In its second-largest acquisition, Amazon buys the company for $970 million.
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“We have a broader range of products that are much less expensive than our competitors’,” CEO Tabibi contends. “And our customer service is excellent. That is why we’re growing so fast. You don’t grow at the clip we are because you’re more expensive or your service is poor.”
PetsUnited prides itself on keeping prices as low as possible, CFO Van Doren says. “For the last six and a half years we’ve been battling with vendors to keep costs down so we can offer customers the best deals out there. It’s an ongoing battle that will never end, but we’re doing our best to control prices.”
Pet lovers united
The company, however, does not reach out to customers simply by attempting to offer low prices or good service. It also relies on its animal-specific online communities to engender customer loyalty as well as gain feedback to help guide its business strategies.
Forum.Dog.com is an example of PetsUnited’s online communities. It receives nearly 15,000 unique visitors every day, the company reports. Shoppers who register for the forum can post comments, advice, questions and answers, as well as upload photos, view other members’ profiles and subscribe to an e-newsletter.
Even though it does not directly generate sales, community-building is key to successful e-commerce, Tabibi argues. “There are a lot of questions and a lot of knowledge out there,” he says. “Creating the forums is one of the important things we have done.”
Someone may have a dog that’s limping, for example, and post a question in the forum. “People like to discuss and discover things,” Tabibi says. “Sometimes topics are silly and fun. Other times they’re very serious stuff. Online community members leap in there and help each other.”
Still, the effect that forums-and similar content like customer reviews-have on web sales is unclear. Jupiter is in the midst of research examining how user-generated content affects sales. “Forum participants are very engaged people,” Freeman Evans says. “In this case, they are very interested in learning about what they should be doing for their pets, and such engaged customers are a great audience for a company to have.”
Forum members, however, aren’t the only ones learning from the online community. Company executives have discovered a lot about customers and their shopping preferences from the web discussions.
“In March in the horse forum, customers were talking about our free shipping offer and its pros and cons,” Van Doren explains. “We’re offering free shipping for orders over $49 on Horse.com and in its catalog. The trade-off is we use a consolidator shipping service-it’s cheaper but slower. We had dozens of customers giving their opinions, which was very enlightening. Most of them understood we’re simply trying to keep costs down and pass savings on to them. This kind of feedback helps guide our business decisions.”
From the horse’s mouth
An online community section fosters a tighter bond between a company and its customers, Tabibi says. “Regarding the free shipping, one forum member posted a note saying they were annoyed it took eight days to get their package. Another customer replied that the company is giving them this option, and they don’t have to go that route. A message like that coming from a customer is more powerful than coming from me as the CEO. There is nothing more valuable than having people who like you as a company.”
To keep customers coming back and help develop new ones, PetsUnited is preparing web site enhancements and new marketing tactics.
It has been using technology and services from Omniture Inc. to improve site navigation. Now it’s looking to add functionality, like a universal shopping cart that customers can use across all PetsUnited sites, and optimize site search. “If you’re looking for products for your macaw, we don’t want products for canaries displayed in search results,” Van Doren says.
On the marketing side, the company relies on conventional web marketing, promotions and a weekly e-newsletter, as well as word of mouth, which is aided by dedicated customers in the online forums, Tabibi says. The company now is considering television advertisements.
Further, it’s cutting back the number of catalogs it prints. “On the dog side we have dramatically reduced the number of catalogs shipped while increasing overall revenue,” Tabibi says. “We most likely will not be doing catalogs for our new ferret segment. If we decide to buy companies with existing catalogs, we will continue to ship those catalogs for the time being. In the end, decreasing the number of catalogs is a very important part of our strategy. We will continue with catalogs but in a much more focused and limited way.”
Decreasing catalogs during a time of increasing web sales saves money and minimizes expenditures on resources like paper, he adds.
With all the changes and growth there inevitably will be obstacles to be overcome. PetsUnited is dealing with a couple right now. “What keeps me up at night is just maintaining the most efficient infrastructure and making sure we are able to maintain the supply/demand equation for our company,” CEO Tabibi says. “But we have embraced the Internet and are all about technology that can help us operate as efficiently as possible.”
For Van Doren it’s literally keeping things together. “Getting the operating divisions integrated and bringing about true multi-warehousing functionality is a significant challenge,” the CFO says. “Meeting that challenge, though, will bring about huge benefits for us and our customers. The company will gain smoother, more efficient processes, and customers will continue to be offered lower prices and quicker delivery.”
No sacred cow
The PetsUnited team plans to address these and future challenges using knowledge gained through important lessons it has learned to date. For example, when it comes to e-retailing there is no sacred cow, Tabibi says.
“There are a lot of things people take for granted in the catalog arena, such as defined and limited amount of space,” he says. “In e-commerce you have to completely alter your thinking. You have to be open to everything. If you test a pill with a rat it won’t necessarily have the same effect on a human being. You cannot make assumptions.”