Prompt Cast
The Success and Acquisition of Zappos by Amazon
TLDR Alfred Lin, former chairman and COO of Zappos, shares the story of how Zappos grew and succeeded, from acquiring customers during the dot-com bubble to transitioning their business model. The acquisition by Amazon was a success due to the alignment of core values and the opportunity for Amazon to own their biggest competitor.
Timestamped Summary
00:00
Alfred Lin, former chairman and COO of Zappos, discusses his time at the company before it was acquired by Amazon.
05:32
Alfred Lin, former chairman and COO of Zappos, discusses how he and his friends started a pizza business in college and the entrepreneurial mindset they had even back then.
11:22
Alfred Lin and Tony Hsieh started an internet business called Link Exchange, which eventually became a display advertising network and was acquired by Microsoft.
17:38
Zappos grew and became successful despite the lack of funding during the dot-com bubble, and one of the factors that contributed to their success was their ability to acquire customers in a way that was unit positive on the first order.
23:02
Zappos only raised $10 million in primary capital, but was able to burn $100 million of free cash flow by being smart about how they acquired customers and extending vendor credit terms.
28:33
Zappos was able to acquire cheap ad units at airports after 9/11, which helped them extend their runway and avoid running out of money.
34:02
Zappos transitioned from a drop ship model to a retailer model in order to provide better customer service and improve the overall experience for consumers.
39:24
Zappos endured the financial crisis and had to navigate liquidity issues and difficult conversations with employees, leading to some employees needing to sell their stock at a discount for immediate cash.
45:28
Zappos remained fully independent as a wholly owned subsidiary of Amazon, which was a novel approach at the time but has since become a common playbook for other acquisitions.
50:47
Zappos' core values aligned with Amazon's, making the acquisition a success, and Zappos' use of Kiva systems for efficient distribution centers caught Amazon's attention and eventually led to their acquisition of Kiva.
56:40
Zappos' shoe business, whether on Amazon or Zappos' site, has been growing well for both companies, and Amazon's acquisition of Zappos allowed them to own their biggest competitor and pour investment into growing their own business.
01:02:00
Zappos focused on customer service and customer obsession as a way to compete in the e-commerce space, which was going to be difficult for a startup to do based on price and selection alone.
01:07:23
Zappos was a great business on its own and acquiring it was a good use of capital for Amazon, although it may not be as transformative as Instagram.
01:13:12
The host and guest discuss a blog post about Google Maps and the importance of having a diverse range of interests.
Categories:
Technology
Business
