Why Wag.com Might Make PetSmart Sit

| About: PetSmart, Inc (PETM)

In New York, where Seamless is king, it's hard not to notice how we are shifting toward an economy where everything is ordered online and delivered straight to our door. In the city, Seamless began the trend with food back in 2005. In 2013 Seamless completed its merger with Grubhub and now delivers over 130,000 meals each day. Seamless dominated the meal delivery market by bringing restaurants that historically only took orders either in person or over the phone to a centralized, free, and easy to use online platform. The transformation was tremendously successful and Seamless revolutionized the way we order meals in so many ways.

For one, Seamless means no more busy signals, no more confusion about which dish you are trying to order over the phone, and no more frustrated customers in the store trying to get a pizza waiting impatiently for the guy behind the counter to get off the phone.

Secondly, Seamless became a one stop shopping center for hungry customers looking to browse available restaurants. By entering your address into the platform, Seamless is able to identify restaurants that are willing to deliver to your location, their minimum delivery price, and give you an approximation of how long it will take before you can stuff your face with General Tso's chicken. The platform also has a rating and filtering system for users to identify which restaurants are high quality and which run down 1/5 star burger joints should be avoided.

Finally, as the name suggests, Seamless has integrated itself to the fabric of life in cities in which it operates. Seamless is incredibly easy to use and is ruthlessly efficient. Features including the option to save your credit card information and reorder previous deliveries with the press of a button mean that a food order is never more than a few clicks away. Seamless also has a great mobile app which allows customers to place orders for pickup or for delivery while on the move.

Others have taken note of the Seamless revolution and are beginning to launch online platforms to capture other markets using the Seamless method. One notable example is Wag.com. Wag is an online one stop shopping center for pet supply deliveries which also happens to be a subsidiary of Amazon (NASDAQ:AMZN). By taking pet supply delivery to the internet, Wag is going head to head with brick and mortar pet stores like PetSmart (NASDAQ:PETM). Last Tuesday, PetSmart reported FQ4 2014 earnings missing the Estimize.com community consensus on revenue by $27 million.


PetSmart has now missed revenue expectations from both Wall Street and Estimize 5 quarters in a row. This quarter PetSmart missed by the widest margin seen over the past two years and revenue fell by 4% compared to FQ4 last year. On the other hand, while Wag is only a small fraction of its total business, Amazon has steadily grown revenue by at least 20% per quarter on a year-over-year basis in each of the past 6 quarters. Additionally, Amazon continues to heavily reinvest its revenues in its own business and expand the online juggernaut presence it has developed.

Over the past 20 years, the internet has proven to be a powerful tool for centralizing information and saving users' time. It seems logical and highly likely that other platforms will pop up in different industries copying the Seamless model. Keep an eye on the two companies and see if Wag.com can continue to disrupt PetSmart's business or if PetSmart can come up with a strategy to bite back.

Disclosure: No positions.