July 2, 2010, 4:18 PM

The root cause for buying Woot

Mark Brohan

Research Director

I like Amazon’s approach to the private sale and daily deal web site business: if you can’t beat ‘em, buy ‘em.

Even Amazon, the technology and marketing whiz kid of the online retailing business, doesn’t always have the expertise to attack every emerging business model with a home-grown solution. And that’s precisely the reason they acquired Woot.com. As one of the pioneers in offering the one-day bargains that many online consumers seem to love, Woot is a quirky and irreverent daily deal site that has thousands of loyal customers. The customers don’t come to Woot.com just to get a good deal. They come for the experience.

Woot offers one discounted item a day—often computer hardware or an electronic gadget—until the item sells out. Avid Wooters keep a running dialogue going during the sale. There’s also a blog and a weekday podcast of a song or skit about the daily item. Fans eat up Woot’s witty tone and the mystery of not knowing how many items are left. And Woot knows how to generate buzz. While normally Woot doesn’t offer a new item once that day’s deal sells out, the e-retailer springs random Woot-Offs about twice a month, offering items one after another as each one sells out for up to 72 hours. Once a deal closes, Woot posts data about the sale, from sales per hour to the Woot name of the first “sucker,” that is, customer, to buy the item.

They know what makes their customers tick, and that is precisely why Amazon acquired them. Amazon likes to buy successful niche players with a certain expertise, run them as stand-alone companies with existing management, and then give them full run of Amazon’s multi-billion dollar infrastructure. Last summer Amazon acquired Zappos.com for its expertise in shoes, apparel and, above all, customer service. In previous acquisitions, Amazon, No.  1 in the Internet Retailer Top 500 Guide, also acquired Abebooks.com for its successful independent bookseller’s model; Audible.com for expertise in audio books retailing; and ShopBop.com for online apparel savvy.

I like the Amazon/Woot marriage. Amazon needed an entry into the rapidly evolving private sales web site business and this deal gives them that “in.” Likewise, Woot now has the wherewithal to really develop its business model backed by the assets of the world’s biggest online retailer. Amazon studies business opportunities and then moves with judicious speed to get in on the action. It would have taken Amazon years to build a truly successfully private sale or daily deal site.

They didn’t have to—Woot was available and Amazon, like Vito Corleone in the Godfather, made them an offer they couldn’t refuse. Woot, No. 176 in the Internet Retailer Top 500 Guide, already had their competition beat. That’s why Amazon bought them.   

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