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 (Endless.com)?
- Will Amazon move to integrate its acquisitions or continue to have them operate independently?
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 in 2012.
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 and reorders.
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."
The 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.
Quidsi co-founder 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?
Discussion Thread0
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