Modern hightech industries are also not immune to the perils of perfect competition. Many Internet entrepreneurs learned the hard way that it is difficult to beat the forces of perfect competition. Fueled by eager venture capitalists, about 100 etailers such as pets.com, petopia.com, and pet-store.com had sprung up by 1999, at the height of the Inter- net bubble.23 Cut-throat competition ensued, with online retailers selling products below cost. To make matters worse, at the same time, category-killers such as PetSmart and PetCo were expanding rapidly, opening some 2,000 brick-and-mortar stores in the United States and Canada. As a consequence, most online pet supply retailers went out of business. Taking a look at the competitive industry structures depicted in Exhibit 3.3, we might have predicted that online pet supply stores were unlikely to be profitable. When there are many small firms offering a commodity product in an industry that is easy to enter, no one is able to increase prices and generate profits. The ensuing price competition led to an industry shakeout, leaving online retailers in the dust.