A Brief History of Marc Lore and Amazon

How would you like to go up against a world-champion heavyweight boxer? How would you like to do it twice?

Marc Lore has. Actually, he went up against the champion, went to work for them for over two years, and is now in the process of going up against them again.

The champion I’m talking about is Amazon. Lore has went up against them twice in a little over a decade; first as founder of Quidsi, parent company of Diapers.com, and second as founder of Jet.com. Since Jet’s acquisition by Walmart in 2016, Lore is now continuing his battle against Amazon as President and CEO of Walmart eCommerce US. 

So what makes somebody decide to fight a seemingly impossible fight? To understand that, you must look at Lore’s history with the company, starting in 2005.

Diapers.com: The Beginning

Lore and his co-founder, Vinit Bharara, started Diapers.com in 2005, originally going by the name 1800DIAPERS. The goal of the company was to build a website for Mom, a sort-of online version of Baby’s-R-Us. Rather than trying to sell high-margin goods that were popular internet sales items at the time, Diapers.com focused on low-margin consumables like “the diapers, the wipes, the formula.” They focused on building the back-end logistics of the company first, rather than focusing on design and marketing as their predecessors tended to do (Pets.com). This meant figuring out packaging and shipping and focusing on customer service from the beginning.

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Diapers.com was a subsidiary of Quidsi, a startup that also owned Soap.com and Wag.com. Within five years of opening, the company was worth over $300 million. When they initially opened, Quidsi had an operating margin of 4.6%; in 2009, this margin was up in the teens. In the same year, the company was selling $89 million in diapers each year.

Amazon Comes to Town

Everything was going great for Diapers.com and Lore – that was until Amazon showed up. In 2009, “Amazon sent a senior vice president to have lunch with the founders,” who warned them that Amazon was thinking about entering the diaper industry after seeing the success of Diapers.com. The message was clear: you are going to sell your company to us.

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When Lore and Bharara rejected Amazon’s offer, diaper prices on Amazon began to drop  upwards of 30 percent – a pricing bot automatically lowered Amazon’s sales price based on the price on Diapers.com. In 2010, the morning of a meeting between Lore and Amazon, Amazon Mom was launched, focusing specifically on baby products.

Eventually, the pressure from Amazon got too great and Diapers.com had to decide whether to sell to Amazon or Walmart. When Amazon heard of Diapers.com getting bids from both companies, they told the Diapers.com executive team that if they did not sell to Amazon, they would continue to drive prices down until Diapers.com failed. On November 8, 2010, Quidsi sold to Amazon for $545 million.

Working for the Man

For the next two years and five months, Lore worked at Amazon. On his experience there, he has this to say:

“There were some things at Amazon that I didn’t like, and didn’t want to replicate in my future companies. I think transparency is lacking at a lot of companies.”

Jet.com: A New Venture

A year and a half after leaving Amazon, Lore began work on his newest venture, Jet.com. The idea behind this company was simple: it a world where companies were competing on speed, Jet.com would focus on price, what Lore believes is the next wave in eCommerce trends. Jet.com used a “SmartCart,” which used an algorthim to decrease your per-cost item the more you bought. In their first round of fundraising, Jet.com raised $80 million, which was followed up by a second round of fundraising in 2015 which gathered $140 million.

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When they originally launched on July 21, 2015, you needed to be a member to use Jet.com; the fee was $50. In October of 2015, Jet eliminated this restriction and opened the website to everyone. Reviews of the website were mixed but they did exactly what Lore said they would do: lower prices (~9 percent lower than Amazon) but slower shipping times. In November 2015, Jet served their one millionth customer and closed another round of financing which gave their company a valuation of $1.5 Billion.

Walmart Comes to Town

“AMAZON IS DOMINATING”

This was the message that Lore went to Walmart with. Yes, he was working on convincing Walmart to take this deal, a huge shift from the last time a company of his was acquired. Lore knew of the difficulties that Walmart was having with their eCommerce business and recognized that Jet’s system would be able to revolutionize the way they were doing business at Walmart, giving them a fighting chance against Amazon.

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On August 8, 2016 Walmart announced that they would be acquiring Jet.com for $3.3 Billion – not bad for a company that was only fifteen months old. Less than a year later, Amazon announced that they would be shutting down Lore’s old company, Quidsi, which had been their fourth-largest acquisition up until that point. Although Amazon announced they were closing the company because “it hadn’t been able to turn the business profitable,” many believe that their real motivation was Lore’s decision to sell Jet to Walmart.

Working for the (Other) Man

Lore now serves as President and CEO of Walmart eCommerce US. His task is huge: expand Walmart’s online presence and dethrone Amazon as the largest e-retailer. Under Lore, Walmart has continued to purchase their way into the eCommerce sector, acquiring companies such as “ShoeBuy, Bonobos, ModCloth, Moosejaw and delivery company Parcel.” So far, Lore’s strategy has been to keep these brands separate from the Walmart brand with the goal of adding their products to the long-tail of products available on Jet.com and Walmart.com.

He is hoping to be able to leverage all of Walmart’s assets in this competition with Amazon, taking advantage of something Amazon doesn’t have many of: physical locations (although Whole Foods did add ~460 locations). Walmart has 4,600 stores within 10 miles of 90 percent of the US population, giving Walmart an advantage when it comes to hybrid online/offline sales.

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The Future

So, what does the future hold for Lore and Walmart? Only time will let us see who was more successful in the eCommerce arms race. One thing is for certain though, Amazon was not expecting such a fight when they tried to buy a new diaper company a decade ago.

6 comments

  1. Great post. I loved it. I did not know all the history between Lore, diapers.com and Jet. Its amazing the amount of Jet.com’s acquisition. Its a huge deal and a huge company. Now Walmart tock and company had increased YOY in more than 50% in eCommerce and digital business. It seems like Jet.com is pushing boundaries in the Walmart infrastructure and they are growing like crazy, not only the top line but the bottom line. Customer service is everything and even though Amazon is first in class, Jet.com is also one of the best. Obviously backed by Walmart.
    I do wish they start competing heavily vs Amazon to make things more interesting. I wish JEt.com had a better delivery system. I only used it once and it was nothing like 2 day Shipping from Amazon

  2. clairemmarvin · ·

    Really interesting post! I remember reading about Amazon’s acquisition of Diapers.com in one of my previous business courses but I had no idea the same man was behind Jet.com. Unfortunately, Amazon just has so much market share now in virtually all commerce industries that they can push around everyone else around them. I recently read a WSJ article detailing Amazon’s Alexa Venture Capital Fund where Amazon invests in small companies that focus on artificial intelligence. This all seemed fine and good until one of the companies that received Alexa Fund financing accused Amazon of stealing their intellectual property and using it for Amazon’s own benefit. I really hope that Lore and others continue to try to stand up to Amazon because what’s capitalism if we all only have the choice to use one retailer?

  3. Great post, Bob! I had no idea about the saga that has gone on between Marc Lore and Amazon. I know we have previously gotten into some (friendly) Twitter debates over whether Walmart can catch up to Amazon. Personally, I still think that Amazon is poised to win. Business Insider predicts that Amazon will capture half of all online sales in the US this year. Even if Amazon was to only grow 8%, that would be equivalent to the entirety of Walmart’s digital operations, only valued at $11 billion compared to Amazon’s $200 billion. But perhaps both companies can exist and compete against each other to drive further innovation- something that will definitely benefit us as consumers.

  4. Very interesting post. I think this sheds light on the fact that it is more difficult than ever for start ups to make it make it big and become a capable competitor in the tech industry. As you mentioned, Diapers.com were bullied and coerced into being acquired by Amazon once they started growing and taking up a niche market. On the other hand, Jet.com’s end goal from the get-go almost seems to have been to be bought up by a bigger, more established company. Companies like Amazon are so diversified that any time they encounter an company with a bright idea and the appropriate market, they can acquire it and still credibly justify that it is a strategic move that is relevant to their existing operations. While this may appear to discouraging to start ups with innovative ideas and the ability to make ends meet, I think it could also incentivize them – as a founder of a business, it may not be a bad thing to know that one only needs to grow the company to a certain level, before one of the Frightful Five will make an enticing acquisition offer that is difficult to turn down.

  5. Great post. Walmart definitely got Jet.com to get to Marc Lore. Will be interesting to see if he can help them.

  6. emmaelennon · ·

    Great history! Impressive to see what Marc Lore has done in such little time, particularly with Jet.com. I also find their branding strategy a testament to Lore’s vision and power — still, so many consumers are unaware of Jet’s relationship with Walmart, and through this distinct brand identity, Jet is able to reach an entirely different consumer segment. Your point about brick and mortar stores is super interesting, too — I wonder if that will end up hurting or helping Jet and Walmart in their battle with Amazon.

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