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Amazon takes majority stake in Pets.com

The online pet store gets $50 million in its second round of financing, with Amazon getting a 54 percent stake.

3 min read
Amazon.com has taken a majority stake in Pets.com as a part of the online pet store's latest round of funding.

Pets.com announced today that it raised $50 million from Amazon, Bowman Capital, and Hummer Winblad Venture Partners in its second round of financing. Although neither Amazon nor Pets.com would say how much Amazon alone invested in the company, an Amazon spokesman said the Amazon now owns 54 percent of Pets.com.

Amazon bought a nearly 50-percent stake of Pets.com in March during the company's first round of funding. Hummer Winblad also participated in that round of financing. Pets.com did not reveal how much either company invested in that round or the size of the overall investment.

Pets.com chief executive officer Julie Wainwright said the money from the latest round of funding will be used to build the Pets.com brand. Pets.com plans to launch a major online and offline marketing campaign in two months, Wainwright said.

The funding will also be used to help expand the company's offerings, she said. Pets.com recently opened its first distribution center in San Francisco. The company offers some 6,000 different items and Wainwright said the company plans to double that number by the end of the month.

"This gives us the financial strength to execute our plan," Wainwright said.

Amazon spokesman Bill Curry said the Pets.com investment fits into the company's overall strategy of trying to be the leading e-commerce site. However, Curry declined to say whether the company had any plans of folding Pets.com into Amazon's larger site.

Curry said Amazon's investments in Pets.com, drugstore.com and HomeGrocer.com offer an "improvement in customers' lives" by allowing them to save time by shopping online instead of having to go to brick-and-mortar stores.

"That's the appeal to us," Curry said.

But Forrester Research analyst Evie Black Dykema suggested that Amazon would be getting more of a return on their investment than just happy customers. Every investment Amazon has made has helped them to better understand online consumers, Dykema said.

She added that information about pharmaceuticals customers at Drugstore.com and pet products' customers as Pets.com allows Amazon to "get up close and personal" with consumers.

"Amazon is developing an incredible database on consumer psychographics and this is another great insight into the mind of the consumer," she said.

Amazon's Curry declined to say whether the company would be getting data from Pets.com. But Wainwright of Pets.com said that while the pet store will not give data on individual customers to Amazon, it already is talking sharing some of its aggregate data with the e-commerce giant. Wainwright suggested that the two companies would be learning from each other.

"They have an open-door policy with us and we with them," she said.

Jupiter Communications analyst Mike May suggested that Amazon's investments in Pets.com, HomeGrocer.com and drugstore.com would give the company something else: regular entry into people's homes.

Wainwright said that in the near future, Pets.com customers will be able to sign up to have items like pet food and kitty litter delivered to their homes on a regular basis. May said that Amazon could use that regular contact with customers to sell them other products.

"If you have an ongoing dialog with a consumer, it's much easier to sell them books, music and videos," May said.

May added that the subscription strategy was similar to record and coffee clubs in the real world that regularly deliver products to customers.

"It's a model that exists offline. With the right technology and marketing, there's no reason to suggest it won't exist online as well."