Quidsi (Diapers.com)

Documented cause

Quidsi was founded in 2005 by Marc Lore and Vinit Bharara in Montclair, New Jersey. The company operated several ecommerce sites under the Quidsi umbrella: Diapers.com (baby products), Soap.com (household essentials), BeautyBar.com (cosmetics), Wag.com (pet supplies), Yoyo.com (toys), and others. The business model combined subscription reorders, curated selection, and logistics optimization for the specific characteristics of household consumables — heavy, frequent, and brand-loyal. By 2010, Diapers.com was generating approximately $300M in annual revenue with strong customer retention. Amazon detected the growth and identified Quidsi as a direct threat to its household consumables business. Amazon's response was textbook predatory competition: the company launched Amazon Mom (a diaper discount program) and dropped prices on diapers by approximately 30%, operating at loss to undercut Quidsi's pricing. Quidsi's margins were insufficient to match Amazon's prices while funding continued growth. The founders approached Walmart, which had no serious interest. They returned to Amazon. In November 2010, Amazon agreed to acquire Quidsi for $545M — a reasonable price given the revenue, but far below what the business might have been worth without the price war. Amazon promised to operate Quidsi independently and preserve its culture. The FTC reviewed the acquisition and ultimately approved it. For several years, Amazon did operate Diapers.com and Soap.com as standalone brands. But as Amazon Prime, Amazon Family, and Amazon Subscribe & Save absorbed the core use cases, the Quidsi properties became redundant. In January 2017, Amazon announced it was shutting down Diapers.com, Soap.com, and all other Quidsi properties. The competitive threat that had justified a $545M acquisition was permanently eliminated. Marc Lore later founded Jet.com, which Walmart acquired for $3.3B in 2016.

Lesson

Failure anatomy