Amazon to buy Diapers.com for $540 million

http://finance.fortune.cnn.com/2010/11/06/amazon-to-buy-diapers-com-for-540-million/

by themichael • 16 years ago

113 50 16 years ago

finance.fortune.cnn.com

Ah, so it's a business! From the title I thought it was just a domain purchase, that would be the greatest (disclosed) ever by a significant amount if it was.

user242• 16 years ago

yeah. I actually flagged the article because that headline is far too misleading (not themichael's fault).

tvon2• 16 years ago

I'm surprised, diapers.com should be pretty well known to anyone interested in business or entrepreneurship.

araneae• 16 years ago

I heard of Diapers.com from HN, and I've seen several articles about it on here, so I don't think it's an unreasonable assumption to make. Diapers.com is a big competitor for Amazon.com on the baby stuff, so it's a good acquisition for them.

mahmud• 16 years ago

Wasn't broadcast.com sold for 5 billion?

prs2• 16 years ago

broadcast.com was a company, not a domain name alone.

prs2• 16 years ago

A bit of a background on diapers.com - referred to in the article - Recommended Read.

http://www.businessweek.com/print/magazine/content/10_42/b41...

hristov• 16 years ago

You gotta have nerves of steel to start an Internet business with your own money where you ship stuff out and lose money on each thing you ship. Or maybe you have to have a lot of money.

vaksel• 16 years ago

they sold another business prior to this, so it's probably the latter

rubyrescue• 16 years ago

any HNers with experience w/Amazon "price bots"?

When Quidsi launched Soap.com in July, adding an additional 25,000 products to their lineup, the site was strafed almost from the minute it went live by price bots dispatched by Amazon. Quidsi network operators watched in amazement as Amazon pinged their site to find out what they were charging for each of the 25,000 new items they initially offered, and then adjusted its prices accordingly. Bharara and Lore knew that would happen. "If we put something on sale, we usually see Amazon respond in a couple of hours," says Bharara.

Or as Rohan puts it: "A price bot attack truly is the sincerest form of flattery."

timmins• 16 years ago

When we had our child and found diapers.com, I was convinced it was already an amazon company. diapers.com has great customer service and an unreal shipping policy. I guess it was a matter of time but it makes complete sense to me just like Zappos. Amazon buys company cultures, not businesses.

djb_hackernews• 16 years ago

hmm, I always figured it was fulfilment companies that got picked up by Amazon. If you can move volume, and have loyalty, Amazon wants to know how.

privacyguru• 16 years ago

Great company and a great business success story. I guess Amazon doesn't fear Diapers.Com Anymore! Excellent story over at Businessweek on the company: http://www.businessweek.com/magazine/content/10_42/b41990627...

jakarta2• 16 years ago

I'd be really interested in seeing how much equity the founders have left in the business.

It's definitely not capital light, so I can imagine that they had to raise quite a bit of money to get it off the ground and running.

ceejayoz• 16 years ago

I actually read an article on how Diapers.com got started. It was a couple folks in a garage. P&G and the other diaper manufacturers wouldn't talk to someone so small, so they got warehouse club memberships and just bought mass quantities to mail out.

At times, they apparently bought out the BJs and Sams Clubs within a 100 mile radius. They were doing it all on credit cards in their own cars and rented U-Hauls.

Here's the article: http://www.bloomberg.com/news/2010-10-07/diapers-com-takes-o...

kingkilr• 16 years ago

Two of my cousins own a vending machine business and for certain products they do the same thing (buying out Sam's Clubs). Why? Sam's Club volume is so much higher than theirs that even after Sam's Club tacks on their markup, it's cheaper for them to buy through them than to go to the manufacturer. It's always funny to go on these shopping trips with them, the look on a cashier's face when you have thousands of dollars of candy is priceless.

seiji• 16 years ago

People seem to love buying office coffee and diapers from amazon: http://www.amazon.com/gp/bestsellers/grocery

apowell• 16 years ago

I work at home with my wife and six-month old daughter, and that list describes our Amazon buying habits very accurately.

b3b0p• 16 years ago

Wow, that's kind of awesome. I looked at the first 2 pages and it's literally almost entirely diapers and coffee, sprinkled in between I noticed maple syrup, coconut oil, and wipes for all those diapers and at the end a box of Honey Bunches of Oats.

jrockway• 16 years ago

My guess is that it has to do with the discount Amazon offers for Subscribe & Save and the fact that diaper and coffee needs are easy to predict. Those are two things that you don't want to run out of, so it's worth buying in bulk.

younata2• 16 years ago

well.

That stinks.

younata2• 16 years ago

ok, lesson learned:

Don't make humorous comments; you can't get modded +5 (funny) on here. Instead, you get downvoted.

zzleeper2• 16 years ago

A question: Do they (diapers.com) make money? Free shipping, cheap diapers, expensive warehouse and logistics, etc. All this leaves very thin margins.

I'm wondering how much money they have burned until today (the other articles implied it was a lot)

jakarta2• 16 years ago

The past articles written about the company have mentioned that the diapers are indeed low margin items, but they try to cross-sell products that have higher margins (products like baby oil or soap).

Since the box to send the diapers is already huge, the incremental cost of shipping these adjacent products is quite low (usually they can just throw them in the diaper box).

It's a good strategy.

zzleeper2• 16 years ago

More on this: http://techcrunch.com/2010/04/20/diapers-com-on-its-way-to-s...

http://www.mentortechventures.com/MT-News.blog/2009/09/01/Di...

So apparently, Quidsi (the real name) is at break even*, has raised 80 million in equity since 2006 (plus the founders own injections), and this year will sell 270m while spending 30m on advertising.

At first I thought that they may not have been worth the 500m, but I'm rethinking that now.

revorad• 16 years ago

Note to self: Do NOT read Techcrunch comments. Ever.

tlack• 16 years ago

didnt amazon also start their first facebook page-based store selling diapers? diapers must be their most interesting product according to some internal spreadsheet..

steveplace2• 16 years ago

Apparently AMZN squeezed their margins so they were forced to sell.

steveplace2• 16 years ago

Looks like I'm being down voted for lack of citation, so here you go: http://www.businessinsider.com/amazon-diapers-price-war-2010...

antidaily• 16 years ago

That's about 3 billion diapers.

brianbreslin• 16 years ago

The most fascinating things about their business to me are the robots that move the product shelves TO the human pickers & the algorithmic approach that allows them to eke out extra margins

jmelloy• 16 years ago

diapers.com is one of our competitors, and we're currently evaluating the same Kiva system they use in our distribution centers. The initial numbers look fantastic.

citizenkeys• 16 years ago

oddly enough, i went to a "founders institute" workshop just last night and one of the primary examples involves... diapers.

staple items like diapers are things people like to order without actually seeing. plus, those types of items are easy hooks to get people to buy complimentary items with bigger profit margins.

chadp• 16 years ago

Does anyone know what % the founders held at the time of the sale?

Sounds like they should have done OK, depending on what % they gave up for their $78MM VC.

kloncks• 16 years ago

Side question: Any one know the font used in the diapers.com logo?

hyperbovine• 16 years ago

Litera?

mcdowall• 16 years ago

just use whathtefont.com

dr_• 16 years ago

As an interesting side note, the COO Vinit Bharara's brother is the US Attorney for Manhattan (direct Obama appointee) Preet Bharara. In the news fairly often.

dennyabraham• 16 years ago

I've heard that diapers.com's warehouses are fully automated. If this isn't already how amazon's warehouses are set up, is this infrastructure (and the know-how to reproduce it) part of the reason behind the acquisition?

cosmicray• 16 years ago

From what I read, and from what I know personally, being able to take an arbitrary shopping cart of items, and select the most efficient box is a huge advantage. You can absolutely improve your margins by trimming your shipping costs to a minimum. Although the article doesn't mention it, I suspect UPS is doing most of their carriage. Anyone know for sure ?

the_imp• 16 years ago

Yes. Their warehouses use a Kiva Systems setup, i.e. they have hundreds of little orange robots that run around and lift & carry shelves. Though an ad, this gives a rather good idea: http://www.youtube.com/watch?v=6zXOW6v0c8s

Amazon to buy Diapers.com for $540 million

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