Amazon's Soap.com Adds Food

JON SPRINGER

An ecommerce site that began in diapers is growing up.

Soap.com, one of the channels in a group of websites operated by Quidsi here and owned by ecommerce giant Amazon.com, last week began offering 10,000 nonperishable grocery products. Company officials told SN last week that the offering would provide additional solutions to a loyal customer base who hooked onto the site when it sold only diapers and baby gear, but has since expanded to household products and dry grocery (soap.com); pet goods (wag.com), cosmetics (beautybar.com) and toys (yoyo.com).

Those sites, operated by Quidsi as a separate division of Amazon.com, share a unified checkout but have affinity in brands and a targeted audience, said Lindsey Andrews, associate director of marketing for Soap.com.

“A large part of our model is to encourage people to shop across site, really targeting that Mom demographic we got initially with the Diapers.com site and helping them out with all of their needs,” Andrews said. “They may need diapers and all that stuff for their baby, but they're a busy mom and they will also need household stuff and pet stuff. This is about making their life as simple as possible.”

Soap.com was launched a little more than a year ago by Quidsi, which founded Diapers.com in 2006. Published reports last year suggested Soap.com would generate around $40 million in sales during in its first half-year, while Diapers.com is said to have more than $300 million in annual sales. The sites — previously seen by some as a threat to Amazon.com — were sold to the Seattle ecommerce giant for $500 million a year ago.

Soap.com's grocery offering could expand to 15,000 SKUs by year-end, according to Suzanne Kuhl, director of merchandising. She said the company chose the products it would sell based on customer suggestions and POS data. Categories include coffee and tea, snacks, cereal, pasta, baking goods and canned items. The company offers free delivery on all orders of more than $39.

Much of the items on the site are club sizes or multipacks that tend to build basket sizes — a key to retailers offering free delivery, noted Bill Bishop, chief architect of Brick Meets Click, Barrington, Ill. Kuhl said it was “easier and more efficient” for the company to handle multipacks, and online shoppers are already used to them.

“We have been selling baby food on Diapers.com for the last few years in 12-packs,” Kuhl said.

She said the company buys from manufacturers and from various distributors. It assembles and ships orders from warehouses in Pennsylvania, Missouri and Nevada. Those centers are noted for their efficiency, using robotic order pickers from Kiva Systems and proprietary packaging software that analyzes each item in an order to pack them efficiently. Where most online retailers use four or five different sized boxes, Quidsi has more than 20, officials said.

Kuhl described pricing at the site as fair and competitive. “We're not usually the cheapest option out there but we are providing the convenience aspect,” she said.

The site is relying on consumers cross-shopping to build profitable orders, she added. “Because our business is focused on consumables, there are a lot of items that are low margin,” Kuhl said. “But when you have the ability to put other items in the box that are higher-margin goods — diapers or toys from Yoyo.com — we are able to make money on the whole order even if we don't necessarily make money on every item in the box.”

Observers had mixed feelings as to the potential industry impact of Soap.com.

“The move by Quidsi makes sense, as dry grocery is a natural extension for anybody selling personal care, diapers and HBC in this case,” Nate Holmes, research analyst at RetailNet Group, Waltham, Mass., told SN. “With its cleaner interface, Soap.com could end up being a nice complement to Amazon.com, especially for niche items like natural, organic, gluten-free, and small and new brands. Their cleaner and simpler interface combined with a more content-driven marketing approach vs. Amazon's merchandise-driven marketing make it worth following.”

Bishop of Brick Meets Click said the grocery addition represents “the inevitable slowing of a pretty well-defined [Soap.com] offer.”

“When they first came out they were easy to understand and people knew exactly why to go there,” Bishop said. “Frankly, now they don't have the uniqueness in the market that they used to. So in part this represents an acknowledgement that their hand isn't as hot as it was.”