From Z to A

I understand Zappos selling out to Amazon (even the Amazon logo, which leads from A to Z, makes sense of it) but the news still depresses me. Zappos is a cause as well as a brand. That cause is relationship. As Wikipedia (currently) puts it,

Zappos uses a loyalty business model and relationship marketing. The primary sources of the company’s rapid growth have been repeat customers and numerous word of mouth recommendations.[4][5] In 2005, the chairman reported that 60% of customers were repeat buyers.[5]

Think about the word “company.” At Dictionary.com, the noun is said to mean these things:

  1. a number of individuals assembled or associated together; group of people.
  2. a guest or guests: We’re having company for dinner.
  3. an assemblage of persons for social purposes.
  4. companionship; fellowship; association: I always enjoy her company.
  5. one’s usual companions: I don’t like the company he keeps.
  6. society collectively.
  7. a number of persons united or incorporated for joint action, esp. for business: a publishing company; a dance company.
  8. (initial capital letter) the members of a firm not specifically named in the firm’s title: George Higgins and Company.

And that’s before we get down to military, governmental and other meanings.

Note that the business meanings start at #7. Note the convivial qualities of all the numbered meanings. Zappos has that convivial nature, more than any other big company retailing clothing online. You get the sense that you can relate to these people, because they seem to have a reason for being that goes beyond being the cheapest and most convenient means for choosing goods, paying for them, and having them shipped to you. That’s Amazon’s business. It’s different.

So I’m sure there is synergy there. But synergy alone does not a great acquisition make.

I wonder, now that (as the press release says) “Amazon will provide Zappos employees with $40 million in cash and restricted stock units” — in addition to whatever stockholding Zappos employees get in the form of Amazon stock (the sum of all shareholders and options is 10 million Amazon shares) — if Zappos’ soul and mission will survive the acquisition.

I also wonder what kind of hit the whole subject of relationship, which is so highly potentiated (read: absent, though it shouldn’t be), will take.

Tony Hsieh’s letter to employees (about 100 of them, it says) is reassuring, as is the Jeff Bezos video.

Hope it works out.

[Later...] Alexander Haislip has a financial angle on the deal.

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9 comments

  1. Tim Walker’s avatar

    Interesting thoughts, Doc. As a customer and watcher of both companies, I’ll be interested to see how hands-off Amazon remains in terms of Zappos culture and M.O.

    In making this deal, I wonder if Amazon isn’t doing three things:

    1. Building synergies — each company can learn from the other, etc.

    2. Nipping a competitor in the bud.

    3. Making a Warren Buffett-style acquisition — buying a company that (a) makes plenty of money, (b) doesn’t need fixing, and (c) is available at the right price.

    Could be very smart.

  2. mark finnern’s avatar

    Hi Doc,

    My little hope is, that like some were speculating that Microsoft was trying to buy Yahoo to get a culture infusion, Bezos is trying the same with Zappos: He bought Zappos to replicate their community loyalty success.

    World peace and end of hunger is next on my hope list ;-)

    We will see, Mark.

  3. Doc Searls’s avatar

    Tim, I hope you’re right on all three counts. I’m assuming that’s the fantasy on both sides. To me the big question is whether The Mission becomes temporary handcuffs for alpha Zappos employees, before they parachute out. There will be some of that. Enough to ruin things? The jury has hardly been seated, so we dunno.

  4. Antonio Rodriguez’s avatar

    Doc,

    I am with you— for me buying from Zappos was as much supporting an ideology that I believe I (that relationships really matter) as it was getting great service. Though I love Amazon, I find them too big and diversified to have the same focus (witness their Orwellian snafu last week).

    As much as I am happy that folks made money, I was sort of hoping that Zappos would represent a new kind of IPO.

    And no, I don’t think there is a chance in hell that any of their culture will transfer— culture sadly seems to be as hard to transplant as brains.

  5. Doc Searls’s avatar

    Amen, Antonio. And I love that line: culture sadly seems to be as hard to transplant as brains.

    And Mark, I’m working on a post to follow up on yours. It’s a great idea you have there.

  6. Harry Lewis’s avatar

    Doc,

    This is sweet to read. Tony Hsieh was on Harvard’s programming team in 1993 while he was a Harvard undergrad (I was the “coach,” though I didn’t do much coaching). One of his two teammates was Craig Silverstein, who went to Stanford for a bit and then was the first guy Brin and Page hired and is now Google Director of Technology. Zappo’s wasn’t Tony’s first company; that was the Internet advertising company Linkexchange which he founded right out of college with two of his Harvard classmates and sold to Microsoft after a couple of years. Not a bad group.

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