When Amazon announced its acquisition of Zappos yesterday, I was pretty excited.  Here were two of my favorite companies joining forces. I have become a huge advocate of Amazon (especially their Prime service) over the past couple years, as they continue to show innovation and reduce the pain of shopping (this doesn’t account for the Kindle and AWS, which I discuss here).  I’d say 90% of my online shopping goes through Amazon due to price/ease.

Zappos, on the other hand, is a more recent fad of mine.  I heard Tony Hsieh speak at TiEcon earlier this year, and it was the best keynote I can remember, especially given that I was able to stay awake (without coffee) on a Saturday morning with very little sleep.  And he was quite inspirational, though he didn’t talk just about Zappos or his background.  I actually bought a book on his recommendation – Happiness Hypothesis (which I will blog about sometime in the future), ironically on Amazon.

Their value prop is awesome (free unlimited shipping and returns) and their service is impeccable.  While they focused on shoes (competing with Amazon’s Endless.com), they had already expanded into apparel, and it was only a matter of time before they moved to other types of goods that Amazon offered.  I loved where the direction they were pushing the market in, and was hoping that I’d eventually be able to choose between Zappos and Amazon for that next gadget or toy.

The question I wonder is whether, as a consumer, is it good that these companies are now one and no longer competing.  As Hsieh colloquially put it in his letter (btw I like his sense of humor), this was less an “acquisition” and more like “Amazon and Zappos sitting in a tree…”  In my opinion, Zappos’ customer service cred kept Amazon honest, but now that they are “sitting in a tree” together, who is challenging them, and pushing even their vaunted reputation higher?  I’m sure there are smaller companies out there that are evolving, but to reach their scale it requires significant capital.  Perhaps Ebay can challenge them but given their CEO’s recent statement, it looks like they’re going to push their Paypal offering (which has a terrible customer service reputation, fair or not), which to me means they may be deshifting their focus against Amazon.

Anyways, I will leave you with the presentation Hsieh gave to TiEcon – it gets really interesting around slide 36 (though even the beginning is great):