Pets.com is a former dot-com enterprise that sold pet supplies to retail customers. It began operations in February 1999 and folded in November 2000. A high profile marketing campaign gave it a widely recognized public presence, including an appearance in the 1999 Macy's Thanksgiving Day Parade and an advertisement in the 2000 Super Bowl. Its popular sock puppet advertising spokespersonality was interviewed by People magazine and appeared on Good Morning America .
Although sales rose dramatically due to the attention, the company was weak on fundamentals and actually lost money on most of its sales. Its high public profile during its brief existence made it one of the more noteworthy failures of the dot-com bubble of the early 2000s. US$300 million of investment capital vanished with the company's failure. The company was headquartered in Emeryville, California, U.S.
History
Pets.com was a short-lived online business that sold pet accessories and supplies direct to consumers over the World Wide Web. It launched in August 1998 and went from an IPO on a major stock exchange (the Nasdaq) to liquidation in 268 days. Other similar business-to-consumer companies from the same period include Webvan (groceries), and garden.com (garden supplies).
After its start by Greg McLemore, the site and domain was purchased in early 1999 by leading venture capital firm Hummer Winblad and executive Julie Wainwright. Amazon.com was involved in pets.com's first round of venture funding. Pets.com bought out one online competitor, Petstore.com, in summer 2000.
The company rolled out a regional advertising campaign using a variety of media (TV, print, radio and eventually a Pets.com magazine). It started with a five-city advertising campaign rollout and then expanded the campaign to 10 cities by Christmas, 1999. The company succeeded wildly in making its mascot, the Pets.com sock puppet, well known. The Pets.com site design was extremely well received, garnering several advertising awards. In January 2000, the company aired its first national commercial as a Super Bowl ad which cost the company $1.2 million and introduced the country to their answer as to why you should shop at an online pet store: "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. The company went public in February 2000; the former Nasdaq stock symbol was IPET. It was the last dot-com to go public before the bubble burst.
Pets.com did make significant investments in infrastructure such as their warehousing. Pets.com management maintained that the company needed to get to a revenue run rate that supported this infrastructure buildout. They believed that the revenue target was close to $300 million to hit the breakeven point and that it would take a minimum of 4 to 5 years to hit that run rate. This time period was based on growth of Internet shopping and the percentage of pet owners that shopped on the Internet.
Despite its success in building brand recognition, it is uncertain whether a substantial market niche existed for Pets.com. No independent market research preceded the launch of Pets.com. During its first fiscal year (February to September 1999) Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising. Pets.com lacked a workable business plan and lost money on nearly every sale because, even before the cost of advertising, it was selling merchandise for approximately one-third the price it paid to obtain the products. Pets.com tried to build a customer base by offering discounts and free shipping, but it was impossible to turn a profit while absorbing the costs of shipping for heavy bags of cat litter and cans of pet food within a business field whose conventional profit margins are only two to four percent. The company hoped to shift customers into higher margin purchases, but customer purchasing patterns failed to change and during its second fiscal year the company continued to sell merchandise for approximately 27% less than cost, so the dramatic rise in sales during Pets.com's second fiscal year only hastened the firm's demise.
By fall of 2000, and in light of the venture capital situation after the bursting of the dot-com bubble, the Pets.com management and board realized that they would not be able to raise further capital. They aggressively undertook actions to sell the company. PetSmart offered less than the net cash value of the company, and Pets.com's board turned down that offer. The company announced they were closing their doors on the afternoon of November 6 , 2000 , mere hours before the 2000 United States presidential election. Pets.com stock had fallen from over $11 per share in February 2000 to $0.19 the day of its liquidation announcement. At its peak, the company had 320 employees, of which 250 were employed in the warehouses across the U.S. While the offer from PetSmart.com was declined, some assets, including its domain, were sold to PetSmart.com.
The Pets.com management stayed on to provide an orderly wind down of operations and liquidation of assets. During this period, CEO Julie Wainwright received $235,000 in severance on top of a $225,000 "retention payment" while overseeing the closure. In June 2008, CNET named Pets.com as one of the greatest dotcom disasters in history.
The Pets.com sock puppet
Pets.com hired the San Francisco office of TBWA\Chiat\Day to design its advertising campaign. The firm had recently created the popular Taco Bell chihuahua. For Pets.com they designed a doglike sock puppet that carried a microphone in its paw.
Pets.com had one massive marketing success: its advertising icon, the unnamed Pets.com dog. The puppet, performed by Michael Ian Black (an alumnus of MTV's surrealist comedy sketch show The State ), was a simple sock puppet with button eyes, flailing arms and a stick microphone emblazoned with 'pets.com'.
As the puppet's fame grew through 1999 and 2000, it gained almost cult status and widespread popularity. The puppet made an appearance 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. In addition to the media appearances the Pets.com puppet made, merchandising was also done for the company including clothing, other trinkets, and a retail version of the sock puppet that delivered five of the puppet's famous lines (shown above).
As Pets.com's recognition began to grow, it attracted the attention of the creator of Triumph, the Insult Comic Dog. Representatives from Robert Smigel sent letters, including a cease and desist demand, to Pets.com claiming that the puppet was based on Triumph. Pets.com responded by suing Smigel in California, its home state, to prevent Smigel from suing in New York. The press mistakenly assumed that Pets.com had complained first, leading to negative publicity.
The publicity surrounding the Pets.com puppet, combined with the company's collapse, made it such a symbol of dot-com folly that E*TRADE referred to it in an advertisement during the 2001 Super Bowl. The commercial, which parodies the Crying Indian announcement, shows a chimpanzee riding on horseback through a ruined dot-com landscape. The chimpanzee comes across a company named "eSocks.com" that is being demolished and weeps when a discarded sock puppet lands at his feet.
After the company folded, Hakan and Associates and Bar None, Inc. purchased the rights to the puppet under a joint venture called Sock Puppet LLC for $125,000. Bar None, Inc. an American automotive loan firm rebranded the microphone to say 1-800-BAR-NONE and gave the puppet a new slogan: "Everybody deserves a second chance." Bar None shot multiple commercials with the sock puppet.
Notes
- ^ "Contact Information." Pets.com. Retrieved on October 4, 2009.
- ^ A Startup's Best Friend? Failure
- ^ a b c d e f g h i j k Kirk Cheyfitz (2003). Thinking Inside the Box: The 12 Timeless Rules for Managing a Successful Business . Simon & Schuster. pp. 30-32 . http://books.google.com/books?id=mn_xucBVwzcC . Retrieved 2009-04-22 .
- ^ Matt Haig (2005). Brand failures: the truth about the 100 biggest branding mistakes of all time . Kogan Page Publishers. pp. 188-191 . http://books.google.com/books?id=6o7SrLdgx8gC . Retrieved 2009-04-22 . ...
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