If you‘re an avid online shopper like me, you‘ve probably purchased more than a few pairs of shoes from Zappos over the years. As one of the most popular shoe e-commerce sites, they make buying footwear online easy and risk-free thanks to their free shipping and legendary 365-day return policy.
But here‘s something you may not know – Zappos is actually owned by Amazon.
Yep, the everything store acquired the specialized shoe retailer way back in 2009. And it just goes to show how over the past decade, Amazon has been snapping up businesses left and right as part of its goal to dominate all aspects of online retail.
Curious to learn more about why Amazon bought Zappos and what it‘s meant for both companies? Then keep on reading!
The Story Behind the Zappos Brand
First, let‘s rewind a bit to understand the Zappos backstory before Amazon entered the picture. Zappos was founded in 1999 by Nick Swinmum, who started the company originally under the domain Shoesite.com.
But just a few months after launch, Nick decided the name “Zappos” would be catchier – it’s derived from the Spanish word for shoes, “zapatos.” Good call Nick!
In the early years, Zappos really focused on offering a wide selection of shoes to stand out from other online players like Amazon and eBay. And it‘s inventory has always been one of its major selling points – now with thousands upon thousands of styles from brands like Nike, Converse, and UGG.
Beyond the huge array of shoes, Zappos also aimed to please customers with unbeatable service, going above and beyond to make buyers happy. Over time, it expanded its product line to include handbags, clothes and accessories while staying true to its customer-first philosophy.
Why Amazon Wanted to Buy Zappos
So how did shoe shopping specialist Zappos catch the eye of Jeff Bezos and Amazon?
Well, Amazon has always focused on enhancing the shopping experience and offering killer customer service. In many ways, Zappos shared that same DNA.
So in 2009 when Amazon purchased Zappos for $1.2 billion dollars in stock, Bezos said it would allow both brands "to learn from each other and create even better experiences for our customers."
From my perspective as a longtime analyst of online retail trends, there were a few key strategic benefits of acquiring Zappos:
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Gained a Foothold in the Lucrative Footwear Market – Shoes represent over $100 billion in annual consumer spending. And the shoe industry was one of the fastest growing ecommerce sectors at the time. So buying Zappos gave Amazon an instant leg up against competitors.
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Expanded Its Fashion Ecommerce Ambitions – Amazon has made no secret of its aspirations around apparel ecommerce and even fashion design. The Zappos deal laid the groundwork for growth in this area.
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Bolstered Its Customer Service Reputation – Amazon recognized that Zappos‘ obsessive focus on customer happiness was great PR. It helped soften Amazon‘s image at a time when consumers saw it as ruthless – so smart optics.
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Added a Hip Brand That Attracted Youth – Zappos had major appeal with millennial and Gen Z shoppers. Getting the cool-kid shoe retailer in its portfolio was surely another motive for Amazon.
And for Zappos specifically, the sale provided financial backing and supply chain infrastructure from Amazon to significantly scale its business.
Over the past decade, Amazon‘s faith in Zappos seems to have paid off. Zappos now boasts over $2 billion in gross annual merchandise sales. And it‘s become the second largest online shoe store behind Amazon itself according to eMarketer analysis.
| Online Shoe Retailer | Est. US Sales 2020 | Market Share |
|---|---|---|
| Amazon | $3.95 billion | 28.3% |
| Zappos | $2.76 billion | 19.8% |
What Else Does Amazon Own?
When it purchased Zappos, Amazon was really just getting its acquisition engine revved up.
And it’s snapped up quite an array of companies since then in various industries from robotics to gaming to grocery.
Some of Amazon’s other major subsidiaries include:
- Whole Foods Market
- Twitch
- Ring
- IMDb
- PillPack
Plus Amazon has created its own proprietary brands under areas like Amazon Fashion, Amazon Fresh and Amazon Web Services.
So Zappos now represents just a single slice of Amazon‘s vast and growing empire. But it remains one of the company‘s most strategic buys in the apparel arena.
How the Relationship Has Evolved
You might be wondering – over a decade later, is Zappos still operating independently or has Amazon exerted more control?
Well, one big change is that you can now buy Zappos merchandise directly on Amazon’s site. So that helps Amazon present more shoe and clothing inventory to its customers.
However, Zappos does still function as its own distinct brand with its own CEO, Arun Rajan. The websites haven’t merged and Zappos maintains its own customer service team and unique shopping experience.
And both companies want to keep it that way so they can play to their individual strengths.
In my view, Amazon will likely let Zappos carry on as its own brand indefinitely rather than try to rebrand it as Amazon Footwear or something. Why mess with success given that Zappos rakes in billions annually?
But never say never – Amazon has shut down other acquisitions like Fabric.com when they stopped aligning strategically. As Amazon expands more aggressively into private label fashion, that calculation could someday change for Zappos too if Amazon decides to consolidate.
For now though, I think we can expect the status quo where Zappos continues operating autonomously to leverage the niche they’ve carved out in footwear ecommerce.
The bigger threat I see is whether newer players like StockX, focused on secondary resale of collectible sneakers, start stealing share. Amazon and Zappos may not have the pulse on limited edition drops the way those trendier platforms do.
So while Zappos is sitting pretty for now, in such a competitive, rapidly changing industry I‘d never take continued dominance for granted. It‘s smart of Amazon not to neglect or subsume Zappos, but constantly reevaluate whether the needs of shoe buyers are being met.
Impacts on the Broader Retail Landscape
Clearly Amazon and Zappos have enjoyed a very fruitful relationship. But the acquisition definitely impacted more than just those two companies.
Amazon buying Zappos reinforced many retailers’ worries that Amazon was quickly cementing its status as the “everything store.” Gobbling up category-leading online brands in apparel and other segments signaled how serious Amazon was about dominating all of ecommerce.
The deal put other shoe sellers on notice too about just how fierce competition was getting. DSW, Famous Footwear and Shoe Carnival have had to significantly step up their technology investments and omni-channel capabilities in the years since.
Some footwear brands have worked harder to nurture their own direct-to-consumer channels so as not to rely as heavily on Amazon or Zappos as sales channels. While excellent for distribution, brands don’t love having prices constantly shopped across marketplaces.
Additionally, the acquisition accelerated industry consolidation as big fish ate up smaller ones. Just look at brands like Aldo, Journeys and Rack Room Shoes getting gobbled up by retailers like Genesco and Caleres seeking scale.
So ultimately Amazon taking Zappos under its wing really did represent the turning of a tide. In the decade-plus since, digital disruption of the historically offline shoe industry has only picked up pace. And Amazon sits at the center of it all.
What Does the Future Hold?
Given Amazon‘s insatiable appetite for expansion into new frontiers like brick-and-mortar and healthcare, it likely won‘t be the last bold acquisition Bezos and company make.
In my view, we can expect Amazon to continue aggressively buying up startups and established companies alike to infiltrate all facets of commerce and beyond.
Especially as the company bets bigger on technology like computer vision and voice AI shopping, those innovative startups will be prime targets. And acquiring them early allows Amazon to limit competition down the road – very savvy.
I could also see them trying to dominate global fashion ecommerce through strategic acquisitions of proven players abroad. Or absorb leading multi-brand retailers trying out showroom formats and modern concepts unburdened by legacy baggage.
Basically, I predict Amazon’s strategy of owning category-leading subsidiaries and proprietary brands will only intensify. They wisely allow Amazon to diversify revenue while controlling customer experience across channels.
As for Zappos specifically though, I think they’re likely to continue operating independently as long as they maintain market share dominance in US online shoe retail. But if cracks start forming and a serious challenger appears, Amazon could take aim with changes to the Zappos playbook.
One thing is certain – we‘ve definitely not heard the last of Amazon unleashing its acquisition appetite! But I‘d bet they look back at that billion-dollar Zappos deal as one of their smartest early chess moves entering 21st century ecommerce domination.
