The rise and fall of our online business – PetKaboodle.com

When I was twelve years old, back in the early 1990s, I stumbled into owning my first business, although not sure I really even realized it at the time. I called myself Door to Door Computer Repair and had a surprisingly long list of clientele who were all more than happy to fork over $20/hr to a kid who could fix their computers! This was in the days before Geek Squad.

I didn’t advertise, I didn’t even know I had a service to offer. At the time, my mom worked as an aide in the school system and had mentioned to a teacher friend of hers that I had particular acumen when it came to computers. (I could tell a whole bunch of stories about my early exposure to, and interest in computers – here’s one if you’re interested.) Her friend lamented that she had issues with her own computer and asked if I’d be interested in fixing it – even offering to pay me a great rate!

I fixed her system, and she told other teachers. I fixed their systems as well. Then their family members and co-works, and my circle began to grow wider and wider. I would work a couple hours for each person and averaged about 1 or 2 clients per month.

Thus concludes my first business

My dad told me to keep a list of everyone and send out mailings to stay in touch.

I didn’t

My dad said, “if you keep this going you’ll probably never need a minimum wage job.”

I was young, and I let the business atrophy and the relationships expire. My mom moved out of the school world and into the business world, and life moved on. My first business ended, and I never once mourned it. In retrospect, I’m not even sure I noticed.

My first job was at a local grocery store at the age of 16

for minimum wage

The irony is that what fell into my lap and I let dwindle would effectively be the same thing I’d try and build over and over again throughout my life. The only difference was, my future endeavors never had the same purpose, and I’d always strive for an idea that’s more scalable than consulting. Although, I suppose Best Buy did ultimately crack that nut and came up with a scalable home computer repair company, though I digress.

“Ooooooo… I just had a crazy idea“

Two or three failed businesses later, and that brings us to right around May of 2006. Quick side note, I say failed, but with each go, I’d learn more about business, more about accounting and corporate structure, more about finance and marketing. More about what I wanted and didn’t want my business to be.

It often catches me in the shower – I think I do my best thinking there. My poor future wife, Christina, would regularly have to entertain me coming out of the shower, exclaiming… “Ooooooo, I just had a crazy idea!” With a quizzical, here we go again, look she’d always indulge me, this time with, “oh no, what now?”.

Christina worked as a grooming assistant at the local branch of a popular large pet supply chain and one day brought home a catalog of a large pet supply distributor, PetEdge. I had thumbed through it, looking at all the intriguing supplies and low prices (even lower for bulk). Apparently, that marinated in the back of my mind until the night of that fateful shower.

The idea takes shape

My wife loves animals and at the time was dealing with dogs as a professional on a regular basis. She had first-hand experience with most of the items the catalog offered and knew what items worked best for which breeds and temperaments.

The lack of domain knowledge was a large part of the reason I was struggling with my last-great idea which was to be a self-service kiosk that could be installed at tables in restaurants. I was in the middle of prototyping this when I realized I had no actual restaurant experience and designing an entire POS without industry experience… or at least input… was destined to fail. Well, that and no market research, UI testing, etc. etc. (Like I said, with each failure I learned something)

Now, aside from just my best friends and love-of-my-life, I saw in Christina a business partner, a subject matter expert, an artist, and a designer. (Did I mention she went to college for Animation and is a gifted artist?)

The pitch

I explained all of my thoughts to progressively less skeptical Christina. We thumbed through the catalog together and discussed items. I explained my vision for a website that would have a “Pet Wizard” as it’s stand out point. It would be able to walk you through finding the perfect item for your pet. The entire thing would be built from scratch – we would have a site that was completely ours and didn’t have any “cookie-cutter” feel of other small online stores.

The site would be able to “self-analyze” and grow – it could check current prices against other websites and automatically average out its own prices within certain degrees. And if we manage to hit the sweet spot, we could grow with almost unlimited upside. The sweet spot is the theoretical point that exists where the ROI (return on investment) on advertising is a consistent percentage. Spend $100 on advertising and make a net profit of $50, spend $1,000,000, and make a net profit of $500,0000. Then it’d just be a matter of finding more and more money to throw at the engine.

Now we need a name…

Fortunately, the names came fairly easy to us, unfortunately, as is typically the case the web site domains didn’t. After a bit of searching, we eventually found the perfect domain and right away registered it. PetKaboodle.com was born!

Work begins on PetKaboodle.com

Christina and I dug right into the work of creating the website. We’d have in-depth design discussions about what the ideal user flow would be, what would set us apart, what we liked and disliked about other on-line stores. Christina drew up images of our mascots, Kit (the cat), and Kaboodle (the dog), and gave me images of exactly how the website pages should look. As these came in, I’d chop up the images into smaller sprite sheets. I’d cut the buttons and headers out of the pictures and start writing the functional code to make it all work.

One of these days, I plan on doing a full technical write-up on Tech.BrianRiley.blog.

The search engine

The search engine would allow you to search either by typing in what you’re looking for or choosing categories. You could select “color: blue” and “type: collar,” and it would show you all of the blue collars. Typing “blue collar” or “blue collars” or even “colar blue” (typo intentional) would also select these search choices. Beyond that the only options left to choose were filtered down to things that matched items with “blue” and “collar”. You could select the brands, sizes, materials, collar types, etc. All of this was possible because the site could understand the information in the listing description and title!

The shipping engine

The shipping engine was challenging because we wanted to have the closest exact shipping costs possible. By making the shipping as low but valid as possible, we could offer the items at a lower total rate. Sites that have free shipping on all orders would typically charge more for their items, while ones that had the lowest prices were usually costly on the shipping side. To figure this out, the site would break up the customer’s order into the smallest number of boxes. This meant it needed to figure out how to pack the boxes and how much packing material would be included. Then it would ask FedEx, USPS, and UPS how much it would cost to ship those boxes using different methods. Finally, the site would present the cheapest and fast options available to the customer to select from.

And I’ll form the head company!

With the website development well underway, the next step was to form a company. Fortunately, I’d been down this road before in the past, so the idea wasn’t too overwhelming. I had formed a sole proprietorship/dba once before and even a corporation. That time I had done everything through a lawyer. After being charged for staples and paperclips on an overly inflated itemized bill I vowed not to do it that way again.

This time I headed over to incorporate.com, and within a couple weeks we had our freshly minted PetKaboodle, Inc. The process was so smooth that I later came back and formed 2 subsequent LLCs with them!

I’ll let the professionals explain the differences and ins and outs of Corporations (Inc.) vs Limited Liability Companies (LLCs) for now, but suffice it to say having formed both I would be more inclined to form an LLC in the future unless I had a really good reason to form a corporation.

At the time my primary reason for forming a corporation as opposed to an LLC was that I had thought it would be easier to get investors in the future. In retrospect, we never ended up trying, nor wanting to bring investors on board. More importantly, I’ve since realized that if we had brought in investors, they likely would have wanted to change to the corporate structure anyway – so an LLC until that time would have been perfectly fine (and in a lot of ways cheaper)

And we’re off!!

Now that we had our domain, the website was under development, and our business formed, all we needed was to have something to offer to the world! We had limited funds to acquire our initial merchandise and as we started to look through our potential vendor’s items in earnest, choose the correct subset of items to invest in initially was starting to look like a challenge!

Now for some market research!

So for us, the best way to figure out what items to stock and which sell well turned out to be buying some items and selling them on eBay! We did this for about 10 months before the official PetKaboodle.com website went online. What was great about using eBay for market research was that we could see other sellers of similar – or the same items – and see what they sold for and how long they were on the market. It also gave us some early insight into which varieties of things to purchase.

The next step after checking out other people’s sales was to place some of our first orders. On 2/19/2007 we finally placed our very first order of wholesale pet supplies! As the items arrived we’d make listings for them on PetKaboodle.com (even though it still wouldn’t be live for many months) and then export a feed from PetKaboodle to eBay so we didn’t have to do dual entry. This also worked into an inventory sync mechanism I wrote to keep eBay and our website up to date on quantities of inventory.

And we’re off to our first trade show

Market and product research didn’t end at eBay. We spent a lot of time at trade shows browsing and interacting with as much new merchandise as we could! We made connections with tons of vendors and would come back from the shows and parse through binders worth of information. The first show we ever attended was Superpet expo in NJ. Of all the expos we’d attend though, none of them compared to the Global Pet Expo that takes place annually in Orlando, FL. It didn’t hurt that my wife and I could sneak in trips to Disney World while we were down there!

We begin marketing to our customers

After doing some product tests on eBay, we launched PetKaboodle, the eBay store! Once upon a time, it lived at stores.ebay.com/PetKaboodle. We started to slowly grow our inventory and also progressively including marketing material for PetKaboodle.com. This was mostly in the form of business card style magnets we’d include with each order.

It would be nearly 2 more years before PetKaboodle.com was live

At this point, it was still more a growing side hobby than a business. Time was scarce as my wife and I were also planning our Disney World wedding for May of 2008, after getting engaged there (on Splash Mountain) in 2005. Also, my role at my job was rapidly growing and consuming more of my prior free-time. Additionally, It didn’t help that we were also living in a relatively small basement apartment, so we stored our inventory in boxes, and it was slowly taking over our living area. We could only scale up so much in our current location – fortunately, we purchased a house in mid-2008 as well. That also ate into the time we could put toward the website.

PetKaboodle.com goes live!

Finally, after years of hyping the eventual coming of PetKaboodle.com, our website went live at 1:30am EST on January 18th, 2009! It had an initial inventory of over 500 items – each painstakingly entered by Christina over the course of about 2 weeks.

I’d love to say it was wildly successful from the moment I put it live, but it took a little while for the search engines to find us and sales to start coming in. Order #1 came in about 30 minutes before the official go live… but that was from me, so it doesn’t count. In fact, the first 7 orders were all me testing various things over the course of a couple days. But order #8… that was our actual first order, and it came in on January 28th at 6:48:05am – just less than 10 days after we went live.

and begins to grow…

For February we ended up with 37 orders, by April we were consistently over 100 orders a month with our peek being December when had over 150 orders! During this we were also continuing to sell on eBay as well. As we were maintaining our own inventory, packing, and mailing each and every order the workload was growing.

A large reason for the uptick in orders was I was now paying for advertising and submitting our product to shopping sites. This included:

• Shopzilla
• NexTag
• Yahoo Products
• Shopping.com
• PriceGrabber
• Become.com
• GoShopping.com
• Smarter.com
• Pronto
• theFind.com
• Google Products

We also were running Google AdWords campaigns, also automated directly by the site. We learned how to drive all the traffic we could ask for! Of course, it’s easy to buy traffic – having high converting traffic, now that’s a different story.

The refinement begins

Since all of the feeds for the various advertising sites were being provided by PetKaboodle’s engine, we were able to add in logic that would revise the lists.

For instance, if a pair of dog boots had a lot of clicks coming from NexTag but very few sales, PetKaboodle would automatically lower the price of the item if the traffic was coming from NexTag. Once the item price was lowered enough while maintaining a sub-optimal conversion rate, the item would be removed from the feed to NexTag.

On the flip side, if a collar was converting well, the price would be slowly increased for that feed. If the conversion rate started to drop by a certain percentage, the price would decline as well.

This meant that in the first year, we spend the most on advertising and had the most sales, but ultimately had the lowest profit! As time went on our site would progressively self-regulate the price point of the items to optimize price against the cost.

Out first show – as a merchant

March 8th, 2009 PetKaboodle attended it’s first show – this time to sell. We were slightly misplaced as it was actually a craft show, but the price was right and we discussed with the person running it the types of products we’d be showing. Although I’ve personally worked many trade shows in the past for my day job, I don’t think I’ve ever even been to a craft fair before.  The thinking was it’s really all about getting our name out there, and fortunately we were the only pet boutique retailer at the show so we managed to stand out a bit.

While I don’t think we really made out well at the craft show, it was only the first of many various types of shows PetKaboodle would be seen at. We even did a biker charity show once!

By and large we saw the shows mostly as marketing opportunities. We’d give out tons of business cards, and sell a bunch of inventory – but it always seemed the shows were priced in a way where it was next to impossible to actually make money at them. The better the venue, the more traffic, the more expensive the booth, the more you’d need to sell – it never seemed to scale well.

From a marketing point of view, we’d get some leads and ultimately some returning customers, but again the economies of scale never seemed to be on our side.

Amazon enters the picture

In Oct 2009, we became an Amazon merchant. Like we did with eBay, we added a feed to Amazon that listed our current inventory and updated every-time something sold. Unfortunately, Amazon doesn’t provide a feed of what sold, so I wrote a program that watched the emails that came from Amazon, figured out which item sold, and updated the quantity on our site.

We created a monster!

Over the next several years, our site continued to grow, and our inventory process continued to be refined. Our ratings on Amazon were through the roof, and we probably sold about as much inventory on Amazon as we did on our own website – although the profit margins were definitely higher on our website. Suddenly we found our nights and weekends were spent packing and shipping inventory, or counting inventory, or responding to questions, or dealing with returns, or putting together the next order, or figuring out marketing or preparing for the holidays, or… Obviously, all of this is to be expected, but we also were running based solely on a two-person team and a basement stocked full of inventory! This pace steadily hastened throughout the nearly 6 years we were in business.

Amazon, friend or foe?

Over the life of our business, we also noticed that the online retail of pet supplies was becoming a race to the bottom. Every online retailer is effectively competing with Amazon. The problem is there’s always someone willing to take less profit on an item, to the point that the same things we could buy from distributors were sometimes being sold for less than their lowest bulk wholesale price on Amazon! Sometimes by Amazon directly!

The turning point

We had managed to create something out of nothing – that all started from a crazy idea I had one night in the shower. Not only did we build something, but it was profitable, with a growing customer base. After 6 years of running PetKaboodle, Inc., we had reached a fork. The next logical step in the business was to invest in more inventory. After all, we could turn the inventory around, and running out of supply between orders was beginning to happen more frequently – even with increasing order sizes. The problem was we were virtually out of storage space and would have no time to pack the inventory and handle the rest of the business. We needed to scale, we needed to invest in a warehouse, and bring in an employee to help us get the orders out. We needed to invest more capital in our business to be able to do all of this.

Is this really what we want?

We had this whole time been so fascinated with the question, “can we build this business from scratch,” that we never really stopped to ask, “do we really want a retail business and all that comes with it?” My wife’s passions are art and animation, and mine is software development. We were both able to be successful with our individual passions, and as we pondered the question, retail wasn’t where either of us wanted to be long term. In a strange case of history repeating itself, just as I had blindly sacrificed my first business, Door to Door Computer Repair for a job in retail, I was now about to do it again – albeit, this time of a different scale. My wife confessed she was in the same position – she was enjoying creating something from scratch but didn’t love the idea of dealing with inventory and customer issues. Further, trying to keep it as a small side project with no real future also didn’t seem like a good idea. It had grown too large for us to handle, but still too small for us to sell.

Game Over

By October 13th, 2014, we decided that the glorious adventure we had with PetKaboodle, Inc. had run its course. We considered selling it, but one of its strongest features while we owned it would become one of its worst-selling points – the site was written from scratch. No community could help a new owner if they wanted to change the website or ran into a bug. What meant unlimited flexibility to us, would mean constriction to someone else. We had some intellectual property (IP) that could carry some value – namely our domain and a trademark on PetKaboodle, Inc. – but by just about any comparison, we were too small to get much value from that. At the time, the most valuable asset we had was a bunch of inventory. On this front, we MAJORLY lucked out as an art client of Christina’s just so happened to also sell pet supplies. The liquidation and subject casually came up in conversation one day and the client offered ****** and when the we found a friend-of-a-friend who was starting their own pet supply business and offered**** to buy up the remainder of our stock at a reasonable price. And just like that, PetKaboodle, Inc. was no more.

Final thoughts

While the entire process had its ups and downs, I wouldn’t trade a minute of it. Working with my wife side-by-side on creating this venture from before we were married, living in a basement apartment to working shows, and visiting trade shows. Coming up with a collective vision on paper and turning it into an actual business that generated profit every year for the entire time we were in business was an incredible journey. And now I leave you with the final blog post from blog.petkaboodle.com: