January 25, 2012

Mergers & Acquisitions

Why did Amazon buy Zappos, the online shoe and apparel store, in 2009?

It wasn't primarily for the shoes; Amazon already owned a shoe site called Endless.com. It wasn't primarily for the existing Zappos Web interface - Endless's interface was at least as attractive - or the cash flow. Zappos was a ten year old company with a loyal following, but it was barely profitable.

The acquisition wasn't really for assets at all. It was for the capabilities and in particular for the contribution Zappos would make to Amazon own capabilities system. Zappos had capabilities in retail interface design and customer-relationship management that, on the surface seemed close to Amazon's own. But Zappos, largely through ingenuity and its own creative culture, had outpaced the larger retailer.

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