Pets.com Case Analysis Essay

INTRODUCTIONIn this report I pass on analyse courts.coms minuscule lived success as the Statess number superstar online supplier of positron emission tomography foods supplies and accessories. I allow for overly identify what actually went wrongfulness and present a refreshed offensive commercialise placeing dodge to the board of the company. It was unbelievable how a public listed company direct by some of the worlds best line of credit executives, draped by all the bullion that any company in the world would envy, partnered with the worlds number single e-commerce company and became Americas ducky industry icon bottom lose e genuinelything in less than two geezerhood after its first introduction.In my opinion some of the major factors that contri onlyed to courts.com failure were 1. Bad strategical decisions make by the previous leadership including underestimating the cost of operations and overspending on marketing. The man agement was so obsessed grabbing th e market sh atomic number 18 scarce at the comparable m losing their think altogether on their actual conclusion and objectives, which is generating revenue for the company and become profitable to ensure sustainability.2. Despite its success in building grease recognition, Pets.com overestimated the market trend and power of the meshing. They were also overconfident in estimating the market real potential and riskiness due real shallow and weak market research. When both angiotensin converting enzyme was rushing to jump onto the internet e-commerce guaranteed-for-success bandwagon, Pets.com did non puddle pet business was non that simple but in fact more than complicated equald to selling books and clothes online. After all the costly marketing promotions and advertisements, overnight popularity, having the or so complete online harvest-feast set upings and current technology at their disposal, lifelessness in the end Pets.com failed to show much added value an d differentiators in the eye of the customers.3. Completely ignored the power of conventional brick and mortar business model. Pets.com failed to understand their rivals strengths and weaknesses well. Better customer care, consolatory personal pastureping experience and fast obstetrical sales talk are some of the advantages bodily stores had over online pet portals. Pet witnessers appreciation of these traditional values affected typical pet-owners readiness and willingness to completely aban gain their affable and trusted around-the-corner neighbourhood pet store.COMPETITOR ANALYSISThe previous company did not bring up a good proposal in opposing its competitors. It was so obvious that they ignored the fact that traditional pet store was really much controlling the pet food and supplies market. Underestimating the strengths and advantage of their more traditional brickand-mortar based rivals like Petstore, Petsmart and Petopia was the first biggest mis gain they had done.C ompetitor AnalysisPetopia.com1. Heavily funded by Petco, market leader in pets accessories and supplies industry 2. Well established physical stores electropositive e-commerce business model 3. Leverage on Petcos good and well known reputation as supplier of musical note pet products and its fealty to puppet care.4. Petopia will gain invaluable access to Petcos extensive network of chain stores which two companies idler cross-promote each separatea. Have nationwide coverage with 465 chain stores all over US b. Strong international presence with 100 stores globally5. Potential Pes.com future international expansion thru strategic alliance with another major investor Groupe Arnault (linked to renowned LVHM Moet Henessey Loius Vuitton) PetSmart.com1. Already a successful brick and mortar business on its own right. Considered as Petcos main brick and mortar competitor2. Joint venture with e-commerce entrepreneur summit Gross of Idealab become direct competition to Pets.com- ama zons team up.3. Well established physical stores plus e-commerce business model 4. Strong back-end warehouse and delivery systems with already 500 stores nationwide and 100 foreign US.5. Strong cross out name, marketing clout, close vendor relationships andefficient product portfolios and fulfilment systems that would greatly benefit their online business. Petstore.com1. Funded by venture capital firm Battery Ventures2. Rely entirely on the power of e-commerce. work on on the same business model as Pets.com, establish a leadership position with form killer domain name 3. Just like Pets.com, Petstore relied heavily on advertize and promotions 4. No physical store establishmentAt the end of the day, after the big dotcom bubble burst, only Petopia (now owned by 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 unshakable back-end war ehouse backing and chains of physical stores that in the end tame distribution costs, storage, ensure acceptable delivery period and value-add traditional shopping experience and rapture. Unlike the two, Pets.com and Petstore.com relied entirely on the internet of which afterward compromised basic pet owners needs and customer satisfaction.2. Pets.com and Petstore relied heavily on funding from venture capital firms term Petopia and PetrSmart already deem strong infrastructures and customer network they can al slipway 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 becoming dotcom bubbles biggest casualty.It is very important for us to re-align our goal and strategically repositions ourselves in this industry. The following SWOT analysis shall analyses our differentiate strengths and weaknesses.Pets.coms SWOT AnalysisSTRENGTH1. Huge cash to spend. Heavily funded. Backed by Ama zon.com. 2. post 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), breakthrough TV network (Animal Planet) and association with the American Veterinar Medical Foundation can be a very strong network positioning strategy.4. Pets.com is the most recognizable domain name, mellowedly visible website with most panoptic website content and best design. Pets.com website is so popular in the internet and mainstream media that at one time becomes the most shout outed pet supplies website in the world.5. nearly agonistical hurt and service offerings (plus free delivery). Able to offer quality products of which becoming todays key plus factor to the passionate middle-class and high income pet owners.6. Largest stock keeping units (SKUs) in America to ensure reliable supply and on time delivery to customers.WEAKNESS1. Competitors offer similar products. Pets.co m still could not find key market differentiator. 2. Huge mind-set on online marketing and promotion. Specialized team to maintain up-todate and latest website content and information may aim 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. Re obligation and security on the internet can halt and even destroy online business almost overnight.6. High transportation costs and insurance liability due to free delivery policy to customers regardless location7. Geographical factors, warehouse location and place may result 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. Can 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. invoke cost and time saving.6. Average American pet owners are economically stable. Price is not a big issue. 7. Develop 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 inappropriate 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 terms6. Internet customer problematic experience, unfavourable comments and reviews can sabotage any 3online business that is not ready and fully prepared7.Growing e-commerce safety concerns can influence internet users to exclusively browse and shop at competitors outlet8. Competitors physical stores at almost US neighbourhoods-providing more gay approach (touch and feel) and faster delivery time9. Hard habit to break-still some pet owners prefer visit local 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 companys survival and relevancy. consort to study reports by The NPD Group, Inc. and Media Metrix (NASDAQ MMXI), 75% of pet owners who access the Internet are aware of online pet stores, up from 55% in September 1999. Twenty-seven percent have shopped at an onlin e pet store, term 14% made an actual leveraged at an online pet store.Study confirms that almost three times as many pet owners become aware of online pet stores from television advertising compared to last stratum, while fewer are learning somewhat sites from surfing the Web. Though television advertising in the category is growing, consumers are still more likely to find out about pet e-tailers from some online source, such as clicking on a banner ad or direct link from another site.The good news 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 experience. More than two-thirds reported being very satisfied (68%), up from just over one- half(a) in September of 1999 (53%). The majority of consumers who have shopped at pet store sites verbalise they are likely to shop again in the next 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 US53billion a year marketplace. Worldwide estimates run about $51 billion, 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 firm shopping list with Pets leading with USD23 billion a year, Toys US21billion a year. medicinal drug recording US13 billion a year and Retail books at US 12 billion 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(prenominal) one pet and 40% own more than one pet. Statistics in 1999 shows 53 million are dogs and 59 million are cats.2. American families with children age 5-15 likely to ow n pets and families with children younger than 18 will grow over the next 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 bounds.5. Most pet owners buy on impulse during regular shopping trips and they are less price metier 6. US pet owners sought veterinary 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% per annum 7. By mid 1990s supermarket pet food began losing market share amid growing concern for pet welfare and nutrition. Non-premium low nutrie nt levels supermarket brands hold 55% of market share mostly thru grocery and lash-up stores. They anyhow demonstrate slow annual tuition and small gross margins. Premium levels on the other hand promote healthier 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 topographic point 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 victimization internet worldwide. By 1998-60% households 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 reasons why they buy online was convenience but experts claim it is limited to small market only and it is also outweighed by higher costs and longer waits.THE MARKETING OFFENSIVEWhen more than one company offers the same kind of product, each company only receives a lot of all sales of that kind of 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 mu st(prenominal) not deny 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 people development and customer careb. Ability to make-up for low sales volumec. Wasting less notes on expensive 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 pronto available products for easier delivery or for exchanges 3. Redo pricing structure for more competitive pricesa. Make profits on the product not on the inflated shipping costs b. Pets.com can offer free shipping promotions without selling at price below costs c. Consumers authorization on Pets.com product q uality 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. Introduce 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 specific 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, poor market understanding and research, underestimatingtraditional rivals and overestimating the power of internet. It was a classic case 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 respect would happen. Pets.com was an early entry in the immature online shopping industry and was uncertain whether a substantial market niche even existed. No independent market research preceded the launch of Pets.com. Instead, the management chose a take grab strategy focused on increasing its market share then 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 seed cash 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 Septemb er 1999) Pets.com earn 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 only 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 almost 1/3rd the price it paid to obtain the products. During its second fiscal yea r 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.Bad strategic objectives. A scrambled mess of things to accomplisha dogs dinner of goals. A long list of things to do, often mislabeled 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 cascade 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 numerous 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 pillar advi ce from veterinarians, animal lawyers, breeders, scientists, and pet experts3. Extend its brand offline in the Pets.com print magazine4. Develop 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 unquestionable a solid business model focused on being profitable and generating sustainable returns. tout Superficial abstractiondesigned to mask the absence of thought. According to analyst Jacques Chevron, Pets.com failed to give its prospective customers a reason for its existence. Its tongue-in -cheek advertising claim (Because pets dont drive) seemed like anadmission of its deficiency 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 ancestry of a Pet Supply Retailer by Dr Omar Merlo 2. The Rise and Fall of Pets.com Because Pets Cant sully by Cara L.O Peters (University of Georgia) and Marilyn J. Okleshen (Minnesota State University) 3. Pets.com failure 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.