November 3, 1999 1:25 PM PST

Pet sites bark up the Net tree

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Amazon's bite doesn't deter pet-shop rivals

May 7, 1999
A dogfight is brewing in the online pet industry, with four big players announcing multimillion-dollar investments and prime-time partnerships.

Just today, Amazon.com-backed Pets.com announced that it had received $35 million in its third round of venture funding from Amazon, Bowman Capital Partners, and Hummer Winblad Venture Partners.

Petstore.com also announced today that it had received an investment of $97 million in cash and marketing services from Discovery Communications (owners of the Animal Planet cable network), Battery Ventures, and Advanced Technology Ventures.

The deals follow similar weighty moves made by rising competitors in the online pet market. Petopia, for instance, aligned with offline pet supply company Petco and simultaneously received a $66 million investment in July. And Petsmart.com, a joint venture between Internet incubator Idealab and offline pet giant Petsmart, says it has received a cash infusion of $50 million in September.

Despite the large sums of money and well-chosen partnerships, no single store seems to have taken the lead in the industry. And with all the sites offering a similar large-scale inventory, competitive prices, and advice from experts, observers say each site could easily be confused with its competition.

"So far none of them are dramatically different from one another," said Mike May, Jupiter Communications digital commerce analyst. "Obviously, the challenge for all these players is to differentiate themselves from their competitors."

Some sites are trying to do just that.

As part of its new relationship with Discovery, Petstore.com will take control of Discovery's Animal Planet Web site and will gain access to Animal Planet's pet-related content.

The company soon will begin integrating the two sites, offering e-commerce

Pet sites proliferate
Company Site launch
Pets.com Nov. 1998
Petstore.com May 1999
Petopia.com July 1999
Petsmart.com July 1999
PetPlanet.com Sept. 1999
and content from both sites, said Chris Luhnow, Petstore.com's senior vice president for corporate development. The company will launch a combined "destination" site early next year, he added.

"We'll have an incredible one-stop shop for animal lovers for all their entertainment, information, and shopping needs," Luhnow said.

But Petsmart.com chief executive Tom McGovern said Petstore.com and the other online pet stores have to go further before they can catch up with his site. Building on Petsmart's brand recognition, McGovern said that Petsmart.com already has culled the largest online audience.

"All of these three competitors have to go out there and spend like crazy in desperation to get the mindshare of consumers," McGovern said. "We have a huge advantage in that we don't have to build a brand--we're just enhancing Petsmart's brand."

But Pets.com chief executive Julie Wainwright said that Petsmart.com's relationship with the Petsmart chain could be its chief disadvantage. Both Petsmart and Petco will have to deal with "channel conflict," which has plagued other traditional retailers that have come online. As they begin to sell more products online, such companies face the potential of stealing sales from their own more profitable brick-and-mortar stores.

"This will happen; it has happened every place else," Wainwright said. "How does it shake out? Who knows? But it's not going to be pretty."

Wainwright said Pets.com will use the money from its recent investment on marketing and expanding its distribution facilities. The company operates a distribution center in San Francisco, and Wainwright said it will open one on the East Coast "right away." Wainwright said Pets.com wants become the one-stop shop for pet supplies, offering a wider range of products than any of its competitors, including products carrying its own product label.

"We have a different strategy from the other people," she said.

Gomez Advisors e-commerce analyst Matt Stamski said that although none of the players is really in the lead right now, he wouldn't rule Pets.com out. E-commerce giant Amazon's 46 percent stake in Pets.com gives the company access to the most powerful database of consumer buying habits online, Stamski said.

"It would seem that Pets.com would have a leg up," Stamski said. But, he added, "It is early in the game here, so we'll see how it shakes out."

 

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