Amazon Buys Rival. What’s Next?
Amazon.com’s acquisition of Quidsi, owner of Diapers.com,
Soap.com and BeautyBar.com, for $500 million in cash plus $45 million in assumed
debt raises a boatload of questions.
- Does Amazon intend to change the way consumers buy everyday staples and
go head-to-head with all the other retailers selling disposable diapers,
laundry detergent, etc.?
- What company will Amazon acquire next? It has a history of buying up e-tailers
(Zappos) even if they are in the same business as one of Amazon’s properties
- Will Amazon move to integrate its acquisitions or continue to have them
According to a Bloomberg report, Quidsi is looking for sales to increase
by 67 percent this year, reaching around $300 million. The company expects to
grow the business further with CEO Marc Lore projecting revenues of $1.3 billion
Quidsi has been rapidly expanding into other businesses from its Diapers.com
start. Next year, according to a VentureBeat, the company plans to launch
Yoyo.com, an online toy site, which may represent somewhat of a departure.
The Quidsi model works, according to Josh
Goldman, a partner at Norwest Venture Partners, because it sells products that
consumers need to continue ordering. The company’s sites make ordering convenient
by shipping free overnight to roughly 70 percent of the U.S. with orders of
$25 or higher.
“When you can get into a replenishment model, it’s very powerful,” Mr.
Goldman told Bloomberg. “Amazon hasn’t done much of that
on their own. The Diapers.com guys have done a really good job of getting you
to come back for replenishment items.”
Another piece on the DailyFinance site
looks at likely targets for Amazon to acquire next. Alice.com and Drugstore.com
are cited as two prospects.
Alice.com, which primarily sells grocery non-foods,
is a good fit because its model is similar in many ways to Amazon’s while different
in others, according to the DailyFinance analysis. Alice.com offers
free shipping on minimum orders and sells goods at prices set by manufacturers.
It also puts out coupons on an on-going basis to encourage incremental purchases
Drugstore.com is appealing, according to the DailyFinance piece,
because it has “a very strong female following and provides a robust product
selection in high-margin areas like natural health and beauty products.”
final question is whether Amazon will start to move to integrate its acquisitions
with the rest of its business.
With all its acquisitions, according to VentureBeat,
the company is becoming an owner of brands and not a single power brand. Very
few, the piece points out, are able to be accessed by consumers through their
Amazon accounts or are part of services such as Amazon Prime.
Vinnie Bharara told VentureBeat that Amazon’s hands-off
approach to Zappos.com was a key in the decision to sell and for himself and
co-founder Marc Lore to stay on.
Discussion Questions: What do you make of Amazon.com’s purchase of Quidsi?
What questions does the purchase raise for you about Amazon’s future direction?
to Acquire Diapers.com and Soap.com – Amazon.com, Inc./Business
- Amazon Agrees to Buy Diapers.com Owner for $500 Million – Bloomberg News
- Amazon.com’s secret retail empire – VentureBeat
- Next on Amazon’s Acquisition List: Alice.com and Drugstore.com? – DailyFinance