Amazon’s abrupt announcement last week that it would be shutting down Diapers.com parent Quidsi smells funny to some of the company’s employees.
Anonymous sources working for Amazon reportedly told Recode they didn’t totally buy the claim that it was terminating Quidsi because the subsidiary failed to turn a profit.
True, as Recode notes, Quidsi hasn’t had a full year of profits in the six years since Amazon bought its once-rival for $545 million. But it has had profitable months here and there and Amazon’s leadership was apparently confident Diapers.com would become profitable before long.
Amazon and Quidsi executives reportedly told employees they believed the subsidiary would turn a profit in 2017 at an all-hands meeting at the end of last year. They also said the brand would generate significant free cash flow this year, according to sources cited by Recode.
That meeting, combined with the complicated history between Amazon and Diapers.com, is raising some questions.
Diapers.com was founded in 2005 by Vinit Bharara and Marc Lore as a “mom-centric retail technology company.” What followed was a fierce price war between Amazon and Diapers.com that led Lore and Bharara to Walmart’s doorstep to discuss the possibility of an acquisition. In a classic, keep-your-enemies-close move, Amazon instead bought Diapers.com. Lore stayed on at Amazon for a few years and then went on to found a competing e-commerce brand Jet.com, which was then gobbled up by Walmart in 2016 for a whopping $3.3 billion.
Given the history and the less-than-rock-solid reason Amazon gave for shuttering Diapers.com, it’s unsurprising that many of employees were, well, surprised.
It’s possible that Amazon didn’t want to continue operating a business that drove customers to other sites to purchase diapers. Amazon announced it would stop selling its own private-label diapers in 2015, citing a need for design improvements.
But Recode floats another, more tawdry hypothesis:
Others believe a more unusual reason, claiming it could be some gamesmanship on the part of Bezos intended to send a message to Wall Street, as well as Walmart leadership, that Quidsi co-founder Marc Lore cannot build profitable businesses. Lore is currently the e-commerce chief in the U.S. for Walmart, which paid $3 billion to buy the startup, Jet.com, that he created after leaving Amazon.
GeekWire reached out to Amazon to comment on the Recode report. We’ll update this story if we hear back.