Delivering Happiness

partnership opportunities. I look forward to hearing your ideas on
Thursday…
When we started talking to Amazon in early 2009, however, both sides
seemed to have a different perspective compared with several years ago. On
the Amazon side, they seemed to be more open to the idea of us continuing
to run as an independent entity so that we could continue building the
Zappos culture and business the way we wanted to. They had been
following our progress over the years and saw that our approach to business
was working for us. On the Zappos side, what mattered the most was
continuing to do what we were doing for our employees and our customers
while gaining access to Amazon’s vast resources.
In our minds, we thought of a potential acquisition scenario more as a
great marriage than as selling the company. Both companies cared deeply
about being customer-centric. We each just had different approaches to it.

---

We thought of Zappos as being more high-touch, and Amazon as being
more high-tech.
Even though our original goal was to buy out just our board of directors
and the shares that they held and represented, the more we thought about it,
the more that joining forces seemed to make sense. By doing so, all parties
would be 100 percent aligned, which was the whole challenge that we were
trying to overcome with our current board of directors.
We had originally been resistant to the idea of exploring an acquisition
scenario with Amazon, but Michael Moritz convinced us that it could end
up being mutually beneficial and the best possible outcome for shareholders
as well as employees. (And, as it would turn out, he was right.)
Initially, Amazon wanted to literally buy Zappos using cash because
that’s how they had done most of their previous acquisitions. That didn’t sit
well with Alfred, Fred, or myself. In our minds, that felt too much like we
were selling the company. Selling our company wasn’t our goal. We wanted
to continue building the Zappos brand, business, and culture. And we
wanted to continue to feel like owners of the company.
So we pushed hard for an all-stock transaction, meaning that Zappos
shareholders would simply trade in their stock in exchange for Amazon
shares. In our minds, this was much more in the spirit of the marriage that
we were envisioning, analogous to when married couples get a joint bank
account.
As both sides got to know each better over the next several months, our
levels of mutual trust and respect for each other and for each other’s
businesses grew. When it finally came time to sign the paperwork, we felt
incredibly lucky. Amazon was a win–win-win situation that made everyone
happy: It was good for Amazon, good for our board of directors and
shareholders, and good for Zappos employees. We could continue working
toward our long-term vision and building our culture and our business the
way we wanted to. If it weren’t for Amazon, I’m not sure how we would
have ended up resolving our alignment issues with the board. We might
have remained at a stalemate. But as it turned out, our misalignment with
the board turned out to be a blessing in disguise. It just goes to show that
you never know when something you perceive as a negative will ultimately
turn out to be a good thing.

---

The hardest part about the whole process was having to keep everything
secret from our employees for the several months leading up to the signing
of the paperwork. We didn’t want to do it, but were legally required to by
the SEC because Amazon was a public company.
Jeff Bezos flew to Vegas and came to my house to meet Alfred, Fred,
and myself right before the actual signing of the legal paperwork. I
barbecued burgers for him in my backyard and we all talked for a few
hours. Later that night, Fred and I randomly ended up spending two hours
in a recording studio talking and hanging out with Snoop Dogg. At the end
of the night, Fred and I looked at each other and couldn’t help but laugh.
The entire day had been beyond surreal.
July 22, 2009, was the day we were planning on signing and announcing
the pending acquisition to our employees and to the world. We planned on
announcing after the stock market closed. The hours leading up to the
public announcement were nerve racking. We had to coordinate with
Amazon to get all the timing down perfectly. We had to communicate with
Zappos employees, Zappos vendors, Amazon employees, Amazon vendors,
the press calling Amazon, the press calling Zappos, our customers, the SEC,
our board of directors, our investors, and the general public all within a
two-hour window, and it had to be perfectly coordinated. It felt like we
were about to launch a rocket to the moon.
Finally, at the predetermined time, I sent the following e-mail to our
employees:
Date: July 22, 2009
From: Tony Hsieh
To: All Zappos Employees
Subject: Zappos and Amazon
Please set aside 20 minutes to carefully read this entire email.
(My apologies for the occasional use of formal-sounding language,
as parts of it are written in a particular way for legal reasons.)
Today is a big day in Zappos history.
This morning, our board approved and we signed what’s known
as a “definitive agreement,” in which all of the existing shareholders
and investors of Zappos (there are over 100) will be exchanging their

---

Zappos stock for Amazon stock. Once the exchange is done, Amazon
will become the only shareholder of Zappos stock.
Over the next few days, you will probably read headlines that say
“Amazon acquires Zappos” or “Zappos sells to Amazon.” While
those headlines are technically correct, they don’t really properly
convey the spirit of the transaction. (I personally would prefer the
headline “Zappos and Amazon sitting in a tree…”)
We plan to continue to run Zappos the way we have always run
Zappos—continuing to do what we believe is best for our brand, our
culture, and our business. From a practical point of view, it will be as
if we are switching out our current shareholders and board of
directors for a new one, even though the technical legal structure
may be different.
We think that now is the right time to join forces with Amazon
because there is a huge opportunity to leverage each other’s strengths
and move even faster toward our long term vision. For Zappos, our
vision remains the same: delivering happiness to customers,
employees, and vendors. We just want to get there faster.
We are excited about doing this for 3 main reasons:
1. We think that there is a huge opportunity for us to really
accelerate the growth of the Zappos brand and culture, and we
believe that Amazon is the best partner to help us get there
faster.
2. Amazon supports us in continuing to grow our vision as an
independent entity, under the Zappos brand and with our
unique culture.
3. We want to align ourselves with a shareholder and partner that
thinks really long term (like we do at Zappos), as well as do
what’s in the best interest of our existing shareholders and
investors.
I will go through each of the above points in more detail below, but first,
let me get to the top 3 burning questions that I’m guessing many of you will
have.

---