Posted by: Tiffany Suk Han | June 20, 2009

An Example of E-Commerce Failure and Its Causes

The Tragedy of Pets.com’s Quick Fall

SPACE

Pets. Com is a one of a kind dot-com enterprise that sold pet accessories and supplies directly to consumers over the World Wide Web. When it was launched in August 1998, the company rolled out a regional advertising campaign using various Medias like the TV, print, radio and even a Pets.com magazine!

As a result, the company managed to successfully turn its mascot, from being an unknown sock puppet, into something so famous that it appeared in a multimillion-dollar Super Bowl commercial and as a balloon in the Macy’s Thanksgiving Day Parade!

pets.com sock puppet

They even captured the public’s attention with a creative answer to the question:

“Why should you shop at an online pet store?”

“Well, because pets can’t drive!”

That ad was ranked #1 by USA Today’s Ad Meter and had the highest recall of any ad that ran during the Super Bowl.

Despite its success in building brand recognition, the company was overconfident in estimating the potential market that existed for Pets.com. Shockingly, during its first fiscal year, February to September 1999, Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising! Moreover, Pets.com was also too ambitious, it was selling merchandise for approximately 1/3 the price it paid to obtain the products, and also tried to build a customer base by offering discounts and free shipping  for products that only offer 2 – 4% of profit margin.

Besides, no matter how ‘cute’ or possibly ‘annoying’ the sock puppet was, Pets.com was never able to provide pet owners a convincing reason to buy supplies online. Basically, a customer had to wait a few days to actually get the products they ordered. So, why not buy from the grocery store nearby without having to wait for days??

Guess those were the reasons why Pets.com, after bursting to life to deliver on the promise of e-commerce, closed its business the same year it went public. One weird thing is, although sales surged enormously from attention gained by the commercials, the company was weak on its fundamentals and actually lost money on most of its sales.

Therefore, one valuable dot-com lesson learnt from this Pets.com incident:

“Advertising, no matter how clever, CANNOT save you. “

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Responses

  1. good~ informative


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