Pets.com


Pets.com was a former dot-com enterprise that
sold pet supplies to retail customers. It began operations in August 1998 and closed
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 mascot
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 San Francisco. 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 to liquidation in 268 days. Other similar business-to-consumer companies
from the same period include Webvan and Boo.com. 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, purchasing a majority 54% stake in the company. The CEO of Pets.com said of Amazon’s investment,
“This is a marriage made in heaven”. 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. 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 customers 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. Pets.com made 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 break even point and that it would take a minimum of
four to five 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 was 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 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 the 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 its IPO price
of $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 was declined,
some assets, including its domain, were sold to PetSmart. The Pets.com management stayed during the
liquidation and 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 dot-com disasters in history. 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. The puppet, performed by Michael Ian Black,
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 some of the puppet’s famous lines. The sock puppet toy was the last item available
for order on the Pets.com site at the time of its shutdown in 2000. 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. 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 famous
Crying Indian public service advertisement from 1971, 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. See also
References External links
Pets.com Archive of Pets.com www.barnone.com—website which currently
owns the puppet’s rights “Pets.com, Sock Puppet’s Home, Will Close”
New York Times article “Investors put Pets.com to sleep; Garden.com
wilts”—Internet Retailer “Pets.com is extraordinary!”—Epinions
“Pets.com to finalize liquidation plans”—InfoWorld via the Wayback Machine

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