With a URL like Pets.com, you’d think that the company would be an overwhelming success. Its start and ultimate demise certainly attracted the spotlight, a lawsuit, and recognition as a textbook example of a dot-com disaster. It was an ambitious venture for the time, gaining investors and national attention. It even had a sock puppet mascot you couldn’t help but love. So, what happened to this website? Let’s find out below.
The Birth of the Internet
It’s helpful to understand the rise and fall of Pets.com by reviewing the history of the Internet. The concept had existed since the 1960s, primarily for communication between researchers and the government. On January 1, 1983, the path was opened with the adoption of standard protocols. Many credit Sir Tim Berners-Lee with creating the so-called World Wide Web in 1994.
The Rise of Pets.com
The dates are essential for understanding the risks that Pets.com founder Greg McLemore was taking at the time when he launched the site on November 4, 1998. Remember that shopping was a strictly brick-and-mortar venture. McLemore was proposing an entirely online enterprise for pets. There were other players on the Internet, most notably Amazon.com, since July 1994.
Things moved rapidly for McLemore and Pets.com. The company filed its Registration of Securities on February 8, 2000. Interestingly, Amazon.com was an early investor in Pets.com. Whereas the former invested in its online infrastructure and acquired tech talent, the latter was already feeling the pinch with others in its niche, such as Petstore.com, which it subsequently bought. Things looked bright, for a moment.
Chinks in the Armor
The situation took an ugly turn in April 2000 when comedian Robert Smigel sued Pets.com over the likeness of its sock puppet to his Triumph the Insult Comic Dog. Pets.com responded in kind. The case was eventually dismissed, but the negative publicity exposed the company to even more financial hardship.
Remember that the pet market was quite small at the time and certainly not the $123.6 billion industry it is today. Pets.com invested heavily in advertising and its brand. Cash flow would loom as more than an obstacle even when the company hoped to raise $100 million as its initial public offering. It managed to raise $82.5 million at $11 a share.
To its credit, Pets.com was thinking outside the box when it adopted Broadbase Software applications to understand its consumer base better. Ironically, the personalized shopping experience is one of Amazon’s greatest strengths, with 55% preferring the site and this focus. Pets.com also branched out into animal welfare causes. Unfortunately for Pets.com, it was too little, too late.
The Demise of Pets.com
Pets.com was on life support in the summer of 2000. Logistics and a narrow niche market threatened its survival. Lagging sales and skyrocketing operating costs would take their toll despite cost-saving measures. The death knell came on November 9, 2000, leaving 255 of its 320 workers without a job. The dot-com bubble had claimed the once-rising star.
Tuesday Morning Corporation purchased Pets.com’s assets and the endearing sock puppet. The final liquidation came on June 22, 2004. Keeping $10,000 to handle any lingering expenses, Pets.com paid a mere $0.00747 per share to its remaining investors.
The Legacy of Pets.com
Today, Pets.com stands as a lesson of what to do and what not to do as a dot-com enterprise. In some ways, it was ahead of its time. However, it’s also evident that the company was swimming in uncharted waters, evidenced by its ever-increasing operating costs and lack of a sound business plan. Ironically, PetSmart.com owns its domain name, which is probably the former dot-com’s greatest value.
Pets.com followed a similar path as many small companies did in the early days of e-commerce. Its vision far exceeded reality. It took a 2-year pandemic to boost online sales to its $26.7 trillion global revenue in 2020. McLemore’s vision wasn’t misguided. It was simply not backed by knowledge or business savvy.
Featured Image Credit: nakaridore, Freepik