‘ expertise could also be an asset for Amazon‘s growing private label fashion brands.
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Cultural drift – After CEO Tony Hsieh left Zappos in 2020 and tragically passed away, some say the company culture he championed has begun to erode. Maintaining the Zappos culture apart from Amazon will be a challenge.
Of course, these concerns have to be weighed against the undeniable success Zappos has sustained under Amazon. Consolidating too quickly or deeply could jeopardize the brand Zappos has built. According to one corporate development specialist, "[Amazon] could have integrated Zappos much more tightly, but each year that goes by, Zappos is able to chart its own future."
What‘s Next for Zappos and Amazon?
As Zappos enters its 23rd year and 14th under Amazon, what lies ahead for this dynamic duo of online retail? Here are a few strategic priorities and possibilities I‘ll be watching:
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Going offline – In 2022, Zappos has been experimenting with physical retail, opening pop-up stores and even an "experience center" at its HQ to let customers try products. Expect Zappos to tap into Amazon‘s growing network of stores and retail tech.
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Fashion and luxury expansion – Under the leadership of former Amazon Prime boss Kedar Deshpande, Zappos is increasing its focus on high-end fashion partnerships and exclusive merchandise, an area of strength for Amazon. Deshpande wrote that Zappos aims "to be the platform that gives every brand a way to connect with their customers directly."
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Social commerce – Zappos has been leaning into user-generated content, live video shopping, and social commerce trends to develop deeper connections with customers, especially younger ones. Integrating more with Amazon‘s influencer program could boost exposure.
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International growth – Now under the leadership of Amazon veteran Scott Schaefer, Zappos has been pushing into global markets like Canada, where it launched in 2020. Expect more international moves piggybacking off Amazon‘s logistics.
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New category expansion – Zappos continues to push beyond shoes into adjacent categories like activewear, outdoor gear, and home goods. Shoes are now less than 50% of sales. Zappos could be a powerful launching pad for Amazon to establish authority in new verticals.
Of course, all of this will be against the backdrop of intense competition and economic headwinds. Zappos will have to maintain its sterling reputation and customer relationships in the face of disruptive players like Shein, rising customer acquisition costs, and challenges like supply chain snarls and inflation. But with Amazon in its corner, Zappos remains well positioned to keep delivering that "wow" factor.
The Bottom Line
In the final analysis, the Amazon-Zappos relationship has been a major win-win over the past 13 years. Zappos has maintained its cherished culture and customer-centric identity while leveraging the vast resources of Amazon to grow far beyond what it could have done alone. Amazon gained a foothold in fashion, credibility with brands, and key learnings it has applied across its empire.
But in the rapidly evolving world of online retail, Zappos and Amazon must continue innovating and finding new ways to collaborate to stay ahead of the pack. As the competitive lines blur, powerful partnerships like these will make all the difference. Consumers should ultimately benefit from the combined strengths of these two pioneering companies working to make online shopping easier, faster, and more delightful than ever before.
After all, as Amazon founder Jeff Bezos once put it, "In the end, we are our choices." And by choosing each other, Zappos and Amazon are positioned to keep making an impact for shoppers for years to come – one perfect pair of shoes at a time.
