Description: Quidsi, which expects to ship 500 million diapers this year, will help Amazon cater to new parents and gain expertise in warehouse management and low-cost shipping.
Source: Businessweek.com
Date: Nov 8, 2010
The company profits from diaper-buying customers who also purchase higher-margin products such as brand-name baby shampoo, wipes and formula. Amazon is looking for products that customers need to keep coming back for that aren’t just one-time transactions, said Josh Goldman, a partner at Norwest Venture Partners in Palo Alto, California. He oversees the venture capital firm’s investments in e-commerce companies. “When you can get into a replenishment model, it’s very powerful,” Goldman said. “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.” Click here for rest of story
Questions for discussion:
- Why was Diaper.com such an attractive takeover target?
- Is this a good strategic fit for Amazon? Why or Why not?
- Do you agree with statement that there is only room for one big winner in e-commerce?
- Where does Quidsi add the most value in Amazon’s value chain?
Brittany
Diapers.com has increasingly become major competition for Amazon.com. By buying the company, they are not only eliminating their major competition, they are also acquiring a market of loyal customers that have already been established. There are many options when it comes to purchasing on the web and Diapers.com has done a great job of supplying the customers with what they want, in a timely manner, for a reasonable price. Parents from across the United States have chosen Diapers.com as the website they would rather buy from than Amazon.com. Although Amazon.com is very smart to buy their major competition, if they don’t offer what Quidsi did, they will lose customers to a different website that starts up to provide the services that they dont. I thing that there is room for one big winner in e-commerce, however, that winner can change quickly if the customers are being offered what they perceive as being a rewarding online experience that meets their needs.
Celest-
Amazon is already a giant in e-commerce. It wasn’t leading in selling diapers, therefore, needed Diapers.com out of competition so as to stand out businesswise. Diapers.com being a smaller company in relation to Amazon may have needed the cash for to take care of it’s other issues. This was readily offered to it by Amazon, sadly in exchange for the business that was doing really well.
Buying Diapers.com is definitely a good strategy for Amazon as it has succeeded at eliminating the one competition it fears most. -An attempt to own the market. The question, however remains how Amazon plans on looking after the customers it will have gotten from Quidsi. How well will Amazon deliver to them? That said, an agreement by Quidsi to help cater to new parents helps Amazon learn the secrets that enabled Quidsi command such a big market share. Besides, the diaper-buying customers that Quidsi will have passed over to Amazon will keep going back to replenish diapers thereby buying many other higher-margin products from Amazon. Quidsi will have helped Amazon by a far off!