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Now that Amazon's $1.2 bln deal is completed, Alfred Lin talks about synergies and plans
It’s been a few months since Amazon's acquisition of Zappos closed in November 2009. The deal is valued at $1.2 billion, based on Amazon’s current stock price. Recently, I sat down with Alfred Lin, the affable and unassuming COO and CFO of Zappos, who flew in from Las Vegas to see family and to talk to me about the “synergies” realized now that the Seattle-based mega retailer and the smaller Zappos have completed their deal.
So far, there's been little integration, according to Alfred, who's known for his skills in growing revenue and selling companies. Prior to Zappos, Alfred worked at LinkExchange, which was sold for $265 million to Microsoft. "When we did this deal, Amazon and Zappos agreed that Zappos would be run independently," he said. "We haven’t tried to capture any potential synergies."
With that response, you might wonder why Amazon bought the company in the first place. Alfred explains that later on in our interview. But there's no doubt, Alfred explained, Amazon can clearly help the retailer (which generated north of $200 million in revenue just in the last five or six weeks of 2009), expand more rapidly into other areas, beyond shoes.
Additionally, in the near future, there are many other ways Zappos can leverage Amazon's infrastructure - from using Amazon's Web services, to using Amazon's distribution centers and to utilizing Amazon's engineering talent.
One thing that's new to Zappos is its recommendation engine, which was rolled out at the end of last year. At the moment, it's a few percentage of sales, said Alfred. "In clothing and shoes, it’s slightly different [than recommending media, like books, movies], if your friend bought a blouse, you probably wouldn’t want to buy the same one, and your friend wouldn’t appreciate it."
The big question for Zappos is how it's progressing in moving away from footwear and into other categories.
Right now 85% of sales comes from footwear, said Alfred. Over time, footwear will drop to below 20%, he said, explaining that the clothing market size is four times the size of footwear.
What have been the challenges moving into new categories? I asked. “For shoes, we spent eight to nine years building relationships with brand partners. We have to do that all over again in a different product category… That’s a somewhat time-consuming process.”
I followed up by asking, "Why would I go to Zappos to buy non-footwear items?"
"The same reason you’d go for footwear, we’re trying to provide the absolute best service that you can get in an ecommerce environment,” said Alfred. “Think of us as bringing the store to your home. You get to go online, order a bunch of stuff and the next day we ship it to you, and you can try everything altogether, and send us the stuff you don’t want.”
Zappos has a 365-day return policy. Now that's service.
Be sure to watch for the next Zappos interview, in which Alfred talks about Zappos' outlook for the retailer and the economy.
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Our goal is to position Zappos as the online service leader. If we can get customers to associate the Zappos.com brand with the absolute best service, then we can expand into other product categories beyond shoes. And, we're doing just that.
Internally, we have a saying: We are a service company that happens to sell ________.
- and handbags
- and clothing
- and eyewear
- and watches
- and accessories
- (and eventually anything and everything)