How To Challenge Amazon And Win. How Marc Lore Beat Amazon.
Marc Lore is a man who has gone up against Amazon several times and has been successful. For the past five years after starting Jet.com and being acquired by Walmart, he has been at the helm of Walmart’s e-commerce business efforts against Amazon. Last week he stepped down. This week we cover the lore.
Amazon is a really tough business to go up against. There are very few entrepreneurs who have gone up and succeeded.
How Amazon operates and behaves is almost like a monopsony. It controls or dominates the demand for goods and services with its marketplace and own brand products. It is very challenging to beat Amazon, because Amazon like most Big Tech do not portray themselves as a monopoly but have similar staying power.
Shopify’s mantra of “ arming the rebels” is a direct reference and challenge to the retailing empire that Amazon has built — although what Shopify is doing may not actually be harming Amazon. Shopify’s arming the rebels is a nice marketing spiel, in reality they are arming everyone — arming of rebels requires Shopify to back a specific side. When Shopify arms everyone, no one is really armed. In such an environment, the ones with the bigger marketing budget and ability to distribute their goods is the winner… Amazon!
But when it comes to a case study on how to beat Amazon, one of the most notable is Quidsi. As one of Amazon’s largest acquisitions, Quidsi ran several sites with prime keyword domain names such as Diapers.com, Soap.com and Wag.com. Six years after the acquisition, Amazon had to shut down Quidsi as they weren’t able to get it to be “profitable”.
The founder of Quidsi and serial entrepreneur, Marc Lore, has gone up and won against Jeff Bezo’s Amazon. Lore also has some serious hustle. Having found opportune moments of arbitrage, he has gone up against Amazon several times successfully. He has made massive business exits from going up against Amazon and is quite a business creator!
📕 Marc’s Lore
“ I am not going to accept that it can’t be done unless someone proves it is a zero probability. Often the case, you can’t prove it is zero. There is always some non-zero probability. It is typically the stuff that is close to the non-zero that nobody else is touching and that is where the opportunities are “.
Marc Lore’s story paints him in the light of having some of the stereotypical entrepreneurial traits. As a kid, he charged his family 5 cents whenever they wanted to watch Casper the Friendly Ghost on his slide projector — and he made up a story for each frame. He did other gigs that would make some money too, mowing lawns, picking weeds, selling newspapers and washing cars.
At 14, he started trading on the stock market and baseball clubs. Marc Lore was also a ‘numbers guy’. During high school, he snuck away to Atlantic City casinos to count cards. After high school, he did a Bachelor’s degree in Business Management and Economics. This was followed by a six years career in Investment Banking positions where Marc ended up heading the Risk Management divisions.
Marc Lore’s first foray into the startup game was to find a niche and compete with another ecommerce giant, eBay. In 1999, Lore co-founded The Pit, Inc., an Internet market-making collectible company alternative to eBay. Two years later, he sold the company to The Topps Company for $5.7 million.
According to Marc, one of the ways he is able to get huge wins is by putting himself in a position where the situation means what he is doing can’t not work.
For The Pit, Marc put all of his money — every penny into it.
In his second business, Quidsi (Diapers.com), Marc had most of his friends and family invest into it. That investment drove Marc to make it succeed as he didn’t want to disappoint those whom he cared about. Marc had to react, to go in. According to him, “ once you are in the gear, you don’t think about it… run as hard as you can and you don’t look back “.
The other strategy is to do what others struggle with. When someone says something can’t be done, Marc Lore gets excited for the market opportunity.
🛒 How do you go up against Amazon in e-commerce?
Quidsi annoyed Jeff Bezos. It annoyed Bezos so much and frustrated his company’s efforts in crushing it that Amazon spent $545 million dollars to acquire it in 2010.
Quidsi was a parent company of some valuable one word letter domains: diapers.com, soap.com, wag.com, beautybar.com, case.com, yoyo.com etc. Started originally as 1800Diapers in 2005, the company, Diapers.com, focused on selling diapers to mothers with children up to the age of three. Marc and his co-founder, Vinit Bharara, focused on building a brand with strong customer loyalty. They also had really optimised packaging.
The company that Marc Lore and Vinit Bharara had founded was doing what Amazon had done a decade ago. Diapers.com was an e-commerce company in just one category but really crushing it. The business profit of doing so would be similar to what Amazon had previously done… own one category well and then expand. Diapers.com was creating a flywheel on customer delight. They were providing cheaper ground-shipping rates than competitors through warehouses positioned close to metropolitan areas and were able to provide overnight shipping that in many cases were faster than Amazon’s own shipping methods.
Prior to Diapers.com, Amazon didn’t sell diapers. It took Amazon one year after Diapers.com to begin competing with the startup. For Amazon at the time, diapers were seen as being too bulky and too low-margin to be delivered profitably. What Marc and Vinit had been able to do was with the same method as what Bezos had previously done is so proud of.
Online retailers don’t typically scare Amazon. Quidsi’s success in delivering a product profitably which Amazon had thought was impossible — scared them. In an internal Amazon email, Amazon’s senior executives (the ‘S Team’) fretted about their failure to price match Quidsi, their worries of Quidsi as their #1 short-term competitor and Quidsi’s growth:
Shortly after the email by Amazon’s S Team, some of Amazon’s executives went to meet the Quidsi founders to encourage them to sell their company.
Marc Lore and Vinit Bharara declined.
Amazon went to war. Amazon started slashing prices of their diapers by 30%.
How do you win against Amazon?
Instead of caving into Bezos pressure, Lore and Bharara decided to open a second category of product. In June 2010, Quidsi launched soap.com. Bezos got worried.
The Amazon S-Team and Bezos kicked off their war room and formulated a “ Plan To Win “.
Quidsi managed to hold on. Their customer loyalty held. But the pricing war was beginning to hurt Quidsi.
Unfortunately for Quidsi, Amazon had a larger war chest and looked to employ a pricing war with its reserves to put Quidsi out.
According to HBR, one way companies can avoid a price war is to emphasise other negative consequences (such as the risk of poor product quality) from their competitors. Since Amazon and Diapers.com stocked the same goods, this was not possible. Quidsi’s executives calculated that based on wholesale prices of Procter and Gamble’s Pampers, it appeared that Amazon’s aggressive pricing tactics against Quidsi was set to have Amazon lose $100–200 million.
Amazon was offering discounts on discounts specifically on the diapers category. Quidsi could not compete with Amazon in a protracted pricing war. Marc Lore and Vinit Bharara folded and Quidsi was sold to Amazon in November 2010.
Marc didn’t forget about e-commerce though and after some time at Amazon, he went back to war with Amazon again.
Creating Jet.com in 2014, Lore speculated on creating an Amazon Prime competitor but instead of competing on fast free shipping, they would compete on trying to save consumers more money. Lore modelled his ideas on a fee-based membership model like Costco and Sam’s Club.
This time around, Jet.com was acquired by Walmart for $3.3 Billion in 2016. He then tried to help Walmart compete with Amazon with Walmart also launching free one-day shipping in 2019 to rival Amazon Prime.
Marc Lore’s Big Tips On Building A Team
According to Marc, what has helped him beat Amazon and succeed in business is his team. For him, it is really important to empower people. When he looks to hire, he looks out for self-motivated people who are “more missionaries than mercenaries”.
He has an acronym:
Smart: Curiosity and applied knowledge.
Passionate: Fire to drive forward.
Optimistic: Big change requires big ideas and big ideas require a sometimes naïve belief that you can accomplish anything.
Tenacious: Find a way no matter how arduous the path.
Adaptable: No sacred cows. Being tenacious is not about being stubborn. Make changes where necessary.
Kindness: An environment where people want to come in every day and create a springboard for step-change improvements.
Originally published at https://viralwegrow.com on January 24, 2021.
