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Pets.com
- 2. LIVE FAST, DIE YOUNG
- 3. PETS.COM • Founded 1998, Raising $82.5 Million IPO • Online Retailer • $23 Billion Pet Food Industry (1999) – 15% Growth Rate • 320 Employees • Amazon Funded – 54% • Popular Sock Puppet Dog (Celebrity?) • “Because Pets Can’t Drive”
- 4. STRATEGY • Rapid Growth • Extreme Marketing • Low Cost • Large Offering
- 5. RAPID GROWTH • Amazon Partnership • Stocked Over 15,000 SKU’s • 50% Off Dog Food – 2 Weeks • Large Customer Service Team • Raised a total of $180 • Acquired it’s Rival Petstore.com
- 6. EXTREME MARKETING • Spent $17 Million in Q2 of 2000 • $1.2 Million on Super Bowl Ad • Lure of Big Sales, Online Coupons, and Discounts • Awareness > Interest > Desire > Action • Won Awards in Advertising and Web Design
- 7. LOW COST • Buy Online and Cut the Middleman • Undercut Store Prices • Flat Shipping Fee - $4.95 • Constant Sales and Promotions
- 8. LARGE OFFERING • Stocked and Offered Over 15,000 SKU • Dogs, Cats, Ferrets, Fish, Reptiles • Listed More SKU Than Any Competition • Offered Pet Advice • In Stock At All Times
- 9. RESULTS • IPO To Liquidation in 268 Days • First Year Revenue = $620,000 • First Year Advertising Spend = $11.8 Million • Stock Price of $11 to $14 and then $0.19 • Lost Money On Every Sale
- 10. STRATEGY FAILURE • Rapid Growth Requires Capital + Expertise • Acquire Customers Quick • Required Massive Warehousing + Management • Attracted Interest Not Customers • Lost Money On Sales + Shipping
- 11. ALTERNATIVE STRATEGY • Focused Market – Dog & Cat Food • Customer Service • Subscription Service • Loyalty and Connection Programs • Events
Editor's Notes
- The premise was that you could “buy online and cut out the middleman” and “take advantage of Pets.com’s strong buying power”. Users of the site could browse through different categories, choose products they like and have them conveniently delivered to their home. Think Amazon’s original premise – books – but for pet products.
- Pets.com was looking to hit the market with a big splash and grow rapidly. They took money from VC and started spending right away hiring 300 employees, purchasing warehouse space, and aggressively marketing their product. They experimented with undercutting retail stores with low prices and a fixed shipping fee of $4.95. They offered a massive amount of SKU’s for dogs, cats, ferrets, reptiles, and many other pets. Their strategy was to rapidly disrupt retail pet stores through clever marketing, price cutting, and low shipping. They aimed to create volume through advertisements and marketing
- Partnered with Amazon to build a powerful website Stocked a massive amount of products in big warehouses requiring lots of workers and real estate Initially used tactics like 50% off all dog food as a customer acqusition tool Large customer service team had to become educated in all types of pet foods, treats, and products They raised a total of $180 million but felt they needed $260 million and the $180 million would be tough to get by with So within a 6 month period they had an ad on the SuperBowl, acquired its largest rival, went public, and sued Conan O’Brian
- Spent $17 Million in Q2 of 2000 on advertising 1.2 million on a Super Bowl Ad Lured customers in with advertising that promoted big sales, a variety of coupons, and huge discounts They looked to create a massive awareness through TV ads, print, radio, and promotions at events like Macy’s day parade and Super Bowl Their advertising was widely accepted and won multiple awards
- They looked to cut cost by not having a brick and mortor store They undercut store prices which puts brands in a difficult place with upset stores Flat shipping fee of $4.95 on all shapes and sizes They constantly had sales and promotions such as 50% off all dog food or free shipping
- A large part of their strategy lied in their attempt at differentiation in product offerings They stocked a massive amount of products for multiple types of pets Offered pet advice from leading vets Kept all of the SKU’s in stock at all times
- Live Fast, Die Young was the end result of Pets.com In just 268 days they managed to spend almost $300 million Every sale they made they sold the item for less than they paid for it Lost money on any large shipments – most petfood is large and heavy – The more sales grew the more they lost
- They gave birth to a hungry dog and it ate money. They burned through the money faster than expected and didn’t have time to become pet food experts They wanted to acquire customers quickly through big sales but this was not a sustainable business model Their differentiation other than online was their huge product offering but this required huge warehouses and huge teams to manage them. At the time there were no advanced computer warehouse tools The Sock Puppet Dog created lots of awareness for Pets.com but it did not create desire. People became interested or aware but did not convert With their sales model they were selling products for less than they purchased them and often times lost money on the shipping charge. To overcome customer push back of waititng to receive items they covered express shipping = loss They upset pet food brands
- Jack of all trades, master of none is what happened to Pets.com My strategy would be to start slower with a focus on the big movers in dog and cat food. I’d throw out the “build it and they will come” model Focus on customer service. Your disadvantage with petfood online is the lack of education opportunities you have as opposed to in store with employees Create a subscription setting for auto pay and ship (Amazon culture) Loyalty and connection programs through free reccomendations sent and birthday gifts Have a team at pet events to connect personally with audience- Grass Roots growth