Well, that is remarkable. Bloomberg:
Amazon.com Inc. is shutting down its Quidsi division, which it acquired for about $545 million in 2011, saying it has been unable to make the owner of Diapers.com and Soap.com websites profitable.
More than 260 employees at Quidsi’s Jersey City, New Jersey, headquarters and customer service operation will lose their jobs in June, according to a notification sent to the New Jersey Department of Labor. Some of them will be able to apply for other Amazon jobs, according to the notice. Quidsi also has warehouses in Kansas and Nevada.
Stone explains how Amazon has a secretive unit — dubbed Competitive Intelligence — responsible for ordering large quantities of goods from competitors to analyze their businesses. This division eventually became aware of Diapers.com and its parent company Quidsi, and dispatched M&A chief Jeff Blackburn to initiate acquisition discussions.
Quidsi’s founders originally rebuffed acquisition offers from Amazon. So Bezos’s Amazon sent them a message, Stone explains:
“Soon after, Quidsi noticed Amazon dropping prices up to 30 percent on diapers and other baby products,” Stone writes. “As an experiment, Quidsi executives manipulated their prices and then watched as Amazon’s website changed its prices accordingly. Amazon’s pricing bots — software that carefully monitors other companies’ prices and adjusts Amazon’s to matc — were tracking Diapers.com.”
Diapers.com revenue growth eventually slowed under Amazon’s pricing pressure, and the founders engaged in acquisition talks, agreeing to a $540 million buyout.
As Stone tells it, Walmart eventually made Quidsi a better offer of $600 million, but it was too late by then.
“The Quidsi executives stuck with Amazon, largely out of fear,” Stone writes.
It is interesting to note that, back then, Walmart already was interested in Quidsi and had made a better offer. Quidsi founder Marc Lore is of course today Walmart’s e-commerce boss, after Walmart bought Jet.com, his next startup after his (prison) time at Amazon.
And well, the feelings, let’s just say Marce Lore seems to have a fire in him:
Lore now runs all U.S. e-commerce operations for Walmart, Amazon’s biggest competitor stateside. Last week, he told me in an onstage interview at Code Commerce that his long-term goal for Walmart is to win the U.S. e-commerce battle. I asked him if that means being the No. 2 player behind Amazon, since the Seattle giant has such a huge lead.
“Win means win,” Lore said.
Let’s get back to Amazon for a second.
Four things didn’t help Quidsi at Amazon:
- Amazon has had a hard time establishing its own brands outside the devices business (Kindle, Echo, Fire TV). Even Amazon’s private labels are mainly successful only within Amazon. Quick name one private label by Amazon that would work on other marketplaces as well. Or, just name one private label not called “Amazon Basics” period. Quidsi as it stood was an outlier at Amazon. (It still has/had its own warehouses, for crying out loud.)
- This is also because Amazon bought Quidsi because Amazon didn’t want the competition, not because Amazon needed to to fill a hole in its portfolio per se.
- Amazon’s organization is based on a common platform (Amazon.com) with microservices that are used by departments independently from each other like startups. Also: this opens up opportunities to build new (startup like) businesses like Prime Now or the Treasure Truck tied into larger systems like Amazon Prime, giving them a way to kickstart their products. Where does a seperately run Diapers.com or Soap.com fit into this? Zappos under Amazon is not a runaway success either.
- Quidsi’s headquarters being in Jersey City, New Jersey. This doesn’t have to matter much, but combined with the first three points it certainly didn’t help not being based in Seattle.
Amazon purchased the sites to eliminate a competitor and learn as much about the specialty categories as possible, and it no longer needs brands like Soap.com as stand-alone sites, said Allen Adamson, founder of Brand Simple Consulting in New York.
“They sucked out any knowledge that team had and now they’ll put it behind the Amazon brand and steamroll those categories,” Adamson said.
Amazon also bought Kiva Systems in 2012, the supplier that equipped Quidsi with robots for its warehouses. Kiva and Amazon are now world leaders in robotics and automation in warehouses. You see, that fit perfectly into Amazon’s existing organization and modus operandi.
- Amazon In A Nutshell
- What Does it Mean Strategically That Amazon Robots cut “Click to Ship” Time From 1h to 15 Minutes?
- Platform Company: How AWS Hints at the Structure of Amazon’s Present and Future Businesses
- The Headscratcher That Is Marc Lore’s Online Strategy for Walmart
- It’s the First of Many to Come: Walmart Acquires ShoeBuy For Jet.com
- Why Walmart Bought Jet.com for $3.3b, In Walmart’s Own Words