UPDATE 2-Amazon.com to buy owner of Diapers.com, others

* Amazon to own Diapers.com, Soap.com and BeautyBar.com

* Deal also includes $45 mln in debt and other obligations

* Amazon shares up 1 pct
(Adds background, quotes, stock activity, changes dateline,
previously New York)

By Alexandria Sage

SAN FRANCISCO, Nov 8 (BestGrowthStock) – Amazon.com (AMZN.O: ) plans
to buy the owner of online shopping sites Diapers.com and
Soap.com for $500 million, the world’s largest online retailer
said on Monday, as it aims to sell more household items that
need to be replenished.

The deal, which has been approved by shareholders of the
smaller company, Quidsi Inc, gives Amazon a larger base of
repeat customers who have learned they can buy basic items like
diapers, soap, laundry detergent and other household goods
online without having to visit store locations.

Those items have been staples at big-box retailers from
Wal-Mart Stores Inc (WMT.N: ) to Costco Wholesale Corp (COST.O: ),
and e-commerce experts believe their sales will take a hit.

“I’m sure the executives at Wal-Mart, Target (TGT.N: ),
Safeway (SWY.N: ), Kroger (KR.N: ), Albertsons, & Walgreen (WAG.N: )
among others are very, very concerned that Diapers.com and
Amazon are coming together,” said Cathy Halligan, senior vice
president of sales and marketing for PowerReviews.

Amazon shares were up $1.76, or 1 percent, at $172.53 on
the Nasdaq at midday.

Amazon, which currently sells a wide variety of merchandise
from books and electronics to garden and home goods, signaled
its interest in the diaper market in September, when it
announced its Amazon “Mom” subscription program, offering free
shipping and other perks on baby items. [ID:nN08139428]

The company has been keen to transfer more of its customers
to subscription programs for bulk items, whose convenience
spurs more purchases and allows Amazon to better plan for
purchases. [ID:nN14269324]

Sending bulk items such as diapers, dog food and laundry
detergent through the mail means small profit margins, but
retailers like Amazon and Diapers.com rely on a large and
compelling selection, so customers order multiple items and
shipping costs are diffused.

Amazon posted a 39 percent rise in revenue in its most
recent third quarter. It is expected to spend more on
technology to support its retail business in the fourth
quarter, and analysts believe the company is willing to
sacrifice some profit margin in the near term for longer-term
growth.[ID:nN18289197]

For a Breakingviews commentary on the deal, click here:
[ID:nN08108118]

SIMILAR DNA

Diapers.com and Soap.com share many of the elements that
have driven Amazon’s success strategy: free or discounted
shipping, low prices and a large selection.

Customer service is a hallmark of Diapers.com and Soap.com
and is similarly key to the success of another Amazon purchase,
Zappos.com, the online shoe seller it acquired last year for
roughly $1.1 billion.

Diapers.com, which launched in 2005, has about half a
million customers. Sales — which were around $300 million at
an annualized rate in July — have been doubling every year.

Chief Executive Marc Lore told Reuters in July that he
expected Soap.com, which debuted that month, to be an even
larger service. [ID:nN14164918]

In addition to buying Quidsi shares for $500 million in
cash, Amazon will assume about $45 million in debt and smaller
obligations. Quidsi, whose venture capitalist backers include
New Enterprise Associates and Pinnacle Ventures, according to
Amazon will continue to operate independently under its current
leadership team and the brand names will not change.

Quidsi owns Diapers.com, an online shopping site dedicated
to baby care products, Soap.com, which sells household and
personal care products, and recently launched BeautyBar.com, a
beauty products site.

The deal is expected to close in December.
(Additional reporting by Martinne Geller, editing by Dave
Zimmerman and Gunna Dickson)

UPDATE 2-Amazon.com to buy owner of Diapers.com, others