Amazon buys Zappos, killing a potential threat

Sometimes, the best way for an established company to hold its ground and avoid having its business disrupted by a rival is to acquire the disruptor.

Today, Amazon.com (AMZN) did just that. Amazon, an innovative company by many measures, said this afternoon that it would acquire Zappos.com, the online shoe retailer known for its outstanding customer service. Amazon offered $807 million in cash and stock; it will issue 10 million shares for Zappos and provide its employees with $40 million in cash and restricted stock units. (Also see "Sweet deal for shoe grunts.")
Amazon has been keeping an eye on this company for some time. In May, Zappos launched its "zeta" site, with plans to expand beyond shoes and sell computers, camcorders, DVDs, and other electronics. (Sounds a lot like Amazon.com, which once sold only books.) With Zappos clearly on its way to becoming a competitor to Amazon, and with sales already above $1 billion annually, Jeff Bezos, Amazon's chief executive, had no choice but to swallow Zappos whole.

The plan now is for Zappos to continue to operate independently, with its headquarters remaining in Las Vegas. Amazon.com will continue to operate its own shoe store, Endless.com.

The deal follows a number of other Amazon acquisitions, including the most recent, SnapTell, a visual-product search company, which Amazon bought last month for an undisclosed amount.
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