The online pet store is winding down operations.
Pets.com looked strong in this niche sector, offering an extensive product range. Its operational partnership with Amazon.com was key to its apparent security. In addition to providing crucial first-round funding (Amazon held a 30% stake in the business), the relationship with Amazon extended to a marketing opportunity of considerable value, enabling Pets.com to reach Amazon’s established customer base that closely fitted its own customer profile. The company also diversified its product offering by introducing private label goods and partnered with an online veterinary information provider to strengthen its content.
Combined, these factors helped Pets.com to successfully develop a strong company brand – its sock puppet character is sold in stores throughout the US. Yet profitability remains a distant prospect, despite the purchase of key assets from its doomed rival PetStore.com in June this year. Unsurprisingly, investors are reluctant to inject any further cash into the business to keep it afloat.
The demise of Pets.com confirms that a dotcom shakeout is underway. These companies were once seen as a key threat to traditional bricks and mortar companies with fears that their first mover advantage would be hard to compete against. However, the bricks and mortar companies have years of retail, marketing and category management experience combined with the all essential ingredient – financial backing.
For traditional retailers, the Internet is simply another channel of distribution permitting incremental sales. An offline presence can be leveraged into online market entry. Consumer research has indicated that traditional retailers and manufacturers generate feelings of trust among consumers and are perceived to have better security and fulfillment processes. With these key advantages, dotbams may well bring the demise of the dotcoms. Perhaps the only way pureplays can survive the shakeout will be to partner with dotbams drawing on each other’s strengths and maximizing synergies. Online grocery retail company Peapod was rescued from the ashes by Royal Ahold. Perhaps Mars (which own Pedigree and Whiskas) or Nestle (Friskies) should consider coming to Pets.com’s rescue?
