Influx

This month’s Inc Magazine has an interesting story about Zappos and Amazon that makes it very clear why Amazon acquired them.

Here are some of the key points:

1.  Always imagined Zappos as selling more than shoes- used Virgin as a model, but instead of being all about being “hip and cool”, Zappos wanted to be about the best service.

2. The board wasn’t all behind the brand’s unique corporate culture, many thought it was some kind of crazy experiment. The majority of the board wanted the company to focus on profitability and they couldn’t see the connection between this and culture.This caused serious tensions and the only possibility for founder Tony Hsieh was to buy out the board at the likely cost $200 million.

3. The company explored various options, but followed up with Amazon who they had met back in 2005. In 2009, Hsieh presented to Bezos, he instantly got the core Zappos selling point, its culture.

4. Amazon closed the Zappos deal on November 1st at a valuation of $1.2 billion.

5. Zappos benefits from Amazon’s understanding of its culture and they are starting to share ideas.

6. Zappos operates independently, but the relationship is governed by a document that recognizes the uniqueness of Zappos’s culture and the responsibility of Amazon to protect it.

7. The deal appears to be working- in the first quarter of 2010- net sales were up 50%.

8. As it grows, it’s even more important for Zappos to protect its unique culture and they are taking steps to do this, by tracking cross departmental relationships and encouraging employees to look at photos of random employees and asking them how well they know them.

There are a number of critical points that come out of this experience and it seems obvious that many of the money guys just don’t get the soft intangibles that make all the difference to a brand, they seem unable to draw the correlation between the two.

Perhaps, the advocates, supporters and creators of these soft intangibles need to do a better job of linking these to financial performance. The other important thing this story shows is the importance of a strong leader who has a point of view and a belief system.

Posted by Ed Cotton