Thursday, April 13, 2017

Why Is Amazon Closing Quidsi?

A few days ago, Amazon explained that it was closing Quidsi because the unit was unprofitable. Many were skeptical and thought that this didn't sound much like Jeff Bezos . The Amazon founder is famous for operating retail businesses at such slim margins that rivals can't compete.

Quidsi employees had another reason to be surprised.

As recently as late 2016, at Quidsi's quarterly all-hands meeting in Jersey City, New Jersey, executives from Amazon headquarters in Seattle spoke to the unit's 250-plus workers and affirmed the parent company's commitment to Quidsi's business, according to multiple people who were in attendance. (Recode previously reported on some details of this meeting.)

One of the executives to present was John Boumphrey, Amazon's vice president who oversees baby products, and the direct boss of Quidsi CEO Emilie Arel Scott, said the sources, who asked not to be named because the meeting was confidential.

Yet a few days ago, with the first quarter coming to a close, employees were informed that Amazon was shutting Quidsi down and laying off hundreds of workers, ostensibly because the division was unable to make a profit. The diapers, toiletries, beauty products and pet care items sold by the various Quidsi brands would all be available on, the company said.

Not everyone was shocked. Earlier in March, Quidsi's finance chief, Randy Greben, left to become CFO of clothing company Ann Taylor (: ), though as of 3 April he was still listed as the No. 2 executive on Quidsi's leadership page. One person who spoke to said Greben's departure was a "huge red flag."

Behind the scenes, the winding down of Quidsi had been quietly underway for over a year. Unlike shoe seller Zappos, which Amazon acquired in 2009 and has flourished as an established independent brand, Quidsi's commodity products play right into Amazon's core business.

In the fourth quarter of 2015, Amazon started redirecting inventory from Quidsi's three fulfillment centers - in Nevada, Kansas and Pennsylvania - to Amazon's own massive network of warehouses, sources said. That process continued throughout 2016 and is still underway, two people told us.

Quidsi's facilities were running out of capacity. The robots that ran through Quidsi's fulfillment centers, pulling goods from shelves and efficiently boxing them up, were owned by Amazon through the 2012 acquisition of robot maker Kiva Systems. Amazon was investing in improving the robots but directing those upgrades primarily to its own facilities, not Quidsi's, sources said.

Furthermore, from a customer perspective, Amazon preferred to keep buyers on its own website rather than on Quidsi's network of sites like and With its inventory fleeing to Amazon's warehouses and the Quidsi sites being de-emphasized, there was no longer a strategic reason to have a separate Quidsi operation.

"They didn't buy service with Quidsi, they bought domain names and customer lists," said Michael Pachter, an analyst at Wedbush Securities who has a buy rating on Amazon. "It was inevitable that both diapers and soap would be absorbed into Amazon's overall business, as there is no competitive advantage given up by doing so."

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