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A pet food start-up takes a bite out of Amazon

A little more than three years ago PetFlow.com kicked off its first venture capital fundraising meeting. As we were about to sit down and properly introduce ourselves, one of the senior VC partners looked us dead in the face and said, "What about Amazon?"

It was the same question asked of us at every single fundraising meeting there on out. And our answer always remained the same: "Just because Amazon sells something doesn't mean we can't."

Amazon is an incredible service (I use it quite frequently). After all, Amazon sells just about everything you could possibly purchase. The reality, however, is that the pet-supplies space is a nearly $55 billion industry, with online penetration of less than 4 percent.

"So what about Amazon?" I said. "What about it?"

Here's how PetFlow.com competes:

GK Hart | Vikki Hart | Getty Images

Our employees have to be our customers.
We aren't simply in the business of shipping our customers' orders, we are product experts because we focus on nothing else. We have a strict requirement that each and every one of our reps owns a pet and uses our products daily. You not only have to love animals, you also have to live with one, allowing you to understand behavior, wants and needs.

This means that if a customer calls PetFlow.com and asks for a recommendation on a chew toy that will last longer because Rex the pit bull is a heavy chewer, we'll know exactly what to recommend. Or if Rex suddenly develops an allergy to chicken, we've got that covered, too.

(Read more: Five start-ups to watch in 2014)

You can't compete on shelf space, and you shouldn't try to.
Merchandising is another extremely important differentiating aspect. Having Amazon as a competitor with unlimited cash for inventory and warehouse space forces our team to be laser-focused on the quality of products instead of the quantity. We are able to turn our inventory over 10 times a year, a feat that keeps the cash in our coffers for operations and advertising instead of decaying on our warehouse shelves.

When our product team meets with vendors, we often hear: "This is a big seller at Amazon; you should definitely carry it." For us, it's not that simple when it comes to listing the same item on our site. We carefully review the ingredients of each and every product, examine where they are manufactured and even send many of our staff home with the products to allow their pets to test them.

"We like to think we know what customers want, but they often surprise you." -Joe Speiser, co-founder of Petflow.com

Remember that every Goliath has its weakness.
If you have a large Goliath in your business, focus on the areas where they are weak. Build a competitive advantage around a specific niche, and work on offering the best possible customer experience. Often, the personal touch is something the Goliath isn't capable of offering.

Don't bet on a current sales fad as being your edge.
We weren't without our mistakes and regrets when we first launched in 2010. Flash sites were all the rage. We built our first version as a "Members-Only Club," just like Gilt or Groupon. The immediate feedback was overwhelming: No one wanted to sign up before seeing our products.

Purchasing pet food was not like shopping for a new blouse or a half-off massage. This forced our small tech team to reengineer the entire structure of our e-commerce platform a month after launching. We like to think we know what customers want, but they often surprise you.

(Read more: Dogs are people, too: The VIPet market)

Pay to hire the right talent; you very likely aren't it.
Our biggest regret came very early on as a new e-commerce business. We realized that our past work experience made us strong in many different areas, but there were still large holes in our operational skills. My co-founder and I worked hard to overcompensate, but even while we were learning and improving, it was at a real cost of time and capital.

When you are looking at a market land grab, it's important to move as fast as possible before a competitor jumps into the fray. Hiring recruiters to attract best-in-class talent, while expensive, pays off extremely quickly—allowing you to focus on your natural strengths. It's one of the things we wish we would have done from the beginning.

Today our site has never been stronger. In its first half year of operation (PetFlow launched in July 2010), sales were $1 million. By 2013, sales had grown to $39 million. Sales are projected to break $50 million this year.

We plan to continue our strategy in disrupting a $55 billion industry by doing just one thing very well: keeping customers happy.

—Joe Speiser is the co-founder of Petflow.com and a member of the CNBC-YPO Chief Executive Network.

CNBC and YPO (Young Presidents' Organization) have an exclusive editorial partnership. It consists of regional Chief Executive Networks in the Americas, EMEA and Asia-Pacific. These Chief Executives Networks are made up of a sample of YPO's unrivaled global network of 20,000 top executives from 120 countries who are on the front lines of the economy. The opinions of Chief Executive Network members are solely their own and do not reflect the opinions of YPO as a whole or CNBC.

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