For a company that's become one of the world's top brands and prides itself on offering a one-stop e-commerce shop backed by unique services and a well-oiled infrastructure, it has always been a little odd that Amazon.com (AMZN) maintains a handful of online retail subsidiaries with their own brands and operations.
The strategy has admittedly paid off at times, as shown by the success of Amazon's Zappos footwear unit, which the company bought for $850 million in 2009. And as Amazon's just-announced deal to buy Middle Eastern online retailer Souq.com shows, the approach can make regional expansion easier.
But in those markets where Amazon has a giant warehouse footprint and its Prime service has gone mainstream, the rationale for running standalone e-commerce units that specialize in certain types of products has gotten weaker. Particularly when those units often sell goods that don't cost much and/or are bought on a recurring basis in conjunction with other items.
And the rationale has perhaps gotten weaker still following a new report about Amazon's attempts to woo major consumer packaged goods brands.
On Wednesday, Amazon announced it's shutting down the websites run by its Quidsi unit, which it bought in 2011 for $545 million. Quidsi runs Diapers.com, Soap.com, and four other sites that specialize in various household goods. Over 260 employees at Quidsi's New Jersey headquarters will be laid off. Quidsi employs 1,100-plus workers overall, and has warehouses in Kansas and Nevada.
Amazon, whose North American e-commerce reporting segment posted a $2.4 billion operating profit last year, attributes its decision to a failure to make Quidsi profitable since its acquisition. It adds that Quidsi's brand experts will continue working to provide selections for Amazon.com, and that its software team will work on the AmazonFresh grocery delivery service.
There has been speculation that Amazon's move amounts to retribution against Quidsi co-founder and current Wal-Mart (WMT) e-commerce chief Marc Lore. In 2014, Lore founded yet another Amazon rival in Jet.com, and two years later sold it to Wal-Mart for $3.3 billion. But it's hard to imagine Jeff Bezos making a call like this on account of a personal grudge.