Thought Leadership

Why Has Amazon Become A Diaper Company?

Amazon has made a big splash with its private-label of household goods for Amazon Prime subscribers. The Amazon Elements is starting with diapers, a unique offering that doesn’t quite seem a big deal for all. However, diapers are the key to Amazon’s future, and they show all manufacturers and distributors a target for growing their operations.

With a plan of growing the line into the everyday items parents and consumers need, Amazon is strategically targeting an area of high growth, immense need, and an area of immense trust. If the company can supplant major brands in the diaper market, it knows that its reputation is in great shape. That means customers are going to be willing to purchase other private-label goods, which will give it a boost in everything from diapers and formula to TVs and personal electronics.

Let’s look at the benefits Amazon will reap from a successful jump into the diaper market, and search for those nuggets of wisdom lurking in its operations. It’s very likely that Amazon has hit upon a digital gold rush, so panning downstream will yield plenty of useful advice and planning support for everyone in the supply chain game.

Universal Targets

Part of Amazon’s approach is to tout its appeal to a wide range of consumers, even those who do not normally turn to online shopping for everyday essentials. By sourcing these diapers and making a point for them to be socially conscious, Amazon is hoping to draw in more consumers for its existing operation.

This is a new acquisition strategy for many manufacturers and retailers because it’s a growth outside of existing channels. With the emergence of an e-commerce world, we can expect many to follow suit. However, Amazon is likely to be one of the few whose new products are such a strong departure from its existing offering—diapers follow a smartphone, tablet, smart TV, and online services.

Amazon’s latest statements have repeated the phrase “we want to ship everything to you,” and it appears that the brand is making a play for that major role in the lives of its customers, old and new.

Expanding Customer Advantage

Amazon has become vital to the supply chain of the modern home. And like a good supply chain partner, it has made its relationships available to every point in that supply chain. While most of its existing customers will benefit, the addition of these diapers could be a boon for its toddler parents—consider your option as a way to specialize with offerings for specific customer segments.

Amazon has beefed up its Prime offering with a “Mom” subscription that provides 20% of diaper subscriptions and comes with exclusive discounts. Using this service, subscribers will get boxes of diapers for roughly $0.22 per diaper, or about a $9 savings per every box of 160 diapers. After ordering 12 boxes, the consumer has saved more by joining the $99 annual Prime service and they get free shipping on those diapers, expanding their savings.

Amazon is able to increase its business but reduce costs to consumers, overall netting more sales and more profit while customers net more savings on a majority of the goods they buy. This is the true supply chain dream, and it’s an operation we’d all be better off remembering and emulating.

Diapers and Inroads

So, why diapers?

Amazon is a large distributor and its goals are much larger than diapers. However, that single product is likely seen as the company’s biggest inroad into those deeper sales.

Back in October of 2013, Businessweek reported that was the fastest company it could find who went from a start-up to beat a $300 million mark in annual revenues. Quidsi, the parent company of and the company Amazon bought in 2010, grew its major brand with diapers as its entrance into the home.

However, Quidsi was able to make most of its money and truly find profit in the goods that were added to those carts filled with diapers. Formulas, shampoos, clothing, and other items were bigger ticket and allowed the brand to discount its main product line while still turn a significant profit.

Amazon is taking a play from its child and launching a similar service that will provide similar discounts, but include more discounted items and access to its digital services through the Amazon Prime subscription that’s required. Mom or Dad will come in for the diapers but maybe add that new electronic mobile, bouncy seat, or a new flat screen—for the same cartoons on infinite repeat plus a little relaxation when the little ones are asleep—all with free shipping.

That TV and Amazon’s Fire TV products are likely to be big pushes because they’re a smart intersection of Amazon’s main products. Fire can pump cartoons into the home through the digital streams, layering in that extra goodness and preventing parents from having to purchase a copy of everything.

The Future Is Home

The one space Amazon hasn’t entered yet, but likely could, is the addition of service industries to its existing offerings. With diapers and videos for the kids, Amazon is building itself as a trusted children’s brand.

Parents may soon extend that trust to Amazon’s growing local services—currently in a Groupon-like operation—and it’s easy to see that extend to an Amazon-approved babysitter or daycare. And if you were that daycare provider, wouldn’t you purchase all of your supplies from Amazon for any additional benefit or ranking in their local service planning?

Amazon is in a prime spot to take its relationships to the service level, becoming more than just a warehouse and DC. Amazon has the potential to become a middleman for daily needs and specialized offerings. It’s a method that is hard to replicate but can make a great goal for every manufacturer, distributor and other major point in the supply chain.

With these blueprints for a future in the homes of every American, all of us also can see where our company can go from here.