Tuesday, February 5, 2008

Baby Essentials Succeed Where Pet Food Failed According to Report

According to Forrester Research, consumers spent just under $2 billion on baby supplies online in 2007. Yet what one would think would fall aside the way of selling pet supplies online, selling bulky commodity items at prices low enough to compete with grocery stores, and ship them for free to consumers, is becoming a success story for companies selling baby products online.

Companies like Amazon.com and Diapers.com are selling diapers, wipes and other baby staples at low prices with free shipping. But how can they do this? Their method is to basically break-even on these bulkier staples while bunding them with higher margin baby items.

“When you’re shipping diapers, wipes and formula, after shipping costs are taken out, there’s really nothing left in the way of profits,” said Mr. Marc Lore, CEO of Diapers.com. “But you add in shampoo, lotions, feeding bottles and those things come out with 35 to 50 percent gross margins.”

Something must be working because Diapers.com tripled its revenue in 2007 to $36 million.

[Read more]

Source: NY Times