Amazon Unit Quidsi Expands From Diapers and Soap to Dogs and Cats, With New Site Wag.Com

7/6/11Follow @arleneweintraub

Today Jersey City, NJ-based e-commerce provider Quidsi—which was bought by Amazon in November for $500 million—is launching Wag.com, an online warehouse that will offer more than 10,000 products for dogs, cats, fish, birds, and just about every other critter that families welcome into their homes. The site will operate independently of Amazon, similar to Quidsi’s other properties, Diapers.com, Soap.com, and BeautyBar.com. Like those sites, Wag.com will offer free shipping on orders above a certain size.

The launch of Wag.com certainly piqued the interest of this reporter, for many reasons. First of all, I am a dog owner who does quite a bit of shopping both online and off for food, treats, and other accoutrements for my terrier mix, Molly (photo above—isn’t she adorable?). But I’m also well familiar with many of the challenges pet sites faced during the first dot-com boom in the early 2000s, when I was a young tech reporter for BusinessWeek. Back then, Amazon owned 30 percent of Pets.com—one of the many pet-related sites that didn’t survive the bust.

So a few days before Wag.com launched, I put two of Quidsi‘s executives on the firing line: David Zhang, Wag’s site leader, and Earl Gordon, its director of marketing. They patiently fielded my many questions about how they planned to compete in a category that’s famous for its low profit margins, as well as its growing crowd of competitors that, oddly enough, includes Amazon itself.

Zhang and Gordon pointed out to me that Quidsi’s Mom-friendly shopping sites have 800,000 loyal users—all of whom would be natural marketing targets for Wag.com. “There’s an interesting parallel between pets and children,” Zhang says. “Pets charm us with their unconditional love. They’re like babies that never grow up. We have one site built on babies, so it was just a matter of time before we added pets.”

Makes sense, but I wondered: How can anyone make a profit if they waive the shipping charge on 40-pound bags of dog food? This was a major issue for Pets.com and its rivals in the early dot-com days, when free shipping was a popular promotional tool. I pulled up one of the first stories I wrote for BusinessWeek (now Bloomberg Businessweek), which we published shortly after Pets.com went public in February 2000—and saw its stock plummet from $11 a share to $6.

BusinessWeek crunched the numbers and figured out that for every dollar Pets.com paid dog food manufacturers and UPS for shipping, it collected just $0.43 from customers. In other words, it was losing … Next Page »

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