Bloomberg Businessweek put Quidsi on their cover earlier this fall. The privately owned operators of beauty, health, and baby product online retail outlets Soap.com Diapers.com, and BeautyBar.com were touted as the biggest threat to physical big box retailers like Target (NYSE: TGT) and Wal-Mart (NYSE: WMT) since Amazon.com Inc.‘s (NASDAQ: AMZN) online business muscled in on their entertainment sales a decade back.
Of course, ten years ago Amazon was almost purely an entertainment retailer, selling books, CDs, and VHS videos. Today Amazon is a direct competitor to those retailers in all categories. From food, to Bluray discs, to HDTVs, and clothing, Amazon has transformed into the big box retailer of the Internet. That makes Quidsi’s booming toiletries and baby goods business a major concern for Amazon.
Not anymore though. Amazon took the same approach with Quidsi it took with online shoe retailer Zappos last year: Don’t compete when you can buy them out. The Seattle, Washington based company officially announced today that they have purchased Quidsi for $545 million (including debt) in cash. With Diapers.com as well as the just-launched Soap.com and BeautyBar.com on track to generate $300 million in revenue this year, up from $180 million in 2009, it looks like Amazon may have gotten a bargain in the process, especially since they won’t have to keep slashing prices of their own baby products to compete.
Broadening their product selection while squashing competition is how Amazon continues to stay strong in a market where consumers are leery of spending. Less than half of Amazon’s revenue comes from the sale of entertainment products these days—DVD, book, and CD sales accounted for 3.35 billion of the company’s 7.56 billion total revenue in the last quarter. The sale of electronics and goods designated “general merchandise”—including the household items sold by Diapers.com and Soap.com—meanwhile accounted for the rest.
Amazon is currently trading above $172 per share, just shy of their 52-week high of $172.70. If Amazon picks up either of the companies that Daily Finance is predicting the company will move to acquire, Amazon shareholders can look forward to a spike that brings shares to all-time highs. Drugstore.com (NASDAQ: DSCM) and Alice.com are the next companies likely to get snatched up by Amazon. Both businesses are, like Quidsi’s outlets, household goods retailers.
Privately owned and venture capital backed Alice.com has grown a strong following for its subscription service. Members create a profile on the website, marking what products they regularly buy, and Alice creates a personalized shopping cart that pulls from a number of other online retailers and manufacturers to provide users with the best deals. Amazon themselves have a similar feature, and given the past success of Amazon Shops partner deals, both Alice.com’s business and their technology seem like good buys. Drugstore.com, meanwhile, wouldn’t diversify Amazon’s business as much as it would just eliminate another competitor.
The online pharmacy and beauty products business has been a stalwart in Internet retail since launching in 1999. They were actually partnered with Amazon until 2005 when Amazon decided to act as their own retailer for household items. Purchasing Drugstore.com would also net Amazon SkinStore.com as well—Drugstore.com acquired the beauty care website last December for $36 million.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
