The Amazon.com-backed company was the leading online pet store and was known for its wildly popular sock puppet spokesdog. The San Francisco-based company said it would sell off its assets, including its catchy URL and the rights to the sock puppet icon.
"I am deeply saddened by this event," chief executive Julie Wainwright said in a statement.
The company said in a notice on its Web site that it will continue
taking orders until 11 a.m. PT Thursday. Pets.com plans to shut down its Web site that day, although it may delay the closure depending on its order volume, company spokesman John Cummings said.
Some of the layoffs will be effective Tuesday, but Cummings said he did not know when the other employees would lose their jobs.
Unlike some of its dot-com brethren, Pets.com has not filed for
bankruptcy and has no plans to do so, Cummings said. Instead, the
e-tailer will distribute the proceeds from its asset sales to its
shareholders, he said. Although no one stepped up to the plate to invest in Pets.com this summer or buy it outright, Cummings said that several companies have already expressed interest in buying its assets.
"It is well known that this is a very, very difficult environment for
business-to-consumer Internet companies," Wainwright said. "With no
better offers and avenues effectively exhausted, we felt that the best
option was an orderly wind down with the objective to try to return
something back to the shareholders."
Pets.com is only the latest Internet company to join the dot-com death watch. Monday, Furniture.com said it had shut down, and earlier this month, male lifestyle site TheMan.com closed down its site. In recent weeks, Beautyjungle.com, Eve.com and BigWords.com have either closed their doors or laid off staff.
Pets.com will be the second Amazon aligned e-tailer to close its doors.
In July, home furnishings e-tailer Living.com closed shop and filed for bankruptcy.
"I think that the most interesting thing about this is the rapid
collapse of an entire industry," Gomez senior analyst Matt Stamski said. "I think it's unprecedented in this recent shakeout."
As part of the winding down of its operations, Pets.com will lay off 255 of its 320 employees. As of Tuesday morning, the company's Web site was still up and running.
Founded in 1998, Pets.com raised $82.5 million in an initial public offering in February.
Tarnished domains Many of the domain names that were once considered prime Internet real
estate are now affiliated with companies that have gone out of business or suffered serious staff cuts. Since June:
Pets.com bought 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 competition, 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, Stamski said. Pet owners are less likely than
others to shop online, he said.
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, Stamski said. Considering that pet food is available at just about any neighborhood grocery, few people have a reason to shop online, he said.
"You had five Web sites selling the same products, the same level of
service and essentially the same name and it was difficult to tell them
apart," Stamski said. "This recent collapse will erase some of that
confusion."
As of the end of October, Amazon owned nearly 30 percent of Pets.com, Amazon spokeswoman Patty Smith said. Despite Amazon's large percentage stake in the pet supply retailer, Smith said Pets.com's failure would not have any "material" impact on Amazon's financial statements.
Amazon considered Pets.com an equity-method investee, meaning that
Amazon has been deducting a portion of Pets.com's losses each quarter
from the value of Amazon's initial investment. As of the end of September, the net value of Amazon's stake in Pets.com was less than a couple hundred thousand dollars, Smith said. A month later, the value of the investment reached zero, she said.
This "will not have any impact on our finances," she said.
Smith declined to say whether the failure of Pets.com and Living.com has dissuaded further investments by Amazon in pure-play e-tailers.
"We never discuss our future investment strategies one way or another,"
she said. "But we remain bullish on e-commerce."
Although most e-commerce companies have been operating in the red,
Pets.com was among the more financially challenged. In every quarter of operation, the company contended with negative gross profit margins.
A company's gross margin is the difference between the amount it charges customers for its goods or services and the amount it pays suppliers for those goods and services. Having negative gross profit
margins essentially meant that Pets.com lost money on every item it
sold.
In Pets.com's third quarter, which the company reported late last month, the goods it sold cost Pets.com $277,000 more than it sold them for. That was an improvement from the second quarter, when Pets.com lost $1.7 million on its gross margins.
As of Sept. 30, Pets.com had about $23 million in cash, down from $37
million at the end of June. The company lost $21.7 million in the third
quarter on $9.4 million in revenue.
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Pets.com: What went wrong?
Despite Amazon's large percentage stake in the pet supply retailer, Smith said Pets.com's failure would not have any "material" impact on Amazon's financial statements.
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