Amazon Expands in Bulk With Diapers, Soap Deal
By Geoffrey A. Fowler And Ellen Byron
In a deal that underscores the growing competition to capture a consumer shift toward buying bulk items online, Amazon.com Inc. is poised to acquire Quidsi Inc., the parent company of Diapers.com and Soap.com, according to a person familiar with the matter.
The parties could announce the deal as early as Monday.
Amazon, the largest online-only retailer in the U.S., is expected to pay about $500 million in cash and assume $45 million in debt and other liabilities, this person said.
The management of Quidsi will remain with Amazon, the person added.
Representatives for both companies didn't immediately respond to requests for comment.
The deal was earlier reported on Fortune magazine's website.
Seattle-based Amazon, which has experienced sharp growth in recent years amid the online shift in consumer-shopping habits, has used acquisitions to increase its presence in certain categories. Last year, Amazon acquired online shoe and apparel retailer Zappos for $1.1 billion, Amazon's biggest buy to date.
Amazon's planned purchase of Jersey City, N.J.-based Quidsi shows hope for the business of selling consumer staples online. While household basics such as cleaning supplies, shampoo and paper goods are still a small slice of online sales, they are growing fast.
Last year, household-product sales over the Internet reached about $10 billion, up from $4 billion in 2003, according to estimates by market-research firm Nielsen Co. That compares with an estimated $361 billion in overall online sales in 2009.
Online shopping for household goods has been held back by the cost of shipping bulky but low-value items, like paper towels and laundry detergent, and the prevalence of bricks-and-mortar stores that sell the products for about the same price.
Yet Quidsi's fast-growing Diapers.com, launched in 2005, helped show there could be a market for selling household products for kids by pairing a wide selection and fast, free shipping with an efficient warehouse-distribution system. Earlier in the year, Quidsi expanded into other packaged goods by launching Soap.com as its second site.
The company previously said it brought in $180 million in revenue last year, and expects to bring in $300 million this year.
For Amazon, hooking shoppers on buying frequently used, everyday staples brings in repeat visitors that could also buy higher-margin goods. In September, Amazon launched a program that offered free two-day shipping for new parents for three months or more.
Amazon has also priced diapers aggressively; on Sunday, a package of 252 Pampers Baby Dry diapers cost $40.99 on Amazon.com, and $44.99 on Diapers.com.
Major consumer-product companies are accelerating their online investments because it provides direct access to consumer data, a gold mine that has long been controlled by retailers.
As retailers during the recession aggressively developed and promoted their own private-label products that compete with brand names, getting first-hand information about shopping habits has become even more important to manufacturers.
Procter & Gamble Co., the world's biggest consumer-products maker, earlier this year launched an online store that sells its major brands. P&G says the site is intended as a way to study consumers' online-buying habits rather than a significant source of sales growth. P&G garners only a fraction of its $79 billion in annual revenue from online sales.
Write to Geoffrey A. Fowler at email@example.com
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Quiet Logistics is the first Fulfillment to Consumer (F2C) provider to deliver a complete outsourced solution that leverages the game-changing material handling robotics of Kiva Systems. Quiet's customers include fast growing etailers and luxury brands such as Gilt Groupe, Bonobos, Cloudveil, Milly and The Mane Lion. Quiet Logistics "Consumer Driven Fulfillment (CDF)" services is an alignment of best-in-class operations experience and a fully integrated technology platform with a simplified business model which considerably improves distribution throughput, accuracy, scalability and flexibility at a lower cost.