An E-Commerce Failure: Pets.com

In this era of modern technology, many businesses are turning to e-commerce in selling their products and services online. From e-commerce, many companies have successfully achieved a good profit in marketing their products. Among the success companies are Amazon.com, Ebay.com and so on. However, there are also companies which did not do well in selling their products via e-commerce. The examples are Webvan, Kozmo.com, eToys.com and so on.

The company that I am going to illustrate here is Pets.com. Pets.com was engaging in an online business that sold pet accessories and supplies directly to consumers over the World Wide Web. It was launched in February 1999 but unfortunately it folded in November 2000. Pets.com was well-known for its widely popular sock puppet spokesdog.

Causes of Failure

• Excessive Advertising Cost

Pets.com made significant investments in infrastructures such as warehousing which needed critical mass of customers to break even. Acquiring customers in volume they needed to break even requires a period of time which was not an easy task. In addition, Pets.com did not have independent market research preceded the launch of their website. Pets.com only offered products that could be more easily obtained at a nearby mall. There wasn’t much distinctiveness in the products sold which therefore reduced the intention of customers buying from them through online.

• Excessive Advertising Cost

Despite its success in building brand recognition, it is uncertain whether a substantial market niche existed for Pets.com. Pets.com earned revenues of $619,000, yet they spent $11.8 million on advertising. This excessive advertising did not benefit Pets.com, rather it helped the entire online pet industry to increase sales. Hence, making their products even more competitive.

• Lack of Workable Business Plan

Pets.com also decided to compete with low prices just like its competitors. This led to the selling of merchandise at prices below cost for the duration of its operations. Pets.com also built a customer base by offering discounts and free shipping, but it was impossible to turn these sales into a profit because the shipment cost has ate to its profits.