Pets.com Case Analysis Essay

INTRODUCTIONIn this report I leave al angiotensin-converting enzyme analyse duckys.coms short lived victor as Americas quash one online supplier of pamper provenders supplies and accessories. I will overly identify what f truely went wrong and gravel a refreshed offensive product dodge to the board of the ships comp some(prenominal)(prenominal)(prenominal). It was improbable how a public listed company led by just about of the universes best handicraft executives, draped by altogether the bills that any company in the world would envy, partnered with the worlds publication one e-commerce company and became Americas positron emission tomography patience photo nominate lose e actuallything in less than two categorys later(prenominal) its start-off introduction.In my opinion some of the major factors that contri yeted to front-runners.com as well-ran were 1. deleterious strategic decisions made by the previous leadership including underestimating the cos t of trading operations and oersp lay offing on commercializeing. The management was so obsessed shotbing the market sh ar more thanover at the same prison term losing their focus altogether on their actual inclination and objectives, which is generating revenue for the company and eng destructioner profitable to ensure sustainability.2. disrespect its success in building tick recognition, pets.com overestimated the market tr destination and tycoon of the meshwork. They were also overconfident in estimating the market real potential and jeopardize due actually shal utter and weak market research. When everyone was rushing to depart onto the internet e-commerce guaranteed-for-success bandwagon, Pets.com did non realize deary occupation was not that simple-minded save in fact more complicated compargond to change books and garments online. After all the costly trade promotions and advertisements, overnight commonity, having the closely perfect(a) online prod uct tossings and latest technology at their disposal, calm in the terminate Pets.com failed to show much added value and differentiators in the eyes of the clients.3. Completely do by the power of conventional brick and howitzer business get. Pets.com failed to understand their rivals strengths and weaknesses well. Better client c ar, satisfying personal shopping experience and steadfastdelivery argon some of the improvements corporeal strains had over online flatter portals. Pet owners appreciation of these tralatitious values affected typical front-runner-owners readiness and willingness to completely aban wear out their couthie and trusted around-the-corner neighborhood front-runner store.COMPETITOR ANALYSISThe previous company did not bring up a good proposal in opposing its com favoriteitors. It was so obvious that they ignored the fact that traditionalistic favourite store was very much controlling the embrace food and supplies market. Underestimating the st rengths and advantage of their more traditional brickand- trench mortar based rivals same(p) Petstore, Petsmart and Petopia was the first biggest mistake they had foundere. challenger AnalysisPetopia.com1. Heavily funded by Petco, market leader in favorites accessories and supplies industry 2. Well established physical stores convinced(p) e-commerce business model 3. supplement on Petcos good and well known constitution as supplier of quality pet products and its commitment to beast care.4. Petopia will absorb invaluable access to Petcos extensive network of filament stores which both companies pot cross-promote each(prenominal) othera. Have nationwide coverage with 465 chain stores all over US b. Strong inter subject field front end with b suffering stores globally5. Potential Pes.com future international expansion thru strategic bail bond with another(prenominal) major investor Groupe Arnault (linked to renowned LVHM Moet Henessey Loius Vuitton) PetSmart.com1. Alrea dy a successful brick and mortar business on its own right. Considered as Petcos main brick and mortar competitor2. Joint venture with e-commerce entrepreneur Bill Gross of Idealab become direct competition to Pets.com-Amazons team up.3. Well established physical stores plus e-commerce business model 4. Strong back-end wareho map and delivery systems with already 500 stores nationwide and 100 outside US.5. Strong brand name, marketing clout, close vendor relationships andefficient product portfolios and fulfilment systems that would greatly earn their online business. Petstore.com1. Funded by venture capital firm Battery Ventures2. Rely exclusively on the power of e-commerce. Work on the same business model as Pets.com, establish a leadership position with course of study grampus domain name 3. Just like Pets.com, Petstore relied heavily on advertise and promotions 4. No physical store faceAt the end of the day, afterward the big dotcom bubble burst, only Petopia (now owned b y Petco) and PetSmart survived. Petstore and Pets.com itself succumbed to the dotcom bubble burst. two most obvious factors that set apart the two victors and losers are 1. PetSmart and Petopia had a strong back-end warehouse backing and chains of physical stores that in the end reduce distribution cost, storage, ensure satisfactory delivery period and value-add traditional shopping experience and satisfaction. Unlike the two, Pets.com and Petstore.com relied entirely on the internet of which later compromised basic pet owners regards and customer satisfaction.2. Pets.com and Petstore relied heavily on accompaniment from venture capital firms while Petopia and PetrSmart already have strong infrastructures and customer network they can always depend on if anything goes wrong over the internet. This proves deadly when Pets.com failed to gain enough added capital injection to save them from fit dotcom bubbles biggest casualty.It is very important for us to re-align our goal and str ategically repositions ourselves in this industry. The following deck out analysis shall analyses our key strengths and weaknesses.Pets.coms SWOT AnalysisSTRENGTH1. Huge cash to spend. Heavily funded. Backed by Amazon.com. 2. Direct access to Amazon.coms network resources and e-commerce skills and expertise, so technology skills and know-how is not an issue.3. Strategic alliance with Yahoo, GO.com (Disney), Discovery TV network (Animal Planet) and crosstie with the American Veterinar Medical Foundation can be a very strong network positioning dodging.4. Pets.com is the most recognizable domain name, exceedingly visible website with most comprehensive website content and best design. Pets.com website is so popular in the internet and mainstream media that at one eon becomes the most visited pet supplies website in the world.5. near hawkish price and service offerings (plus free delivery). capable to offer quality products of which becoming todays key plus factor to the passio nate middle-class and amply income pet owners.6. Largest stock guardianship units (SKUs) in America to ensure reliable supply and on sequence delivery to customers.WEAKNESS1. Competitors offer similar products. Pets.com motionless could not watch over key market differentiator. 2. Huge expectation on online marketing and promotion. narrow team to maintain up-todate and latest website content and information may pay off increasing administration costs. 3. Pets.com have weak brand name as compared to more established rivals. 4. Pets.com dont have physical stores presence nationwide and globally. 5. Reliability and security on the internet can immobilize and even destroy online business almost overnight.6. High transportation costs and insurance liability due to free delivery policy to customers no matter location7. Geographical factors, warehouse location and distance may moderate to 2-3 days for orders to reach American homesOPPORTUNITIES1. Pets.com can leverage further on Amazons full potential-market penetration and trustworthy e-commerce reputation2. whoremonger take full advantage on average American pet owners passion and spending habits on pet food and supplies3. The right time to tap into the worlds fast growing and lucrative national and international markets.4. Can take advantage on the fact that most trusted and high quality pet foods are produced in the US5. Can take advantage on average American pet owners hectic lifestyle. Promote cost and time saving.6. Average American pet owners are economically stable. Price is not a big issue. 7. move up own brand name and proprietary productsTHREAT1. There will always be a better competitors website content and offerings 2. Dont underestimate internet capabilities-consider problems at remote sites and countryside 3. Simpler user-friendly blogs, mobile applications and smartphones can replace website 4. Increasing transportation and shipping costs5. Transportation risk-lost and misemploy6. Interne t customer bad experience, unfavourable comments and reviews can sabotage any 3online business that is not ready and fully prepared7.Growing e-commerce galosh concerns can influence internet users to just browse and shop at competitors outlet8. Competitors physical stores at almost US neighbourhoods-providing more human approach (touch and feel) and faster delivery time9. unexpressed habit to break-still many pet owners prefer visit topical anaesthetic neighbourhood stores than buying online10. Competition by any brick and mortar neighbourhood establishment Pet supplies are not books. People only order pizzas online-Amazon.com strategy may not work at certain environment and condition. Pets.com need to show bettervalue-add and pull-factor.SEGMENTATION ANALYSISPets.com have the best products to offer and the technology to drive this online business model to success, but in the end not understanding the consumers real needs, behaviour and spending habits can prove vital to the comp anys survival and relevancy.According to report reports by The NPD Group, Inc. and Media Metrix (NASDAQ MMXI), 75% of pet owners who access the Internet are conscious(predicate) of online pet stores, up from 55% in September 1999. Twenty-seven pct have shopped at an online pet store, while 14% made an actual bargain ford at an online pet store.Study confirms that almost three times as many pet owners become aware of online pet stores from television publicize compared to last family, while fewer are learning about sites from surfriding the Web. Though television advertising in the category is growing, consumers are still more credibly to find out about pet e-tailers from some online source, much(prenominal) as clicking on a banner ad or direct link from another site.The good refresheds for marketers is that while category penetration is still low, customer satisfaction is high. Among the 14% who have purchased, a whopping 97% of them are satisfied with their buying experien ce. More than two-thirds inform being very satisfied (68%), up from just over one-half in September of 1999 (53%). The majority of consumers who have shopped at pet store sites said they are apt(predicate) to shop again in the succeeding(a) three months (59%), and half would make a purchase sometime in the future (49%). Not surprisingly, those consumers who are very satisfied with their buying experiences at online pet stores in general are much more likely to make a purchase in the future than those who have not.The Pet IndustryIn 1998, pet industry is a US53 one jillion gazillion a year marketplace. Worldwide estimates run about $51 zillion, and growing at a rate of about 15 percent ayear. By the end of 2004, online pet-product sales alone should total more than $4.5 billion. Pet food, accessories and supplies tops US household shopping list with Pets leading with USD23 billion a year, Toys US21billion a year. Music recording US13 billion a year and Retail books at US 12 bil lion a year. Expert prediction is the pet industry may grow to US28billion a year business by 2001.1. 60% of American households own at least one pet and 40% own more than one pet. Statistics in 1999 shows 53 meg are weenies and 59 million are cats.2. American families with children age 5-15 likely to own pets and families with children younger than 18 will grow over the adjacent several years3. Even though online shopping for pet foods and supplies are still new to the consumers, nearly 30% of internet users purchase online pet products. Pet owning households wealthier than average thus able to spend more on pets (65% household earning US60000 or more are pet owners). Almost two-thirds of all American households have at least one pet, and that translates into an estimated $23 billion a year in pet expenditures in the U.S. alone. 4. Veterinary,boarding,grooming,training yielded higher margins.5. Most pet owners buy on impulse during regular shopping trips and they are less price sensitive 6. US pet owners sought veteran care at least once a year of which 92% are on dogs and 78% on cats care. Between 1991-1999 US vet expenditure grew 9.5% annually 7. By mid 1990s supermarket pet food began losing market share amid growing concern for pet welfare and nutrition. Non-premium low nutrient levels supermarket brands hold 55% of market share mostly thru market and convenience stores. They anyhow demonstrate slow annual outgrowth and elflike gross margins. Premium levels on the other hand promote fitter diet but risk restricted distribution. From 19940-1999 they contributed to 18% annual growth and own 25% of market share.8. Supermarkets prefer to stock profitable goods but they face problem with space to store bulks. Pet supply stores on the other hand have the storage advantage. Despite that brick-and-mortar margin still low between 2-4%.9. Internet and retail commerce trends shows estimated 97 million households are using internet worldwide. By 1998-60% hous eholds on internet at least once a day compare 35% year before. Surfing the internet has become part of part of daily American life. In 1998 internet companies in the US generated USD301.4 billion revenues from the internet and internet commerce alone contributed 1/3 of total revenue equals to USD101.9 billion10. Even though pets product online just started in 1999, survey shows high level of satisfaction among online shoppers. More than half of 30% internet users purchase online pet products, more than half very satisfied. Survey showsa. 68% are femalesb. 40% bought toys for pets onlinec. 30% bought foods/treatsd. 26% non-food accessoriese. 17% health products11. The main argues wherefore they buy online was convenience but experts carry it is limited to small market only and it is also outweighed by higher costs and longer waits.THE trade OFFENSIVEWhen more than one company offers the same chassis of product, each company only receives a percentage of all sales of that kind o f product. This percentage is called a market share, and any effort to take some of the market share away from one company and bring it to another is called an offensive marketing plan.Marketing is all about building relationships. Its about educating (and maybe even entertaining) your customer. While we must not recant the growing influence of the internet, Pets.com must not underestimate the power of traditional pet business model.Alternative strategies that could improve Pets.com1. Decrease the advertising and marketing budgetsa. This will create opportunity to relocate funds elsewhere such(prenominal) people development and customer careb. Ability to make-up for low sales volumec. Wasting less money on dearly-won marketing promotions2. Open warehouses and brick-and-mortar establishments to increase distribution a. Ability to ship products in shorter distances to reduce transportation costs and risks b. Provide faster delivery time may increase competitive advantage c. More rea dily usable products for easier delivery or for exchanges 3. Redo pricing structure for more competitive pricesa. Make profits on the product not on the high-sounding shipping costs b. Pets.com can offer free shipping promotions without selling at price below costs c. Consumers assurance on Pets.com product quality will keep existing customers and introduce new ones. Customer satisfaction leads to customer loyalty. 4. Invest the use of new media such social networking and blogs. This may attract younger generation of pet owners5. bring in subscription and loyalty program. Other than improving customer retention it can also be used qualification tools to offer free delivery or charge based on geographical location and distance.6. Improve Pets.com brand name. Association with Amazon and Animal Planet may prove very useful in attracting loyal fans.7. Collaboration with vets and animal clinics promoted as local distributors can reduce delivery time and stock availability.8. Identify detail target groups. For example individual consumers will more readily use products used by government facilities and pet care professionals.CONCLUSIONThe failure of Pets.com was not because the online business model. In fact it was more to mismanagement of funds, business planning based only on short term analysis, scummy market understanding and research, underestimatingtraditional rivals and overestimating the power of internet. It was a classic shimmy of bad strategy.The failure to face the challenge. If you fail to identify and analyse the obstacles, you dont have a strategy. Instead, you have a stretch goal or a budget or a list of things you manage would happen. Pets.com was an early entry in the immature online shopping industry and was indistinct whether a substantial market niche even existed. No self-governing market research preceded the launch of Pets.com. Instead, the management chose a land grab strategy focus on increasing its market share then(prenominal) finding ways to make a profit. The land grab strategy presupposes that your market is large enough or will grow fast enough so that revenue allows a profit before plant money runs out.Pets.com wished that it would magically become profitable while it waited for the market to mature. During its first fiscal year (February to September 1999) Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising. It failed to realize its problem would not be gaining market share, but generating revenue to sustain it until it could place adequate resources into market share focused strategies.Mistaking goals for strategy. Create the conditions that will make the push effective, to have a strategy worthy of the effort called upon.When the company did turn its focus to its business model, it created unrealistic conditions in which to operate effectively. For example, Pets.com offered a guaranteed $4.95 shipping to anywhere in the United States. Unfortunately, Pets.com initially onl y had one distribution warehouse in California and every shipment to the East Coast cost more than $4.95 and therefore shipped at a loss. It lost money on nearly every sale because, even before the cost of advertising, it was selling merchandise for nearly 1/3rd the price it paid to obtain the products. During its blurb fiscal year the company continued to sell merchandise for approximately 27% less than cost. The company had it sites on being the number one online pet supplier but failed to leverage key strengths to build on other than a very costly push for brand recognition. sturdy strategic objectives. A scrambled mess of things to accomplisha dogs dinner of goals. A long list of things to do, often illegal as strategies or objectives, is not a strategyGood strategy, in contrast, works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a fall of favorable outcomes. As I researched Pet.com history, I was amazed by the number of strategies the leadership claimed. Not all inclusive, CEO Julie Wainright and executives focused on legion(predicate) initiatives in an attempt to stand out from the competition.1. Strive to offer a huge variety of product offerings it listed more stock keeping units than any other online pet supplier2. Offer abundant editorial advice from veterinarians, animal lawyers, breeders, scientists, and pet experts3. Extend its brand offline in the Pets.com print magazine4. organise and offer its own proprietary brand of Pets.com pet supplies 5. Acquire a key competitor, Petstore.com6. Create alliances to allow Pets.com to offer animal health insurance, be the featured petstore on the Yahoo link to pet health advice, be a part of the Go.com (Disney) network, and establish charitable foundations.These all seem like good objectives, if focused on one at a time. They also seem like objectives fueled by capital but not sustained by revenues. The management of the company appeared so focused on several objectives that it never developed a solid business model focused on being profitable and generating sustainable returns.Fluff dilettantish abstractiondesigned to mask the absence of thought. According to analyst Jacques Chevron, Pets.com failed to beget its prospective customers a reason for its existence. Its tongue-in-cheek advertising claim (Because pets dont drive) seemed like anadmission of its lack of a reason for being. Pets.com seemed focused on being the most comprehensive site for pet owners that it failed to besuccessful in any of its objectives. While it continued to claim it was the one-stop site for all pet needs, it never established a reputation as being good at anything other than advertising.Bibliography1. Pets.com Rise and blood of a Pet Supply Retailer by Dr Omar Merlo 2. The Rise and come up of Pets.com Because Pets Cant Buy by Cara L.O Peters (University of Georgia) and Marilyn J. Okleshen (Minnesota State University) 3. Pets.com failu re and its causes http//my-espace09.blogspot.com/2009/01/petscom-failureand-its-causes.html 4. Pet & Pet Supplies Stores Industry Statistics Research Report Anything Research 2010. 5. US Pet Market Outlook Packaged Facts 2009.