1 / 15

Petstore Chapter 4, Case 2 - PowerPoint PPT Presentation

  • Uploaded on Chapter 4, Case 2. internet. business models. text and cases. Steven Young COS498. Overview of Introduction. Introduction offered pet food and supplies online.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about ' Petstore Chapter 4, Case 2' - jolie-hall

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

Chapter 4, Case 2


business models

text and cases

Steven Young COS498

Overview of petstore com introduction
Overview of Introduction


  • offered pet food and supplies online.

  • The pet supply business is huge, bigger than books, toys, music, and videos (but not as shipping friendly).

  • The U.S. market for pet food, supplies, and gifts was over 19 Billion in 1999

  • Gross product margin 37 – 43% (gift, novelty, and fish as high as 70%)

  • In 1999, were in fierce competition with three other major players in the pet supply business for partners, customers, and credibility for potential investors (,, and

Overview of petstore com mission and vision
Overview of Mission and Vision

“All things Animal“

  • Shopping

  • Community

  • Directory and resources

  • Educational and entertaining content

    Establish a leadership position through innovation which caters to the “emotional bond that exists between people and their pets,"

Overview of petstore com history
Overview of History


  • is based in Emeryville, CA, and was created in October 1998 by a seasoned founding team with more than 50 years of combined experience in technology, Internet businesses and the pet industry.

  • launched in May of 1999

  • The first major online retailer offering full line pet food and supplies

  • Invested 40 Million in customer acquisition advertising in 1999

  • Partnered with the Discovery Channel’s Animal Planet in 1999

    Partnership with Discovery Channel was:

    • Positive in that Animal Planet is a well established brand name (with 10 Billion in net equity value)

    • Problematic in that the merger will reduce flexibility, and there is a possibility of the customer getting “lost” in the Discover site.

  • has been named by USA Today as a "Hot Site of the Day" and received top marks from



  • To become the dominant provider of pet products and services over the internet.


The company adopted the following strategic objectives:

  • Offer complete pet care solutions to customer needs

  • Provide a superior customer experinence

  • Built strong brand identity by:

    • establishing exclusive or semi-exclusive relationships with portals such as Yahoo and Lycos, as well as targeted websites (

    • Communication with potential customers through opt-in emails

    • Off-line advertising in top 20 internet-pentrated markets

    • Ongoing public relations campaigns

    • Capitalize on association with American Animal Hospital Association (AAHA) an umbrella organization of over 6,000 veterinary clinics.

  • Strengthen and expand strategic partnerships (Discovery channel)

  • Build a sustainable business model

  • Maintain technical leadership

The facts value proposition
The FactsValue Proposition

Value proposition

  • To provide efficient one-stop shopping for all of your pet care needs while providing highest quality customer service.

The facts competitors
The FactsCompetitors


Grocery stores (supply approximately half of the pet food market)

  •,, and

    All three others entered strategic partnership in 1999.

    • getting $55M in equity from Hummer, Winblad, and (who funded 50% of this.

    • Petsmart (the leading brick and mortar pet supply company w/7% share) merged its online business with, andPetopia received a major equity investment from Petco (the #2 brick and mortar chain w/3% share).

The facts economics revenues
The FactsEconomics / Revenues

Industry Economics

Pet food market 12.1 Billion in 1999

  • 52% dog food

  • 40% cat food

  • Premium foods 30% of market

    Pet supplies market = 4.5 Billion in 1999

    Pet-related gifts / novelties = 2.5 Billion in 1999

    Online market for pet food and supplies = 3-6 Billion

    Petstore run-rate of $3M for year, w/gross margin of 52%

Primary stakeholders
Primary Stakeholders

Discover Channel (Animal Planet)

Joshua Newman, President and CEO

  • Harvard MBA, former CEO and Marketing Director, Amerigon

    Chris Luhnow, Senior VP, Corporate Development

  • Wharton MBA, former President and CEO of Flightways Manufacturing

    Brian Sherman, VP Merchandizing

  • Stanford MBA, founder of Sammy’s Pet World (largest pet store chain in San Francisco)

    Mark Reilly, VP Inventory Management

  • Stanford MBA, former VP of Inventory Control and Merchandising Planning at Petco

Gbf analysis winner takes all
GBF Analysis - Winner takes all?

Network Effects

  • None

    Economies of Scale

  • Yes, and high profit margins

    Customer Retention Rates

  • Low

Gbf analysis
GBF Analysis

This is a hard business to capture market share, especially because…

  • pet foods are the biggest ticket, of which…

  • dogfood comprised over 50%... and

  • dogfood is heavy and bulky (therefore hard to ship efficiently)

Gbf analysis1
GBF Analysis

  • $40 Million in advertising / 100,000 unique customers = $400 unique customer acquisition cost

Success or failure
Success or Failure?

The goals and strategy failed as was bought out by in June of 2000

  • gave Petstore stockholders 6.61 million shares of stock, worth $13.6 million at $2.06/share.

  • received:

    • $3 million cash infusion from Petstore investors, largely Discovery Communications Inc.

    • Petstore's list of 100,000 customers (not duplicated in,

    • Petstore's live-fish business, called Flying Fish, and

    • key marketing partnerships.


  • went out of business in November of 2000

  • (going strong)

    • $3.36 billion total sales for 2004

    • Two year comps of 13.3%

    • Services sales up nearly 24-1/2 %

    • Opened 83 net new stores

  • now operating under


    The only players left were the #1 and #2 brick and mortar businesses!