Example of an E-commerce Failure and Its Causes--Pets.com

Introduction

One of the example of an E-commerce failure is Pets.com. Pets.com is a dot-com enterprise that sells pets or pet accessories to the customers directly. It starts its operation in February 1999 to provide pet products, information, and resources to customers. The major competitors for pets.com are petopia.com, petsmart.com, and petplanet.com. Pets.com was the first of these pet stores to enter the online pet industry. pets.com is the successful online pet store in the beginning of 1999 but it closed down in November 2000. It is the second Amazon aligned e-tailer to shut down the business.

The causes of Pets.com failure

There are several factors that cause the failure of Pets.com in E-commerce. The main cause is it never brought profit for pets.com since it is having negative gross profit margin. pets.com lost money on every items sold because it sells its product at a lower price than the cost to purchase from the supplier. Therefore, pets.com had suffered $7.6 million loss on its sales.

Second, the shipping cost is extremely costly for customer because pets.com is a market that sells low-margin food and goods. Nowadays, customers would like to shop at discount stores which is near to their location because it is more convenient for them than shopping at online pet stores.

Third, pets.com business model are not unique since there are many competitors which are selling the same products. Also, in 2000, pets.com decided to go into public. However, it went into public and spent money too quickly, causing excessive spending on marketing and advertising costs.

Lastly, cost of doing business online are high because they tend to sell products below cost in order to compete with competitors. However, they still can't recover from their losses.

http://pets.com/