You may have heard of plenty of E commerce success such as Google, Amazon, Ebay. But did you know that there are many E commerce flops as well? Here, you'll see Pets.com as an example.
Pets.com was an short-lived online enterprise which used to sell pet accessories and supplies directly to customers. Short enough that the company lasted for merely 2 years, from it launch till its liquidation. The company had plenty good things going that could make it as famous as Google. It had major investors included Amazon. It had a well-design website that attracted customers. It even went public only a few months after its initial launch. Sadly, Pets.com lost the gamble. It decided to close its doors in November, 2000 just two years after its launch. Why had the company failed? Following are several reasons.
Overestimation of potential market
The company may have overestimated the number of online customers it could gain in the pet market. Pets.com spent millions on warehouse space and trying to obtain the online pet supplies market through various marketing techniques. It assumed that the market and its revenue would grow quickly enough to allow for a profit. Unfortunately, the market was not large enough and did not grow fast enough before funding money was exhausted.
Excessive spending on marketing and advertising
Marketing and advertising are nice. But excessive marketing and advertising might lead you to downfall. During its lifetime, Pets.com could barely bear its expenditure on marketing and advertising. Simply because it spent way too much - more than $70 million on marketing and an average of $400 to acquire each new customer. Moreover, because the company had to undercharge for shipping costs to attract customers, it actually lost money on most of the items it sold.
Poor customer position
The company never really gave customers a good reason for its existence. Nor did it explain clearly a reason to buy supplies online.Customers were not motivated to get the pet supplies online because they could just get the same thing at the local actual pet shop in much more a convenient way.
Lack of an unique competitive advantage
Although Pets.com had the advantage for being the first of virtual pet stores to penetrate the online market, it did not really offer something that could differentiate itself from its rivals. Basically, the company had no special reason for customers to choose it over the other rivals.
Pets.com was an short-lived online enterprise which used to sell pet accessories and supplies directly to customers. Short enough that the company lasted for merely 2 years, from it launch till its liquidation. The company had plenty good things going that could make it as famous as Google. It had major investors included Amazon. It had a well-design website that attracted customers. It even went public only a few months after its initial launch. Sadly, Pets.com lost the gamble. It decided to close its doors in November, 2000 just two years after its launch. Why had the company failed? Following are several reasons.
Overestimation of potential market
The company may have overestimated the number of online customers it could gain in the pet market. Pets.com spent millions on warehouse space and trying to obtain the online pet supplies market through various marketing techniques. It assumed that the market and its revenue would grow quickly enough to allow for a profit. Unfortunately, the market was not large enough and did not grow fast enough before funding money was exhausted.
Excessive spending on marketing and advertising
Marketing and advertising are nice. But excessive marketing and advertising might lead you to downfall. During its lifetime, Pets.com could barely bear its expenditure on marketing and advertising. Simply because it spent way too much - more than $70 million on marketing and an average of $400 to acquire each new customer. Moreover, because the company had to undercharge for shipping costs to attract customers, it actually lost money on most of the items it sold.
Poor customer position
The company never really gave customers a good reason for its existence. Nor did it explain clearly a reason to buy supplies online.Customers were not motivated to get the pet supplies online because they could just get the same thing at the local actual pet shop in much more a convenient way.
Lack of an unique competitive advantage
Although Pets.com had the advantage for being the first of virtual pet stores to penetrate the online market, it did not really offer something that could differentiate itself from its rivals. Basically, the company had no special reason for customers to choose it over the other rivals.
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