The failure of Pets.com

Pets.com

Pets.com was a short-lived online business (business to customer companies) that sold pet accessories and supplies direct to consumers over the World Wide Web. It launched in August of 1998 and went from an IPO on a major stock exchange to liquidation in 9 months.

After its start by Greg McLemore, the site and domain was purchased in early 1999 by leading venture capital firm Hummer Winblad and executive Julie Wainwright. Amazon.com was involved in pets.com's first round of venture funding. Pets.com would eventually buy out one online competitor Petstore.com.

Pets.com brought rival Petstore.com in June and announced plans in September to move some of its staff to the Midwest to cut costs. Despite these moves, the company's stock price has been mired below the $1.50 level for months.

Trading in Pets.com stock was temporarily halted Tuesday. When trading resumed, the price promptly plunged to 22 cents from 66 cents, a one-day decline of 67 percent. Volume topped 4 million shares.

After trading as high as $14 this year, the rock-bottom stock price values the entire company at about $6.4 million. The month before it went public, the company spent almost half that amount on 30 seconds of advertising during the Super Bowl.

Marked initially for its fierce, well-financed competiton, the online pet supply market has since been beset with consolidation and collapse. In addition to Pets.com's purchase of Petstore.com, Petopia, backed by offline pet supply giant Petco, laid off 60 percent of its staff last month.

Despite all the initial hype and funding--the four largest players each raised more than $50 million in private financing--pet supplies are not a natural e-tail market. Pet owners are less likely than others to shop online.

Additionally, the e-tail pet stores have not offered a compelling reason to shop online. Although delivering pet food and supplies directly to consumers is a convenience, that benefit is outweighed by the fact that the consumer has to wait days to receive their orders. Considering that pet food is available at just about any neighborhood grocery, few people have a reason to shop online.

After bursting to life to deliver on the promise of e-commerce, Pets.com ( Nasdaq:IPET ) closed its business the same year that it went public. To quote Tichborne again.

The failure of Pets.com and other Internet-based companies affects us all in obvious if small ways, and also in ways that we'll never know. These failures not only leave us with fewer choices as consumers, but they make it difficult for today's new online-based enterprises to raise capital. Some of today's upstarts have excellent ideas that will never see the light of day because they can't get funding.



Why did Pets.com die?

Ironically, the eager venture capital investors who swiftly funded Pets.com might have made the company's failure almost inevitable. Pets.com raised millions with nary a sustainable advantage to its name (it was not a Rule Breaker), and the venture capitalists knew that most of the money would be blown on marketing. Then, Pets.com was able to go public without a penny of value creation, let alone meaningful experience, under its belt. Next, Pets.com was allowed to fail quickly without anyone giving it a long-term chance.

When the company went public on Valentine's Day this year, management knew that very soon it would need more money given its marketing spending plan. Pets.com counted on additional funds, most likely from a secondary stock offering (they were a dime a dozen back then), and the additional funds would largely be spent on still more marketing. They arguably had to be. Even a partnership with Amazon.com ( Nasdaq:AMZN) was not bringing the millions of customers that Pets.com needed quickly enough.

Relying on additional public capital to fund the long process of becoming a sustainable business with a meaningful customer base was a big gamble at Pets.com. It lost the gamble. In a different stock market (for example, if Pets.com had gone public in 1997), this bet might have actually panned out, but it didn't.

Revenue model for Google, Amazon.com and eBay

Google, Amazon.com and eBay are some of the most successful companies around the world, well-known for their online generation of revenues.








Now let us briefly view through their revenue model one by one…


Google’s Revenue Model
A major percentage of Google’s revenue income is generated though advertising. In the year of 2007, Google’s revenue income reached as high as 16 billion dollars. Among this figure, 99% of it comes from their advertising services. The remaining 1% is derived from licensing. Some of Google’s advertising revenue model includes Google AdWords, Google Ad Sense and Froogle.

To enquire more information about Google’s Revenue Model…
Go to http://www.organicspam.com/google_revenue_model.asp




Amazon.com’s Revenue Model
Amazon.com is one of the first major companies to sell goods through the internet. They have made total revenue of 14 billion dollars in the year of 2007. Their revenue mainly arrived from selling books, videos, electronics, and kitchen equipment on domestics and international websites, such as Amazon Marketplace.

To enquired more information about Amazon Marketplace…
Go to http://www.amazon.com/gp/help/customer/display.html/?nodeId=537734




eBay’s Revenue Model
Ebay is an online auction and shopping website in which people and businesses buy and sell goods and services worldwide. They generated about 7 million dollars in the year 2007. Among that, 96% of its revenues are generated from transactions. Whereas, it’s remaining 4% comes from advertising and other income.

To enquired information on how eBay’s work…
Go to http://pages.ebay.com/help/newtoebay/questions/about-ebay.html

Based on the above information, we can differentiate the 3 companies according to the way they generate revenues.

• For Google, their revenues are mainly based on advertisements. Therefore, they are adopting the advertising revenue model.
  
• Regarding Amazon.com, their revenues are based on online retailing. So, they are using the sales revenue model instead.
  
• Finally, eBay gained their revenues mainly from the services they provide. This means they adopt the transaction fees revenue model.

To enquire more information about online revenue models…

Go to http://www.davechaffey.com/Internet-Marketing/C2-Internet-micro-environment/Online-revenue-models

E-Commerce Success and Its Causes

The Success of Dell

Dell Computer Corporation is a success to the E-commerce world. Dell was founded 16 years ago by a medical student name Michael Dell. Today, Dell is one of the world’s top providers of computer products and services such as servers, storage, workstations, notebook and notebooks computers. The company has an average revenues of $38.2 billion dollars worldwide and it employs over 41,000 staff worldwide.

In 1994, Dell started using the Internet as an information source and by 1996 they already started their business through the Internet. The reason for them to start using Internet to conduct business was that Dell saw the opportunities. By using the Internet, it is easier to communicate with all the involved parties, includes less costs for transactions and provide an improved customer relationship.

E-commerce offers many benefits to businesses and consumers in their purchasing activities. It changes the purchasing process from being a physical transaction to being a virtual transaction where no paper is involved.This saves time and money for everyone and opens up a virtual global marketplace – for example, you could be staying in Malaysia but you can still buy online from a shop in New York. It is also more convenient as you can access the Internet 7 days a week, 24 hours a day, at your own convenience. However, it requires a whole new business methods and infrastructures to meet the demands of the buyer and the needs of the seller.

Disintermediation and real-time production
Due to its efficient supply chain management, Dell is capable of shiping a PC within 24 hours of receiving an order. This introduction of the internet and e-commerce has helped Dell improve this efficiency and profitability. At Dell, the traditional supply chain has two fundamental differences: disintermediation and real-time production. Dell sells directly to its customer, cutting out the middle man, the distributor and retailer. When a layer that exists between two other layers is removed like this, it is known as disintermediation.

Dell manufactures the products and then sells them directly to the customer, Dell creates disintermediation – the outside retailer is cut out of the process. This reduces time and costs in the process and also ensures Dell is better positioned to understand its customers’ needs directly.

Dell’s supply chain costs are reduced on the storage side too by its efficient relationship between orders and production. Each individual PC that is ordered is only manufactured AFTER the order is received and only using the freshest raw materials, which are delivered to the factory several times a day. This is known as just-in-time production or real-time production. There is no warehouse for either raw components or finished goods. Each computer has been paid for and has been built for a specific customer before it is shipped.

Real time production ensures no costs are incurred from rising inventory stocks. Output is always driven by actual customer demand. Each individual product is created with the latest technology and each product is custom-made to exactly what the customer wants. Dell’s direct selling started off using the customer channels of mail order and ordering using toll-free phone numbers and this has grown to embrace online sales channels too.

Focus Improve Customer Service
customers can create and view their service records online. This includes product support, shipment and delivery dates. Each purchase comes with a service tag code, which can track the model bought and its service requirements. This allows Dell customer service representatives to quickly and efficiently handle requests.

This level of 24 hour customer service and fast response time helps Dell build strong customer relations, which of course is crucial for the company in its understanding of consumer needs. It is also a very cost-effective way of providing sales and support – cost savings which can be passed on in the form of better prices to customers.

Dell is focussed on enhancing its image and relationships, not only with customers, but also with employees and the wider community. To do this, the website is also used as a communication tool for news, press releases and general information to help customers, employees, the media and prospective employees find out more about the company.

History and Evolution of E-commerce

E-commerce began before personal computers were prevalent and has grown into a multi-billion dollar industry, but where did it come from? By looking at the evolution of e-commerce, it will be easier to judge its trends for the future.

Year	Event
1984	EDI, or electronic data interchange, was standardized through ASC X12. This guaranteed that companies would be able to complete transactions with one another reliably.
1992	Compuserve offers online retail products to its customers. This gives people the first chance to buy things off their computer.
1994	Netscape arrived. Providing users a simple browser to surf the Internet and a safe online transaction technology called Secure Sockets Layer.
1995	Two of the biggest names in e-commerce are launched: Amazon.com and eBay.com.
1998	DSL, or Digital Subscriber Line, provides fast, always-on Internet service to subscribers across California. This prompts people to spend more time, and money, online.
1999	Retail spending over the Internet reaches $20 billion, according to Business.com.
2000	The U.S government extended the moratorium on Internet taxes until at least 2005.

The word eCommerce or electronic commerce was founded late in the 1970’s. The term was introduced for transactions done via computer to computer, transactions like important company data transfers, fund codes transfers, bank document transfers, purchase orders, bills or invoices; in other words all the data transfer related to commerce done electronically. E-Commerce is not just a term but a revolution for the online industry. All the tasks, letters, messages and data transferred within a flick of a second at any place no matter how far or how near. This all was impossible even for a thought or a dream, for things to be like that just a few years ago.

In the Beginning, There Was Amazon

However, that's the future. In the beginning, the Internet was characterized by slow dial-up connections and online billboards. Netscape came on the scene in 1994 with its point-and-click Web browser that opened the door to the billion-dollar revenues e-tailers enjoy today. Two of the first online purveyors were, of course, eBayAmazon.com. and

Looking at Amazon's evolution offers a pretty clear picture of the evolution of e-commerce, according to Nielsen//Netratings senior retail analyst Heather Daugherty.

"Amazon has been around since almost day one," Daugherty said. "They were the first ones to offer one-click ordering that people now expect to find. Although Amazon certainly had a lot of skepticism from the street as to when it was going to become profitable, the company kept at it."

Innovative Technology

Rich Riley, vice president and general manager of Yahoo Small Business, told the E-Commerce Times that the essence of the Internet is the establishment of a level playing field for communicating and collaborating. Riley believes the power of the Internet has enabled innovators and entrepreneurs to reach their audiences efficiently and effectively over the past decade.

"Specifically, an important milestone in the evolution of e-commerce is the development of affordable, easy-to-use e-commerce solutions that have enabled hundreds of thousands of entrepreneurs to transform their unique ideas into online successful businesses," Riley said.

One of the most important milestones was order fulfillment technologies, including shipping, according to UPS Vice President for Customer Technology Jordan Colletta. Colletta told the E-Commerce Times that online buying is mainstream today as compared to a decade ago.

"There is increased confidence in online order fulfillment, the security of personal data, and easier online return options," Colletta said. "Another critical turning point is the evolution of the online payment process. By making the payment process easier, the shipping process has become easier and more visible. Once a shipment is en route, it's trackable at all points along its journey."

Looking Ahead

What will the next 10 years bring? UPS' Colletta said we've only just begun: "During the next 10 years we anticipate seeing more ease of use, even better technology, dramatically improved visibility as well as a wider array of solutions for both online buyers and merchants."

Nielsen//Netratings' Daugherty expects to see significant changes as wireless e-commerce grows. "In 10 years, consumers ordering products online through their cell phones and PDAs will probably become commonplace," she said. "In-store pick up will allow consumers to place the order on their wireless device and get the product easily."

Gartner's Sarner said that as consumers tap into broadband, on-demand services would gain greater momentum. "If you don't want to drive to the store to pick up your favorite artist's new album, and you don't want it mailed three days later, then you can order the content online instantly," he said. "Broadband and instant access is going to change the way we think about e-commerce."