Amazon.com Inc (AMZN.O) plans to cut 263 jobs at its money-losing parenting products unit Quidsi this summer as part of a business restructuring, it said in a notice filed with New Jersey on Wednesday.
The New Jersey-based subsidiary operates Diapers.com, Soap.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's software development team will focus on building technology for the grocery delivery service AmazonFresh, the statement said.
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. Fresh food represents a large and fledgling market for online retailers, in contrast to goods such diapers that have been the subject of price wars in recent years.
"Consumables like soap and pet food are often priced very competitively by retailers in order to drive price perception and ultimately drive online and in-store traffic," said Guru Hariharan, chief executive of retail technology company Boomerang Commerce. "While unfortunate, the shutting down of the Quidsi sites isn't completely surprising."
The market appeared to welcome Amazon's attention to losses at the subsidiary, unusual for a company that has prioritized long-term investments over profit. Amazon's stock briefly hit a record high of $876.44 before closing at $874.32. Its chief executive and largest shareholder, Jeff Bezos, gained nearly $1.5 billion from the 2.1 percent stock rise.
SHOT AT RIVAL?
Quidsi was co-founded by Marc Lore, who sold the company during heated competition from Amazon "Mom" subscriptions that offered free shipping and perks on baby items. Amazon has been keen to attract subscribers, who order more goods more often, and now is estimated to have more than 50 million U.S. members in its fast-shipping club Prime.
Lore went on to found e-commerce startup Jet.com, which was acquired by Wal-Mart Stores Inc (WMT.N) last year in an attempt to rival Amazon online. Lore now is CEO of Wal-Mart's U.S. e-commerce division.
"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.
"It is possible that they are taking a shot at Mark Lore for competition at Wal-Mart."
Amazon on Tuesday announced a test phase of AmazonFresh Pickup, similar to a program offered by Wal-Mart and other grocers. Customers order online and schedule a pickup at stores.
The news about Quidsi was reported earlier by Bloomberg.
(Reporting by Jeffrey Dastin in San Francisco; Editing by Jeffrey Benkoe and Leslie Adler)