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Posts Tagged ‘dot-com bubble’

#4 – The fall of pets.com

February 19, 2012 Leave a comment

Above was the advertisement for Pets.com, a company that sold accessories for pets to consumers directly though the World Wide Web from 1998 to 2000. As observed, the company had a mascot of a dog-like sock puppet holding on to a microphone. The company’s aim was to sell items your pets might need…“because pets can’t drive.”

Despite its 2 year run, the company was able to grab the public’s attention amidst the abundance of dot-com company appearing all over the web (also known as the dot-com bubble). They had a strong presence in advertising due to their memorable mascot. The puppet appeared on ABC’s Good Morning America, Nightline, Live with Regis and Kathie Lee, and even had a balloon made in its image for the 1999 Macy’s Thanksgiving Day Parade. The video below will show a snippet from the parade (fast-forward to 3:37).

Just like many others, the company was in a rush to get big during the dot-com bubble. Being quick to take actions is fine, but not having a plan could lead them closer to their pitfall. So why or what factors that contributed towards the company’s flop despite all the seemingly appropriate marketing strategies?

Firstly, the company had no sustainable business model. They spent too much on marketing, specifically beyond what was earned on business. As mentioned in the video below, for every dollar earned in revenue, $20 was spent on marketing. Aside from big marketing budget, the company was selling products at low prices eventually causing them to operate at a loss.

Secondly, the company failed due to lack of appeal in terms of benefits that consumers can gain from shopping with them. The only competitive edge that pets.com had was convenience in terms of elimination of travel time to grocery store. However cons such as delivery period and shipping or product cost outweigh the main advantage.

Lastly, the company failed to plan for the long-term as they did for short-term. Specifically, they failed to improve to create better services, information that could be collected from customers. Yes, the marketing campaigns were effective in getting the word out about the company but it did nothing that is essential to sustain a business such as customer’s satisfaction, product loyalty etc.

The main lesson here is that one should not start a business merely catching on the hype. Pets.com learned it the hard way when it jumped onto the bandwagon, without strengthening its business model and having a strong product positioning to give it a competitive edge. Eventually, the company was liquidated like many other dot-coms doing that time period within 9 months of their initial IPO. Maybe if America decided to ask for bailout (pets.com bailout?), things would be different today huh?