Why Sink $10m Into An Online Pet Shop?

Tutting and shaking their heads this week, reporters have been remembering the fate of the online pet shop Pets.com, which famously paid out millions to advertise during the Superbowl in 2000. Within months Pets.com, an icon of the dotcom boom, had gone under, and many others with it when the dotcom bubble burst. (Pets.com, the name, is now owned by the American giant PetSmart). This small bout of nostalgia is prompted by the announcement this week that a $620million equity investor LLRpartners has backed the expansion plans of an online (only) pet shop Pet Food Direct, with a $10million injection of cash.

Pet Food Direct serves around 200,000 customers in the United States. It was founded as a pet food delivery service in 1997 by Jon Roska, Jr., originally shipping to his customers from the back of a truck.

At the turn of the century Pet Food Direct almost fell victim itself to the dotcom shake-up after a previous investor sunk $15million into the company in 1999.

How times have changed..

Howard Ross, Partner, LLRpartners said this week:

"By focusing on customer needs and trends in the $40 billion pet industry, Pet Food Direct has rapidly grown into a leading and differentiated online retailer."

For the technology media publication Red Herring, reporter Scott Martin quotes Howard Ross:

"We're starting to show that in different vertical markets various online retailers are able to survive."

Notice that he said 'survive', not 'thrive'.

Returning to the UK pet industry, we have our own online memories of the dotcom boom.

Seven years ago, in June 2000, UK online pet product retailer PetsPark raised £1.6m in new funding from the Cross Atlantic Technology Fund - for ongoing development of the business.

During a BBC2 documentary about internet start-ups, the company was shown desperate to bring customers into its website and struggling to fulfill its orders.

By 2001 PetsPark had failed. The site was bought up by another online pet product retailer, PetPlanet. PetPlanet duly pinned a notice to the front page of the PetsPark site and left it for all to see - a monument to its defeat.

Even our own UKPets logo is a reminder of those stumbling early days of e-tailing, designed as it was by the PetsPark graphics department.

Out of the pickings of the boom grew new, less frantic e-tailers. In 2002 Michael Connah bought up the ridiculous name Pets Pyjamas after that company's ready-for-bed actors in cat and dog outfits failed to win over audiences of late night TV. Pets Pyjamas now takes you to Mr Connah's Pets Direct website.

Garret O'Leary's Petsonthebrain (now defunct) left its own memorial in the UKPets offices - in the form of unpaid bills for advertising.

The cautious reception given to the LLR investment in Pet Food Direct is borne out of the spectacular failures of a previous era. Despite the big headlines about Google, Amazon and the like, most companies have been slow to return to or even begin investing online. The story of Pet Food Direct is interesting because it is a first. The highly optimistic question is - is it the first of a new wave?

source: www.ukpets.co.uk