Amazon Closes Money-Losing Quidsi to Narrow Focus on Groceries

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  • Retailer purchased Diapers.com owner for $545 million in 2011
  • Quidsi founder now fighting Amazon from new role at Wal-Mart

Amazon.com Inc. is closing Diapers.com, Soap.com and other sites it purchased for about $545 million in 2011 to eliminate a dogged competitor and gain e-commerce customers.

The online retailer said it’s shutting Quidsi, the unit that ran the websites, because it couldn’t make a profit. But e-commerce analysts said Amazon probably intended to eliminate the sites as stand-alone businesses at some point, and the company’s renewed grocery push is an ideal time to consolidate brands.

“They sucked out any knowledge that team had and now they’ll put it behind the Amazon brand and steamroll those categories,” said Allen Adamson, founder of Brand Simple Consulting in New York.

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.

The closing of the unit is the latest chapter in the running feud between Amazon founder Jeff Bezos and his e-commerce nemesis Marc Lore, founder of Quidsi. Lore duked it out with Amazon before a protracted price war and tight credit market during the U.S. recession pushed him to sell. He worked at Amazon until 2013 as part of the deal.

Lore emerged in 2015 when his new e-commerce site, Jet.com, launched publicly with a plan to challenge Amazon yet again. He sold Jet.com to Wal-Mart Stores Inc. for $3.3 billion last year and now runs e-commerce operations for the world’s biggest retailer and Amazon’s top competitor.

Quidsi specialized in certain categories, like baby products and household goods, while Amazon was trying to offer infinite inventory. But the draw of sites like Diapers.com has faded since Amazon, the world’s biggest e-commerce retailer, has become the go-to source for online shopping.

Declining Market Share

Quidsi’s share of online baby product sales declined to 2 percent in the first quarter of this year from 9 percent in the same period of 2014, according to data compiled by Slice Intelligence.

Amazon, in a statement, said it “worked extremely hard for the past seven years to get Quidsi to be profitable.” The company’s brand experts will continue to find inventory to be sold on Amazon and its software developers will focus on AmazonFresh, the company’s grocery division. Amazon is reinvigorating its push into the $800 billion grocery market with an experimental convenience store and grocery pickup kiosks in its hometown of Seattle.

That push made it a good time for Amazon to unify sales of diapers, soap and other products commonly found in supermarkets under one site, said Matt Sargent, senior vice president of retail at Frank N. Magid Associates.

“Amazon is closing Quidsi in order to pull Quidsi users into the Amazon ecosystem,” Sargent said. “Amazon wants to be the single easy place to go for everything. The timing is not coincidental as Amazon wants to bring more attention to its specific brand entities in areas like grocery where it wants to expand.”

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