Diapers take the cake
Local baby products company seeking a slice of a big market
Wednesday, July 11, 2007
Star-Ledger Staff

Those "diaper days" of babyhood can wear down even the most energetic parents. That's where1-800-Diapers Inc. comes in.

Two new dads, tired of last-minute runs to the market for diapers, founded a one-stop baby supply e-commerce site to make life easier for the postpartum set.

Best friends since elementary school in Tinton Falls, Marc Lore, 36, and Vinit Bharara, 35, had started an online business in 2000 called www.thepit.com, a sports trading card site they sold to Topps Co. in 2001. Topps hired them when they bought their Web site, and after five years working at the candy, trading card and entertainment company, they were looking to go out on their own again.

Around that time, Lore was on diaper duty with his 2-year-old daughter, Sophia, when he called 1-800-DIApERS on a whim. The call was answered by a cloth diaper business. Lore saw potential in transforming the diaper service by adding disposable diapers, and he bought the name and phone number for $25,000.

Today, 1-800-Diapers is on track to sell $30 million worth of diapers and related baby products, almost triple last year's sales, the company says. The business recently co-branded its site with the name Diapers.com because 90 percent of its sales come through the Internet.

Diapers.com aims to turn its strong sales numbers into profits by sometime next year. In the meantime, the company, funded with $4 million from a venture capital firm and private investors, is operating in the red.

Based in a small office building in downtown Montclair --a location chosen because it is convenient to both Lore's Mountain Lakes home and Bharara's Manhattan apartment -- the firm employs 11, most hired since January.

"We want to make life easier for parents," said Bharara, who serves as chief operating officer and general counsel. "Diapers.com is about alleviating one of the pressure points when the baby comes."

In addition to selling brand-name baby diapers, the online store sells a large list of related products and accessories.

"We have a laser-sharp focus on baby consumables," said Lore, the company's chairman and chief executive.

Key to their approach is providing a superior customer experience -- one-stop shopping, low prices and 24-hour, no-questions-asked service. They also offer free shipping on orders over $49 as well as an automatic re-order option, called "Never run out again," to encourage repeat business.

"I don't think I would have thought of diapers online unless someone told me about it," said customer Dana Lewis, 34, a stay-at-home mom with children who are 1 and 3. "Once I tried it, it was so easy. I can order them at 11 o'clock at night and get them one or two days later."

During a recent interview in his office, Lore said Diapers.com is "now the biggest online seller of baby products.

"Sixty percent of customers come back for second orders, and the average number of orders for someone who comes back is over five orders a year," he said.

Amy Chezem, a spokeswoman for the Juvenile products Manufacturers Association, based in Mount Laurel, said for mothers with busy schedules, price is not the biggest factor when buying things for their baby.

"Moms are a little older, a little more educated and have a little more money than moms in the past," she said. "One-stop shopping and easy shopping is what parents are looking for."

Diapers make up $2 billion of the $7.3 billion prenatal-to-preschool market, according to the JpMA. Mass merchandisers like Wal-Mart, Babies-R-Us and Target sell about 80 percent of baby products, while e-commerce sites currently account for just 1 percent, said Chezem.

Among online businesses that sell baby products, Diapers.com's domain name gives it an advantage, Lore says. Early on, the co-founders discovered that a Google search for "diapers" turned up very few competing sites devoted to diapers and baby products. Their main competition comes from larger, more established e-tailers who are not branded as baby-oriented sites, such Amazon.com, Drugstore.com and Costco.com.

"We started selling diapers online to support our warehouses and give us an entry level into other baby products that our warehouses can't carry," said Derek Berndt, a buyer for Costco.com. "We can carry a lot more online. We sell everything from formula to furniture, and the diapers are definitely bringing people into our franchise."

Costco.com sells the Huggies and Kirkland brands at the same price as the warehouses, which are cheaper than Diapers.com. But they also carry standard seven- to 10-day UpS shipping charges on all orders.

Both Amazon.com and Drugstore.com compete with Diapers.com's free shipping on orders over $49; but Drugstore.com charges more per diaper, because they sell smaller packages, targeting consumers in urban areas with smaller living and storage spaces, said company spokesperson Noreen Moriarty.

Amazon.com began selling diapers through its Amazon Grocery Store last July, when it added 14,000 non-perishable grocery items to its site. The diapers on Amazon.com cost about the same as on Diapers.com, but Amazon.com offers more free shipping options than Diapers.com. Amazon.com is also now offering an automatic subscription feature to refill orders like Diapers.com's program.

"The popularity of the Amazon.com Grocery Store led us to create the 'Subscribe & Save' feature," said Maria Renz, vice president of consumables for the online retailer. "All diaper products are included in 'Subscribe & Save.' In fact, 19 of Amazon.com Grocery Store's top-20 best-selling products in 2007 are diapers and wipe items."

Despite the competition, Diapers.com says it has had triple-digit sales growth over the past couple of years. But to achieve profitability by 2008, the company will have to carefully manage its expenses, said Lore.

One way they keep expenses low is through a proprietary software system designed to maximize packing efficiency at two order-fulfillment centers they contract with in Connecticut and Nevada, where they ship about 250,000 diapers a day.

"Diapers themselves are really the lowest-margin item we sell," said Lore. "Hopefully, moms will buy wipes and creams that have higher margins. The diapers are heavy and account for most of the shipping cost, so adding the additional items adds only marginally to the cost of shipping each package."

On a recent weekday, Lore's wife, Carolyn, stopped by with daughter Sophia, now 4, to drop off a couple of "diaper cakes." The Lores also have another daughter, Sierra, 7.

The two- and three-tiered "cakes" are made from diapers and arrayed with satin ribbons, topped with items such as silver teething rings. They are typically given as shower gifts and, at $60 to $125 each, they are the only high-end products available at Diapers.com.

Both of the co-founders' wives have worked behind the scenes while raising their children. Bharara has a 2-year-old daughter, Kareena, and his wife, Venu Narang, had a baby just last week.

"We understand that moms and dads are so busy that time is the one thing they don't have," said Bharara. "I know I don't do my fair share of diaper changing, but we actually did a survey for our Web site about that and it showed that most dads have some work to do there."

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