Amazon and Partners Sink $50 Million into Pet Project

The dog days of summer might be fast approaching, but for Pets.com, the prelude to summer has been an invigorating walk in the park — so far.

The San Francisco-based online pet supplies retailer announced Monday that majority-shareholder Amazon.com and two venture capital companies have invested $50 million (US$) in the company in a second round of financing in just 10 weeks.

The latest investment, which is expected to be finalized later this month, boosts Amazon’s stake in the company to 54 percent. Pets.com said it would use the money to continue to build its infrastructure.

“We are running hard and fast to make Pets.com the best possible customer experience, from product selection to customer service,” said Pets.com CEO, Julie Wainwright. “This significant investment allows us to support our plans to build an enduring customer-focused company.”

Not a Petty Market

Launched in November 1998. Pets.com is striving to grab a piece of a market that rang up sales of $23 billion in 1998. With thousands of products for sale on its site, an uninitiated consumer might think that the company had exhausted the available supply, but there are brick-and-mortar pet supply superstores with 10,000 items lining the aisles.

The affection that Americans have for their pets and the money they will spend to care for and coddle them is a source of industry glee. There are an estimated 200 million pets in the U.S. taking up residency in 60% of American households. Some of them live better than their owners do.

Brick-and-mortar pet supply retailers are familiar with this emotional inversion. The industry is dominated by large multi-store retailers like PetSmart, which registers more than $2 billion in annual sales, and Petco Animal Supplies.

Their familiarity with pet supply consumers has apparently not been translated to the online world. Both companies have been woefully slow to recognize e-commerce potential, and, as a result, online start-ups like Pets.com and Herndon, Virginia-based AcmePet.com have gotten a leg up on them.

Pets.com founder Greg McLenore thinks he stumbled onto a good thing. He sold his interest in Toys.com to rival eToys last spring and was ready for a new start-up challenge. The company has signed and agreement with AOL to be the pet supply retailer on its home shopping channel and its is widely recognized as the most ambitious and interactive of the online pet supply sites.