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Pets Com Inc Rise And Decline Of A Pet Supply Retailer Case Solution
Pets.com’s temporary success in the “information revolution” makes for an intriguing case study. After its inception in 1998 as an online retailer of pet products, the company seemed well-positioned to capitalize on the US pet industry that was worth more than $23 billion according to the Pet Industry Joint Advisory Council. Considering America’s obsession with pets and Pets.com’s solid brand image, the only trajectory the company could take in the presence of CEO Julie Wainwright was upwards as per outsiders. The rising demographic using the internet and increasing consumption duration paved the way for Pets.com to establish itself as the go-to pet supply retailer. A seemingly remarkable partnership with Amazon.com followed with a $50 million investment by Wainwright in 1999, and an expected competitive edge over all its competitors painted an optimistic picture for Pets.com. However, Pets.com Inc. failed to live up to these expectations and eventually dissolved after just 9 months as a firm. It is worth assessing how Pets.com’s aggressive strategies led to its eventual downfall and what CEO Wainwright and other employees involved could have steered the pet company clear of disaster.
Case Analysis for Pets Com Inc Rise And Decline Of A Pet Supply Retailer
After Wainwright assumed the role of CEO for Pets.com, she identified the imminent threat posed by Amazon.com, a company dominating the dotcom race, and considering the possibility of entering the pet industry with its abundant financial resources and unrivalled brand name. Having identified the potential of this move occurring, Wainwright approached Amazon.com offering company shares in the pursuit of forming a mutually beneficial alliance. Jeff Bezos purchased 54% of Pets.com’s shares because of this move, a massive boost for Pets.com which could now take advantage of Amazon.com’s experience and strategic assets. This move had several major upsides such as Pets.com’s improved credibility, reputation, increased market share via Amazon’s remarkable supply chain structure, strengthened business ties with customers, additional capital for business expansion, and increased financial stability.
On the flip side, Pets.com’s collaboration and overdependence on Amazon’s business networks left it vulnerable to the danger posed by other competitors in the pet industry such as Petopia.com, PetSmart.com, and Petstore.com. Pets.com committed a substantial amount of capital on developing its product selection while neglecting other factors of competition including pricing which later cost the company heavily. Rivals such as Petopia.com and PetSmart.com on the other hand diverted their attention and resources towards obtaining significant sales which were essential for sustainable growth. They were able to utilize their brick-and-mortar stores to establish long-lasting customer relationships and foster an environment of customer loyalty that Pets.com just couldn’t match with its online services. The competitors also possessed well-established websites that were promoted to in-store customers on a daily basis, enabling them to make use of printed receipts to advertise their e-commerce websites for the purpose of online ordering.
Pets.com’s marketing mix proved to be highly problematic for the company, with the company aiming for adopting an aggressive communication strategy in its pursuit of achieving its strategic objectives. The company invested heavily in advertising its products through radio, TV, print, and the company’s own magazine. The company’s attempts were met with a noticeable positive reaction from its target population, as people were drawn towards the prospect of acquiring products from Pets.com. However, this policy of aggressive communication increased the cost of customer acquisition by a factor of 5, from a meagre $80 to a whopping $400 per customer. This led to massive financial losses for the company as it was unable to manage its finances.
Furthermore, Pets.com’s marketing mix involved a penetration pricing policy, which turned out to be a massive reason for the company’s eventual demise. In comparison with brick-and-mortar pet shops, Pets.com’s pricing was fairly cheap and affordable for the masses. The company aimed at raising revenue as rapidly as possible, and even resorted to selling some of its products at prices below the relevant costs incurred. This coupled with low initial demand and fierce competition from other pet supply retailers led to the company abolishing shipping charges quite often, in order to lure customers with low prices. A shortage of warehouses on the east coast of America provided further damage to the company’s finances, as transportation of pet products and shipping was expensive through air freight. While Pets.com’s competitors ventured into international markets to diversify their sources of revenue, the company wasn’t keen on broadening its horizons.
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