Why Amazon bought Diapers.com

The tech-savvy retailer goes back to basics by buying a company specializing in soap and diapers.

By Kim Peterson Nov 8, 2010 3:22PM
Amazon (AMZN) and Diapers.com? An odd combination. Diapers are about as low-tech as you can get; what does the king of e-book readers and digital downloads want with a diaper company?

Plenty. Because for all the talk about new technologies, Amazon still has an important business selling staples to families. And a company that uses computer algorithms to stock warehouses and distribute diapers will melt Jeff Bezos' heart any day of the week.

Amazon spent $540 million in cash to buy Quidsi, who owns the Diapers.com and Soap.com operations. That's about $200 million more than what Quidsi was previously valued at, Fortune reports.

Amazon shares were up just slightly Monday after the buyout was confirmed. Here's what others are saying about the acquisition and why it's important to Amazon's business:

Sales. Quidsi reported $180 million in revenue last year, and said that would grow to $300 million this year, The Wall Street Journal reports. Post continues after video:
Hooking the buyer.
While $300 million in sales is just a drop in the bucket, these sales are recurring -- a big deal to Amazon. The company wants repeat buyers, and has aggressively pushed its subscription program for coffee and other staples. Diapers are a perfect product for long-lasting, predictable and repeating sales.

Grabbing women buyers. Women are the household decision-makers, and Amazon is courting them. The company launched a new program this year called Amazon Mom, which sells discounted diapers and wipes with free two-day shipping.

Beating Wal-Mart (WMT). Wal-Mart was reportedly also interested in Diapers.com. One more way for Amazon to knock out a competitor.

Fortune describes Quidsi as "a rapidly growing company with a devoted base of customers that has figured out how to warehouse and ship commodity items quickly and profitably." If that's the case, Diapers.com should fit nicely into the retail base Amazon is building.

The deal has some similarities to Amazon's purchase of Zappos.com, a shoe company the company bought for $1.1 billion in 2009.

Tags: internet
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120
120 rated 1
265
265 rated 2
460
460 rated 3
719
719 rated 4
629
629 rated 5
629
629 rated 6
622
622 rated 7
437
437 rated 8
319
319 rated 9
116
116 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.