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Amazon Was Sucking in Quidsi's Inventory Over a Year Before Shutdown (cnbc.com)

Posted by msmash on from the how-it-all-went-down dept.

Amazon's explanation last week that it was closing Quidsi because the unit was unprofitable 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. From a report: As recently as late 2016, at Quidsi's quarterly all-hands meeting in Jersey City, NJ, 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. 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 last Wednesday, 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 Amazon.com, the company said. [...] 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.

4 of 32 comments (clear)

  1. Not a surprise for those who sell 3P on Amazon by Anonymous Coward · · Score: 5, Informative

    My wife has been selling as a 3rd-party Fulfilled By Amazon (FBA) merchant since 2011. As a work-from-home mom, this keeps the majority of the items in Amazon's warehouses for quick turn-around, as Amazon mixes the 3rd party items in with their own to provide a larger catalog. As the business expanded, we began to dabble in wholesaling (buy direct from the manufacturer, list on AZ, send it to the FBA warehouse, profit) and life was good.

    What we began to notice was that, on the really popular selling products, Amazon started to list their own Sold by Amazon along side the FBA program inventory. Understandable, it's their platform, their listings. Then we started going to tradeshows, and hearing from the manufacturers that Amazon was secretly buying out the same products, and we had to say no, we can't compete against Amazon on Amazon (since they take 15% of the sale when you use their listing service). Over time, we lost the pop lines, and more of our regular inventory sits and sits, waiting for the long tail.

    Ultimately, what Amazon is collecting is sales data. The 3rd party sellers take the risk, make the sales, and Amazon takes a slice of the profit. At some point, they calculate if there's enough margin, and they go direct to the manufacturer and cut out the 3rd party sellers, and take all of the profit. They did the same thing with the private labeling, where they calculate which commonly produced products are in demand, and they move them into their Amazon private label system.

    So, it is not surprising that Amazon is doing the same thing internally, making divisions within the company compete against one another. With their household divisions, they often deal with manufacturers directly under the Amazon Family brand of private labeling. Quidsi (as Diapers.com) sells 3rd party goods (Pampers, Huggies, etc) through wholesale contracts that Amazon would simply have better buying power over; everything the smaller division does could be managed at higher volumes by the parent company, hence lower costs and higher profitability.

    1. Re: Not a surprise for those who sell 3P on Amazon by Anonymous Coward · · Score: 2, Informative

      But but but free market right? Right?

    2. Re: Not a surprise for those who sell 3P on Amazon by m00sh · · Score: 4, Informative

      "Amazon cuts out middle-man; film at eleven."

      So company A sells company B's products through Amazon. Amazon notices and starts selling company B's products directly. Doesn't this mean that company A didn't need to exist?

      It's not like company A made their own product and Amazon decided "hey those are cool, lets make them ourselves and sell them cheaper" and now company A is screwed.

      So company A had a shitty business model, and Amazon made that business model moot by buying their customers and cutting out the, now useless, middle men.

      Company A had to do market research. Company A orders, markets and sell hundreds of products of which one or two sell well. They sell products from Company B-Z which makes slight variations of many products which they will only make once ordered by Company A.

      I would agree with you if Company B created and marketed these products and Company A was just buying from them and putting them on Amazon.

      It seems like Amazon is making Company A do the work of finding out what sells and then swooping in and selling them. Amazon has no intention of buying hundreds of items and then figuring out what sells. They want to let someone else do the hardest work of what sells and then undercut them.

  2. How to translate exec speak by Darth+Twon · · Score: 3, Informative

    ...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...

    When high level execs come out to tell you how important you are, they are massaging your ego until they can afford to layoff/fire you. Been there, had that done to me, it sucks and we should all feel sorry for the gullible suckers at Quidsi.

    --
    Take this sig and smoke it.