Undeniably, many companies have been extremely successful in doing e-business. However, several e-commerce companies were not able to sustain themselves and hence were forced to close down its e-business.
Pets.com is one of the examples of an e-commerce failure companies. Pets.com is a former dot-com enterprise that sold pet supplies to retail customers over the World Wide Web. It was launched in August 1998 by Greg McLemore. It went from an IPO on a major stock exchange on the Nasdaq to liquidation in merely 268 days.
Causes of its failure :-
1) Competition
The fierce competition in the online pet supply market has resulted Pets.com to be a short-lived online business. Apparently, Pets.com did not take the initiative to distinguish itself from other online pet suppliers retailers by offering unique products to customers. It is clearly understood that in order to outperform the market, Pets.com should have endeavoured to differentiate itself from other competitors.
2) An unwise decision
Another reason that led to the failure of Pets.com was that it had entered into a market that is selling low margin food and supplies but incurs high shipment costs to deliver the items ordered to the customers. Pets.com should have realized that the market of customers to buy such pets stuff is not large enough for them to conduct such online business. Ironically, many consumers still feel that it is more convenient to shop at local discount stores rather than shopping online particularly for buying pets stuff.
3) An unsustainable business model
In fact, Pets.com went public in February 2000 after its initial launch without any experience. It assumed that the market and its revenues would grow quickly to make a profit before the funding money was exhausted. This assumption has led to the downfall of Pets.com as it was too focused on gaining market share instead of profits. Besides, another mistake it had made was overestimating the number of online customers that it could gain in the pet market. Pets.com was said to have gone into the public too soon and spent money too quickly that it had made an excessive spending on marketing and advertising. To make things worse, this excessive advertising helped the entire online pet companies to gain sales instead of benefitting Pets.com solely.
4) An inappropriate business strategy
Pets.com also failed to position itself with an effective business strategy. Pets.com’s strategy was to compete with low prices with its competitors without considering switching to a unique positioning strategy in its supplies of goods offered to customers. This mistake had led Pets.com to sell its merchandise at prices below cost and therefore it suffered a negative gross margin for months.
The share price of Pets.com on the first day was $14. However, over its duration of operaton, it has dropped to $0.19 only. Hence, the Pets.com management had no choice but to close down the company as there was a lacking of investors of the company to raise further capital.
For more information about Pets.com, view the links below:
http://www.blogger.com/%20http://news.cnet.com/2100-1017-248230.html
http://www.fool.com/portfolios/rulebreaker/2000/rulebreaker001114.htm
Pets.com is one of the examples of an e-commerce failure companies. Pets.com is a former dot-com enterprise that sold pet supplies to retail customers over the World Wide Web. It was launched in August 1998 by Greg McLemore. It went from an IPO on a major stock exchange on the Nasdaq to liquidation in merely 268 days.Causes of its failure :-
1) Competition
The fierce competition in the online pet supply market has resulted Pets.com to be a short-lived online business. Apparently, Pets.com did not take the initiative to distinguish itself from other online pet suppliers retailers by offering unique products to customers. It is clearly understood that in order to outperform the market, Pets.com should have endeavoured to differentiate itself from other competitors.
2) An unwise decision
Another reason that led to the failure of Pets.com was that it had entered into a market that is selling low margin food and supplies but incurs high shipment costs to deliver the items ordered to the customers. Pets.com should have realized that the market of customers to buy such pets stuff is not large enough for them to conduct such online business. Ironically, many consumers still feel that it is more convenient to shop at local discount stores rather than shopping online particularly for buying pets stuff.
3) An unsustainable business model
In fact, Pets.com went public in February 2000 after its initial launch without any experience. It assumed that the market and its revenues would grow quickly to make a profit before the funding money was exhausted. This assumption has led to the downfall of Pets.com as it was too focused on gaining market share instead of profits. Besides, another mistake it had made was overestimating the number of online customers that it could gain in the pet market. Pets.com was said to have gone into the public too soon and spent money too quickly that it had made an excessive spending on marketing and advertising. To make things worse, this excessive advertising helped the entire online pet companies to gain sales instead of benefitting Pets.com solely.
4) An inappropriate business strategy
Pets.com also failed to position itself with an effective business strategy. Pets.com’s strategy was to compete with low prices with its competitors without considering switching to a unique positioning strategy in its supplies of goods offered to customers. This mistake had led Pets.com to sell its merchandise at prices below cost and therefore it suffered a negative gross margin for months.
The share price of Pets.com on the first day was $14. However, over its duration of operaton, it has dropped to $0.19 only. Hence, the Pets.com management had no choice but to close down the company as there was a lacking of investors of the company to raise further capital.
For more information about Pets.com, view the links below:
http://www.blogger.com/%20http://news.cnet.com/2100-1017-248230.html
http://www.fool.com/portfolios/rulebreaker/2000/rulebreaker001114.htm
2 comments:
Hi,
After reading your post, I realize that there are many aspects to be taken into consideration before and after launching a business. Otherwise, we'll be landed up like pets.com, bankrupt and closed down.
Cheers.
yes, therefore we should bear in mind all the possible causes that could render an online business to shut down and to endeavour to develop ways on how to overcome these potential problems before even starting our own business online, if one wishes to do so.
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