Amazon sets mass layoffs at Quidsi products unit after losses

By Jeffrey Dastin
FILE PHOTO: An Amazon.com Inc driver stands next to an Amazon delivery truck in Los Angeles, California, U.S., May 21, 2016. REUTERS/Lucy Nicholson/File Photo

By Jeffrey Dastin

(Reuters) - Amazon.com Inc plans mass layoffs at its money-losing parenting products subsidiary Quidsi as part of a business restructuring, the company said in a document filed with the state of New Jersey on Wednesday. The e-commerce giant plans to terminate 263 employees in New Jersey this summer, according to a notice filed with the state's Department of Labor and Workforce Development.

Quidsi operates Diapers.com and other websites.

"We have worked extremely hard for the past seven years to get Quidsi to be profitable, and unfortunately we have not been able to do so," an Amazon spokeswoman said in a statement. "Quidsi has great brand expertise and they will continue to offer selection on Amazon.com; the software development team will focus on building technology for AmazonFresh."

The market appeared to welcome Amazon's attention to losses at the subsidiary, unusual for a company that has made investments in logistics and new businesses a priority over profit. Amazon stock briefly hit a record high of $876.44 on Wednesday afternoon, before paring gains to close up 2.1 percent at $874.32.

The move underscores a shift in Amazon's focus to groceries and other areas since it closed its $500 million cash acquisition of Quidsi in 2011.

At that time, Amazon was fending off Quidsi, popular among mothers, with its own Amazon "Mom" subscription that offered free shipping and other perks on baby items.

Amazon was keen to attract more customers to subscriptions of bulk items, which would spur additional purchases and allow Amazon to better adjust inventory. It has heavily pushed its fast-shipping and video-streaming subscription Prime, now estimated to have more than 50 million members in the United States.

"It is likely that Prime has grown to the point where members no longer separately shop on Diapers.com or Soap.com, so maintenance of separate product-specific sites makes less sense," Wedbush Securities analyst Michael Pachter said.

"There isn't the cult-like following that Zappos enjoys," said Baird Equity Research analyst Colin Sebastian. Zappos, the online shoe retailer that Amazon purchased in 2009, continues to operate as a separate website.

Amazon is now attempting to crack the more than $600 billion market for groceries, mostly bought at brick-and-mortar stores by U.S. customers. On Tuesday it announced a test phase of AmazonFresh Pickup in which customers order online and then pick up their order at a scheduled time at a store, where the groceries are loaded into their vehicle. The model is already in place at Wal-Mart Stores Inc and other retailers.

News of Amazon moving staff to AmazonFresh and winding down Quidsi was reported earlier by Bloomberg.

Affected employees at New Jersey-based Quidsi will be able to apply for other positions in Amazon, the company said in its New Jersey filing.

(Reporting by Jeffrey Dastin in San Francisco; Editing by Jeffrey Benkoe and Leslie Adler)