PetFlow Paws its Way to the Top of Facebook, Sniffs Out Growth Path
In February 2011, the website Business Insider quoted PetFlow.com co-founder Alex Zhardanovsky criticizing the pioneer of the online pet-supply business—Pets.com, which famously blasted onto the Web in the early 2000s and then shut its doors when it couldn’t find a path to profitability. In the article, Zhardanovsky contended that Pets.com got in trouble by selling pet food below cost.
That didn’t go over too well with Julie Wainwright, the former CEO of Pets.com, who wrote a sternly worded response to the article pointing out all the resources that e-commerce entrepreneurs have today that she didn’t, namely low-cost “plug and play solutions” for running warehouses and customer service sites. “Cloud computing did not exist, which means that we had to have a server farm and several IT people to ensure [sic] that the site did not go down,” she wrote.
But PetFlow.com has something else that Pets.com didn’t: Facebook. As it turns out, the social media giant has been vital to helping the two-year-old startup stand out against a rapidly expanding group of competitors, including Amazon’s Wag.com. When Xconomy sat down recently with Zhardanovsky at his company’s New York headquarters, PetFlow.com had just surpassed Wal-Mart to become the most talked-about retailer on Facebook, according to PageData, an independent research firm that tracks Facebook metrics.
PageData looks at a combination of factors to come up with its rankings, including the quantity of likes, shares, and comments that retailers generate on Facebook. “What they measure is actual engagement,” Zhardanovsky says.
Zhardanovsky credits Facebook for fueling PetFlow’s recent growth. The company is charting about 35,000 orders per month for pet food, cat litter, and toys, he says. It ships more than 1.5 million pounds of food per month and Zhardanovsky says it took in about $2.5 million in revenues last month. The company’s sales are growing about 10 percent month-over-month, he says. And half of sales come from customers who sign up for the company’s auto-ship option—a feature that allows them to ensure that bag of kibble or litter will show up at their door on a time schedule that they dictate—Zhardanovsky says.
PetFlow.com was founded by Zhardanovsky and Joseph Speiser, entrepreneurs who founded AzoogleAds, an online advertising firm that was bought by a private equity company in 2005. The idea for PetFlow came from Zhardanovsky, who kept running out of the premium food he feeds his dog, Ruby. “I would call Furry Paws on 8th Street and beg the guy to deliver a bag of food at 7 p.m.,” he recalls. “Sometimes they wouldn’t have it. This is a hassle that most pet owners go through when they want to get high-quality food for their pets.”
In 2009, he put a bare-bones landing page for PetFlow on the Web, advertised its auto-ship feature on Facebook, and was stunned by what happened next. “We had an overwhelming response. Ten percent of people who went to the page filled it out,” he says. “The typical response to something like this is 3 percent.”
PetFlow’s Facebook strategy quickly evolved into the company’s most important customer-recruitment tool. “At the beginning we made the same mistake everyone else does on Facebook, which is we bought traffic and sent it to our site,” Zhardanovsky says. “Facebook tells you to build an audience of fans and engage that audience with interesting content. Then step number three is get that customer to buy. At the beginning, we were trying to do step number three without the others.”
So PetFlow turned its attention to its fan page, filling it with cute pictures of dogs and cats, and then inviting Facebook users to write captions and interact with other fans. “The point of that is when they’re interacting with each other they’re seeing ‘PetFlow,’ ‘PetFlow,’ ‘PetFlow,’ and eventually they’re going to make that purchase,” Zhardanovsky says. PetFlow quickly grew from 200,000 fans to more than 500,000.
PetFlow has also been successful running product promotions on Facebook, Zhardanovsky says. After treat maker Dogswell launched a premium dog food called Nutrisca, for example, the company gave PetFlow 2,400 small trial bags. PetFlow ran a promotion on its fan page a few months ago, offering the bags for 29 cents a piece, Zhardanovsky says. Prior to the promotion, PetFlow sold just 58 full-sized bags of the food in two months. But in the two-month period after the promotion, he says, the company sold more than 200 bags. “It actually generated a lot of real customers,” Zhardanovsky says. Facebook, he adds, “has reduced our cost of customer acquisition by 50 percent in the last two months.”
As for that online tiff with Pets.com CEO Wainwright, it resulted in a two-and-a-half hour phone conversation that Zhardanovsky says was illuminating, particularly when they compared notes about how much the cost structure has changed in e-commerce. “God knows how many [warehouse] facilities they had to build. We have two facilities running on a state-of-the art system in the cloud.” That system costs under $10,000 a month, he says.
That’s not to say PetFlow hasn’t run into they typical challenges that e-commerce companies face. Zhardanovsky says the startup struggled at first with the fulfillment side of the business. “I spent days packing orders to get a feel for what goes into it,” he says. “It’s a monumental challenge to actually get an order to a customer’s door.” PetFlow is now able to keep its orders flowing with a full-time staff of 33 and about two-dozen part timers who work in the warehouses, he says.
Zhardanovsky expects rivalry in the pet space will continue to grow. In addition to Wag.com, PetFlow is competing against companies like Pet Food Direct and Amazon, not to mention the two offline giants PetSmart and Petco. But Zhardanovsky believes PetFlow can continue to offer an edge in its selection of premium brands. His company currently offers 78 high-end foods, as opposed to Wag.com’s 56 and Petsmart’s 19, according to figures PetFlow has compiled. “We have a breadth and depth that other retailers don’t have,” he says.
PetFlow has raised $10 million in venture capital from Lightspeed Venture Partners and Westwood Ventures. The company plans to raise another round in the next few months to scale up its product selection, Zhardanovsky says. PetFlow plans to boost its marketing spend and to offer more products for people who have not just cats and dogs, but also fish, lizards, and other critters. “The more products we buy from our suppliers, the less we pay. The more shipments we do, the less we pay,” he says. “It’s just a matter of getting to that scale.” He adds that PetFlow plans to launch a service to compete with BarkBox, the New York company that sends treats and toys to pet owners who sign up for monthly shipments.
Zhardanovsky says PetFlow has tested every form of advertising from print to TV, but he believes it’s Facebook that will give his company the staying power that Pets.com didn’t have. “If I turn off all my other sources of paid media, my marketing goes away. But my marketing on Facebook doesn’t stop,” he says. “I already have that base of a half-million fans. I can continue to generate sales from them. In a sense, it’s the most viable of all marketing channels.”