The Failure of


   is one among many other online retailers that failed as a business-to-consumer e-commerce entity. was a San Francisco-based e-tailer existing only as a virtual firm that offered pet products, information, and resources to consumers.  The site was launched in November, 1998 about the same time as several other online firms offering pet products.,,, and were a few of the major competitors in the online pet industry, although had a first-mover advantage being the first of these virtual pet stores to enter the market.  In spite of the rising competition in the online pet market, appeared to be on a road to success in the beginning of 1999.  Sadly, the success never brought profits for the online firm and decided to close its doors in November, 2000 just two years after its launch. offered consumers a broad product selection, large-scale inventory, competitive prices, and expert advice from a staff of pet-industry experts and veterinarians.  It also offered an efficiently designed website that attracted many customers.  One problem with’s business model was that it was not unique and did not offer consumers anything different from the other online pet supplies retailers.  Each of the pet e-tailers could easily be confused with its competition. claimed that it planned to use the money it received from investors in November, 1999 to increase marketing and expand its distribution facilities. hoped to become the “one-stop shop for pet supplies, offering a wider range of products than any of its competitors, including products carrying its own product label” (Wolverton, 1999).  Although along with three of its main online competitors received large sums of venture capital funding to keep it going, the challenge for was to differentiate itself from competitors.  Another problem that faced was that it entered a market of selling low-margin food and supplies that are extremely costly to ship to consumers.  Many consumers just preferred to shop at local discount stores such as the grocery stores where they would be shopping for food anyway. as well as the other online pet supplies firms failed to offer customers a better alternative to what they already had.  Shopping online for these kinds of products was not any more convenient for them than shopping at an actual retail store. had the advantage of owning the most valuable domain name in the online pet market, but its competitors had other advantages.  For example, had brand recognition on which to build its site. received a burst of confidence when it became affiliated with and gained access to Amazon’s powerful database of consumer buying habits.  With the extreme name recognition and popularity of Amazon, had a one-up over other e-tailers in the pet market.  Unfortunately, this advantage was not used to its full potential and continued to lead in online traffic and revenues.  Despite the tough competition, remained in the “dog-eat-dog” online pet market (Wolverton, Nov. 11, 2000) and operated on negative gross margins for months.  This meant that was selling its products at a lower price than what it cost to purchase the products from suppliers.  Although, had lost $7.6 million on its sales since inception, it chose to go public in February, 2000 when it began trading on Nasdaq (Wolverton, Nov. 10, 2000).  When it went public, Amazon’s stake in the e-tailer dropped from 46% to 30.1% (Wolverton, Nov. 11, 2000).

In June, 2000, made the decision to purchase the assets of its rival acquired the customer database, domain name, trademarks, live fish business, and several strategic supplier agreements from (Olsen, June, 2000).  This acquisition did not come as a surprise in the online pet market because consolidation had been expected for a while.  Although’s shares were near an all-time low, executive of were confident in their decision at the time.  “By acquiring these key assets and strategic relationships, we expect to reap the benefits of consolidation and thus strengthen our position as the online pet category leader,” remarked one chief executive of (Olsen, June, 2000). struggled with the fact that they were not making any profit and In September of 2000, the decision was made to move part of its operations from San Francisco to a more affordable location in the Midwest to help decrease operating costs.  The new location had a lower cost of living and therefore, could cut salaries to lower expenses.  Another way that was recovering from its huge advertising expenses was by selling its sock puppet mascot in retail stores.  Over 35,000 puppets were sold in the first month that they were available (Olsen, July, 2000), which was a pleasant unexpected surprise in the new bricks-n-mortar segment. began to show increasing sales revenue, but high marketing costs had driven the stock below its initial trading price had made some major decisions in 2000; it went public in February, acquired in June, entered the bricks-n-mortar segment by selling its puppet mascot in June, and moved part of its operations to a new location across the US in September.  Unfortunately, this is the same year that the e-tailer closed its doors in November. had become the leading online pet store, but after months of trying everything possible to cut costs, recover dwindling stock prices, and attempt to gain some profits, the online retailer saw no better alternative than to shut down business.

The reasons for the closing of relate back to an unsustainable business model and unachievable expectations.  Basically, “bet everything on the market” (Fischer, 2000).  It acquired large amounts of funding from venture capitalists without demonstrating any background of achievements or success which most likely raised the confidence level of executives far beyond what it should have been.  Without any experience, the firm went public only a few months after its initial launch. assumed that the market and its revenues would grow quickly enough to allow for a profit before funding money was exhausted.  Too strong of a focus on market share instead of on gaining profits led to the downfall of  Also, another contributing factor is that this e-tailer may have overestimated the number of online customers it could gain in the pet market. 

Just like numerous other pure-play businesses, went public too soon and spent money too quickly.  One of its major mistakes was the excessive spending on marketing and advertising.  Since funding was continuously available during the beginning months of, they did not think twice about spending everything in hopes of increasing consumer awareness of the business which would hopefully lead to increased sales.  The goal was to outspend competitors and then adjust prices when the competition decreased.  During its lifetime spent more than $70 million on marketing and an average of $400 to acquire each new customer (Bucholtz, 2000). advertised more heavily than any other online pet e-tailer.  Unfortunately, this excessive advertising did not only benefit as hoped for, rather it helped the entire online pet industry to increase sales.  Marketing expenditures did not establish as a market leader, but instead just brought higher revenues to all pet e-tailers. also failed to position itself in an effective manner.  It needed to provide customers with a good reason for its existence and to satisfy a need.  With a few exceptions, just offered products that could be more easily obtained at nearby retail stores and pet information about health, grooming, behavior, etc. that did not justify a virtual shopping trip. failed to compete with a unique positioning strategy but instead decided to compete with low prices just like its competitors.  This mistake led to the selling of merchandise at prices below cost for the duration of its operations.

The online pet market was a crowded one in the time period when was alive.  With so many competitors offering the same products and services to a finite number of consumers, it was no shock that many of these e-tailers failed. never became the sustainable business that it could have been with a meaningful customer base and long-term profitability.  It did have a very valuable domain name, a strong e-commerce affiliate, a very popular mascot, and other clever marketing ideas and strategies, but none proved to be truly successful in the end. along with others in the online pet market chose to enter a market that was not exactly very attractive for e-commerce.  They just offered products that were already readily available to consumers.  Pet supplies just weren’t meant for e-tailing as much as other products because this industry didn’t really serve a real need.  It may be convenient for some people to have pet food and supplies delivered directly to their homes, but is it really convenient when they have to wait days to receive orders and pay shipping costs too?  Another factor was that there was just no way that online pet stores could offer an experience like physical pet stores were able to offer.

This online retail failure story supports the claims made in the article, “No Sale: Plenty of Companies Still Don’t Let Consumers Buy Products Online; Why?”  The costs of doing business online are greater than the benefits for some firms. demonstrated that their benefits of e-tailing did not outweigh their costs because they operated for two years with negative profit margins.  They had to sell products below cost in order to compete, and they failed to recover from their losses.  A large portion of the market for online pet retailers is not presently online.  The article makes the argument that there is no point to go online if a business’s customers don’t do much shopping there.  This is a factor that affected because they were unable to attract enough online customers to reach their goals.  Shipping costs for online sales are also mentioned as a reason for some businesses to avoid the online market. clearly understood that they would be offering low-margin products to consumers for high shipping costs but they decided to launch their business anyway.  Some businesses can be successful even with high shipping costs, but did not have a chance to prove this.  There are many reasons why some firms may not want to enter the online selling market, and the experience of is just one example of many.





Bucholtz, Chris.  “Poor Product Choices Doom E-tiler E-failures.”  VARBusiness.  November,



Fischer, Jeff.  “Why Died.”  November 14, 2000.


Olsen, Stefanie.  “ To Buy Assets of Rival”  CNET  June 13,



Olsen, Stefanie.’s Puppeteer On Strike Against Ad Industry.”  CNET 

            July 26, 2000.


Wolverton, Troy.  “ Lacks Bite on First day of Trading.”  CNET  February

            11, 2000.


Wolverton, Troy.  “ Raises $82.5 Million Today in an Initial Public Offering.”  CNET

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Wolverton, Troy.  “Pet Sites Bark Up the Net Tree.”  CNET  November 3, 1999.