For anyone with pets, the advent of online shopping has been a blessing. Lugging heavy bags filled with cans of cat food is one of the few negative aspects of having a pet. That’s my personal view, anyway, as the owner of – or is that slave to? – three cats.
Adam Taylor, co-founder of UK-based pet food subscription service PetShop, feels the same. As a young boy, raised in a household with various pets and sisters, it was always Taylor sent to the shops to restock the pet food and carry back the heavy cans. Fast forward 15 years, and Taylor, recently made redundant from Lehman Brothers after its bankruptcy, was back living at home, and back being sent on his regular last-minute trips to the shops to stock up on pet food supplies. The inspiration for PetShop was born. Taylor explains:
From 12 years old to when I was 27, I was like, ‘Mum, are you still running out of pet food? And I thought, what do you do when I'm not here because we've all moved out of the house? I thought I would set up a subscription service for when I'm not there. She suffers from arthritis, but even if she didn't, it's just heavy and bulky for a 68-year-old woman. I found out nobody was offering a subscription service back in 2009.
Petfood as a service
Doing his research, Taylor discovered the average pet owner is generally 45-65 years old and there’s a slight dominance of women buying pet supplies. While there was a ready supply of startups focused on developing fashion, technology and finance products, the former group had been overlooked. So Taylor and his wife Lexi launched PetShop.co.uk, an online store stocking pet food and supplies as well as subscription pet food service, Bottomless Bowl. He says:
The subscription model makes sense. When people buy pet food, it’s the same product generally for the lifetime of the pet. It’s also a perfect product for home delivery as well because it's low value, but it was big and bulky so let the courier do the heavy lifting for you.
Despite choosing a more traditional space for his venture, technology has still been the driver in the firm’s success so far. By applying their knowledge of e-commerce and social media, Taylor and his wife gained one of their competitive advantages.
It’s then using technology to empower us to disrupt the industry, really looking at return on investment technology. So stuff that drives sales. It's very easy to look to raise X million pounds for your startup, but it's very dangerous and to spend money without realizing actually what it does.
By self-funding it, we really looked at what software was available, what could be achieved and how do we really retain customers, how do we drive the subscription model and how do we enable a profitable business.
Making the change to NetSuite
For its first few years of operation, PetShop relied on separate components to start up and run its business – BigCommerce for the website, QuickBooks for accounting and MailChimp for email marketing, with no formal warehouse management system. When the firm hit about £2 million ($2.6m) in sales, the cracks began to appear and it realized new technology was needed to support the volume. Taylor adds:
Customer service started to slip. We were hitting our heads against the wall with constant barriers inhibiting our ability to customize the platform. We basically had to fake it. We offered a subscription service, which to the customer seemed seamless on the website, but actually when we'd get a subscription order, we’d then set up a Google calendar event, which would then message us every day and then we’d create the orders.
PetShop is now a NetSuite one-stop-shop, using OneWorld for ERP, accounts, stock control and customer service – Bronto for email marketing, an RF-SMART warehouse management system built within NetSuite, and SuiteCommerce Advanced for the website. Ahead of embarking on the major IT project in 2014-2015, Taylor obsessively investigated all the other solutions out there and spent a year researching the marketplace. The key driver was a cloud-first product. He says:
I don’t know if I really knew what cloud meant back in 2014, but speaking to everybody available, it became evident that was the only way to go and today it would be the only way I’d go again. One of the big reasons was not only this huge cost of having a server physically on site, and the security, and then also you need to have the IT person managing it as well.
The key for us is to be able to outmanoeuvre the big competitors by being able to out-innovate, and move quickly and efficiently. That's where NetSuite was key in that it enabled a blank canvas to innovate and create all the functionality that we needed, and that we could do it relatively cost effectively.
True cloud advantages
One of the other frontrunners for the IT overhaul was SAP Business One, but Taylor felt the product wasn’t “truly cloud” back then. He adds:
They were trying to market it as a comparable product but ultimately we still needed to have a server online. Rather than having a physical several onsite we’re still paying for a server offsite virtually. It wouldn't get the push-through updates that NetSuite would have, and then there were other costs with the server itself.
As well as SAP, Taylor explored several bespoke and smaller UK-developed ERP platforms, but was won over by NetSuite’s flexibility, cost and the level of investment the firm could put into future development.
A lot of software systems say everything's possible, and that may be true to some extent, but we found that there's often hidden extra cost or it doesn't really seem to integrate. As an example, our Bottomless Bowl subscription service is unparalleled, where you can choose the frequency on a weekly basis and we're also just about to launch that you can choose the date of your subscription to start so you can align it with your pay day. It sounds simple but it’s actually quite a key request from our customers. Making the subscription model successful is having that customization level.
Since PetShop made the decision to put all its eggs in a NetSuite basket, the latter has been acquired by Oracle, a much bigger player and not a pureplay cloud vendor. Taylor was concerned initially that the deal would kill the creativity in the NetSuite product and make it less flexible. However, from his experience Oracle has made a conscious effort to leave the NetSuite team alone to be entrepreneurial.
I hope they don’t change that. They've been very flexible with how we pay them within the remit that they can do and the discount level as well. It’s not just a one-fits-all.
One area Taylor would like to see more flexibility is over its partner model. PetShop worked with a NetSuite partner, Bluebridge One, on the IT project – but this was not the ideal choice from NetSuite’s point of view.
Bluebridge One is one of the oldest NetSuite partners. I think I upset NetSuite a bit, because when we did choose NetSuite, they allocated us one partner and I did say, you’ve given me one person and this is a long relationship. So I went out to every partner I could find in the UK and internationally. I didn’t realise that’s not really the way the model worked. It was a bit unconventional, but I think that’s a mistake and they should make it that people shop around for partners.
I think NetSuite is getting more flexible on this, but I do always like to work directly with the provider and skip out as many middle men as possible. It’s important for new potential NetSuite customers and what is best for them.
But this doesn’t diminish PetShop’s overall satisfaction with its technology partner and the rewards it has seen. The firm has grown by 50% year on year since rolling out the NetSuite technology, and now sells over 10,000 products. Email marketing has seen big gains, with a 12% email conversion rate, thanks to some clever segmented workflows. The customer retention rate has increased from 20% to 45%, and this has all been delivered via 2% lower marketing costs.
The firm has also managed to support this growth with no need for headcount increases in either the office or the warehouse, as the efficiencies and automated tasks enabled by the software have made the business lean in terms of sales per head.
More recently, PetShop has expanded into five new countries - France, Germany, Spain, Portugal and the Nordic region – with plans to be more aggressive there and look for opportunities in other English-language speaking countries. The key barrier to expansion is down to the cost of shipping products; elements like multi-nation currency support within NetSuite means the technology is all in place to support further international rollout.
Like many UK companies, PetShop is awaiting the outcome of the Brexit situation to see what impact it will have on European trading relations. Taylor explained that the drop in the value of the pound as a result of the referendum has increased interest from international markets, but the firm is now waiting to see if any additional exporting costs will outweigh the pound decrease value.
We’re not heavily reliant on the European or international markets currently. We’ll carry on as normal and see what happens.