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Amazon invests in online pet store

Expanding its retail scope, Amazon.com has invested in start-up Pets.com, which describes itself as the largest pet supply company on the Internet.

3 min read
Expanding its retail scope, Amazon.com has invested in start-up Pets.com, which describes itself as the largest pet supply company on the Internet.

The amount of Amazon.com's investment in Pets.com was not disclosed, but Amazon said it will own about 50 percent of the company. Also investing in the pet firm's first round of funding is venture capital firm Hummer Winblad.

Amazon is the top-ranked Internet storefront for books, music, and video, and today it revealed plans to launch a person-to-person auction from its site. Today's investment in Pets.com, which has been transacting business since early November, follows last month's similar deal with Drugstore.com, a newly launched online pharmacy of which Amazon.com owns 46 percent.

"We invest only in companies that share our passion for customers," Amazon CEO Jeff Bezos said in a statement. "Pets.com has a leading market position, and its proven management team is dedicated to a great customer experience, whether it's making a product like a ferret hammock easy to find, or help in locating a pet-friendly hotel."

Earlier this month, Pets.com named Julie Wainwright as CEO. Her last job was as CEO of online video store Reel.com, which was just passed by her new ally, Amazon.com, as the Web's top video outlet for non-adult titles.

In addition to cash, Pets.com will get a front-door button on Amazon's home page, Wainwright said. Amazon also will take a seat on Pets.com's board. The investment is due to close in early April.

U.S. consumers spent $23 billion on goods and services for pets last year, according to the Pet Industry Joint Advisory Council.

Pets.com, founded last year, is being spun off by Web Magic, a Pasadena, California, firm run by entrepreneur Greg McLemore. Web Magic's best-known property to date was Toys.com, which was sold last March to eToys. McLemore still owns some 750,000 shares of eToys, which has filed for an IPO.

Pets.com will move from Pasadena to the San Francisco area, McLemore said, and he plans to relocate too to become Pets.com's senior vice president of business development

Pets.com sells pet merchandise and services, but it is designed to become a "pet portal," said co-founder Eva Woodsmall. It includes chat areas for pet owners, editorial content on pets, a monthly "Pet Lawyer" column, and searchable databases on hotels that allow animals, veterinarians, dog breeders, boarding facilities, and other topics.

"I grew up, figuratively speaking, in a zoo," co-founder McLemore, age 31, jokes. He was surrounded by dogs, cats, iguanas, canaries, and rabbits. As a start-up specialist, however, these days he's limited to a freshwater aquarium.

Wainwright, too, is a pet lover, owning two Yorkshire terriers she picked up while living in London.

"I love the category, I love e-commerce, and I have animals," Wainwright said. "Pets is a big category, and there are no established competitors."

But the pet space is heating up. Wainwright said at least six other start-ups have been circulating business plans to venture capitalists, and Battery Ventures earlier this month led a $10 million initial investment in Oakland, California-based TruePet.com. Publicly traded PetSmart, a warehouse store for pet supplies and services, recently told financial analyst it intends to launch an online store this summer.

"I've never seen so many companies in a category, and they may all get funded," Wainwright said. " I don't think there's room for two. It'll be a bloodbath with huge cash outlays and low margins. It's a tough business."

Despite all that activity, the potential competitor she feared most was Amazon. "The opportunity just got significantly less risky with Amazon in as a partner, not a competitor."