Online pet stores throw shoppers a bone

Engaged in trench warfare with well-funded opponents--each bearing confusingly similar names--the stores turn to promotions to stand out.

4 min read
Engaged in trench warfare with well-funded opponents--each bearing confusingly similar names--the online pet stores have turned to gimmicky promotions to rise above the fray.

Pets.com, for example, has launched an offline, self-titled magazine that it is distributing to veterinary offices and pet shelters. Playing off the star of its popular television ads, the San Francisco-based company has also begun selling sock-puppet paraphernalia on its site.

PetSmart.com and Petopia.com each have opened up Valentine's Day stores to help owners find gifts for their pets. Countering the promotional content, Petstore.com seeks to lure customers with free shipping on orders of less than 50 lbs.

But industry analysts say the barrage of marketing efforts may not be enough to distinguish one from the next.

"There are too many of them; you can't tell them apart," Barry Parr, e-commerce analyst at International Data Corp. said. "I think there's just an incredibly difficult branding problem that these guys have when their names are indistinguishable."

Unlike computer hardware or books, the online pets-supplies industry is a nascent market, one that e-commerce leader Amazon.com jump-started early last year when it bought a stake in Pets.com. Since then, Petstore.com has teamed up with cable network operator Discovery Communications; offline pet supply giant PetSmart has launched its own online store; and offline store Petco has teamed up with Petopia.com.

In addition to the partnerships, each one of the sites has raised tens of millions in venture funding.

The investments and multiple

Sound alike?

brick-and-mortar deals have the fur flying. Pets.com and PetSmart have already launched major television-based advertising campaigns. Meanwhile, Petstore.com and Petopia plan to build their brands with the help of their offline allies.

PetSmart.com and Pets.com's forays into advertising seem to have bought them a lead in the space but not any kind of dominance. According to Internet data firm Media Metrix, each of the top four pet sites had more than 1 million unique visitors in December. PetSmart.com led the pack with 1.75 million unique visitors, and Pets.com was the runner up with 1.17 million.

PetSmart.com has been helped by its relationship with its brick-and-mortar parent, said Mark Siegel, the company's director of marketing. Because consumers recognize the PetSmart name, the company's online store has become the default place to go for people looking for pet supplies online, he added.

Despite this advantage, the company has turned to online and offline promotions to boost traffic and sales, Siegel said.

"We understand that there is some confusion in this category," he said. "We want to make sure that if people visit us, we're going to give them a strong reason to stay and come back."

The battle being fought right now is over acquiring customers, said Steve Reinhardt, vice president of marketing for Petstore.com. In the past, a company could win the battle by sinking $100 million into an advertising campaign, Reinhardt said, but today companies must have the right mix of advertisements, promotions and site design. Free shipping is just one of a number of promotions that the Emeryville, Calif.-based Petstore.com is experimenting with right now to draw those customers in, he added.

"We're continually experimenting with a lot of different offers," Reinhardt said. "What we are doing is constantly looking for the sweet spot."

CNET TV: Pet stores online
CNET TV: Pet stores online

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Of all the pet sites, Pets.com is the one that seems to have found a sweet spot with its popular advertisements and other marketing moves, Jupiter Communications analyst Meredith Medland said. Pets.com should also benefit from its relationship with Amazon.

"That puts them in a key position," Medland said. "The future looks strong for them."

But even Medland acknowledges that Pets.com could face brand confusion with the other sites. And the company's financial records indicate that even if a site wins the online pet supply war, the victor's spoils could be slight.

Pets.com spent $30.7 million on marketing and sales in the fourth quarter of last year, which helped boost its revenue from $568,000 in the third quarter to $5.1 million in the fourth quarter, according to a regulatory document filed today. But the company's products cost more than twice as much money as it sold them for, and overall Pets.com lost $42.4 million for the quarter.

It is losses like that and the competition that lead Forrester Research analyst Carrie Johnson to believe the pet supplies area is ripe for consolidation. PetSmart.com, for instance, bought lower-tier player Acmepet.com last month; and Johnson said more of the smaller sites could be swallowed up.

"There are a number of bottom feeders who will probably get bought or consolidated," Johnson said. "I'm sure there are already talks going on."