About a month ago, I was amazed by the candor and depth of Tony Hsieh’s article for Inc. Magazine on why he sold Zappos to Amazon. He chronicled the entire process beginning with an unsolicited 2005 offer from Amazon, the role of the economic slowdown on Zappos’ $100M line of credit, and a showdown with his Board of Directors that eventually led him into the Amazon fold. He also talks at length about the Zappos culture and how militantly his core team fights to protect their customer-first mantra. It was clear Tony is supremely confident that Jeff Bezos is ready, willing and able to allow Zappos to remain independent – and ideally a bit of the Zappos cult brand rubs off on the Amazon mothership.
While that’s the warm and fuzzy side of the story, there certainly are those who view Amazon as the apex predator within the e-commerce space. They did, after all, take a run at Zappos via their own Endless.com foray that quickly proved you can’t knock-off a culture. And if you look at the trajectory of Amazon’s M&A activity it trends up aggressively and points to increasingly larger deals – many of which are easy given Amazon has strong cash reserves and plenty of stock in-hand. You can reasonably expect they’ll be able to hand-pick the ecommerce superstars and roll-up the most successful players on a category-by-category basis. And if you believe the rumors, Amazon is the lead suitor in a NetFlix deal that would be the video compliment to their MP3 download service – the single most legit iTunes competitor (Amazon gets the majority of my online music bucks because they forced DRM-free and higher bit rate music).
And their latest deal is aimed squarely at what retailers refer to as ‘distressed inventory’. With the acquisition of Texas-based Woot, Amazon has once again snapped up a company with fresh view of the world. You don’t have to look much further than the announcement letter from Woot CEO Matt Rutledge to see they’re expecting every bit the same brand slack granted to Zappos.
It’s a genius move by Amazon given the huge amount of retiring SKUs they likely have running through the operation. Once a model is being replaced, items become harder to get by the container-load or someone simply made a bad buying decision, how awesome is it that Amazon can throw it over the wall to Woot to flush on out o’ the system? Imagine the ramp-up the Woot kids will undergo from a systems and volume perspective when you’re sitting at the end of Amazon’s SKU avalanche.
Most interesting to me is Amazon seems to be overtly grabbing companies with cult brands built around them. I mean seriously, where else other than Woot can you buy a Bag O’ Crap? The bottom line is Woot is irreverent, Zappos is psychotically customer focused, and Amazon is, well, Amazon. They are clearly the 1600 lb. gorilla in online ecommerce, but it seems Bezos and gang are looking for smart ways to fun up the culture – and the efficiencies of the operation. (Oh, and don’t forget Jeff is the sole investor and advisor to Jason and David at 37Signals – just in case you need yet another proof point that he aligns well with hyper-critical thinkers.)
It’ll be interesting to watch Amazon make moves over the next 12-18 months, and I can think of one really cool cult brand company for acquisition if they ever wanted to get into the Email Service Provider space. And I’m not sure if using a monkey in a rap video could actually constitute infringement of some kind :-) At any rate, enjoy the Woot video announcing the Amazon deal: