March 7, 2012
Retailers Prize Pets
Pet products are a gazillion dollar business. Everyone knows it and an increasing number of retailers (brick, click or both) are chasing after the market to get closer to dogs, cats, etc. and their human “parents.”
Conventional wisdom has held that even with economic tough times, people continue to lavish the best on their pets. On the contrary side, at least one report that I’m aware of says that pets are now feeling the crunch themselves with owners trading down from super premium or premium brand foods to value-priced alternatives.
The question could be an either/or: are consumers maintaining their pets’ grand lifestyles or looking to get by on the cheap? The reality is that both are true and this remains a business very much worth pursuing.
Before I get too far ahead of myself, let’s look at some recent coverage of the category.
A recent Bloomberg News article cited a Packaged Facts report from September that found nearly 40 percent of pet owners said they had cut back on buying pet products. That was 13 percent higher than the same period a year earlier.
Another report, this time from The New York Times, pointed to the increase in “chef-inspired” pet foods hitting the market. The segment currently accounts for around five percent of the $19 billion pet food market (Euromonitor) in the U.S.
With a market so large — the U.S. is the biggest pet products market in the world based on Euromonitor figures — there’s no questioning why so many different merchants are chasing the business. For many, that chase has gone online.
A Wall Street Journal article pointed to both established chains and start-ups looking to cash-in on pets and their parents.
One e-tailer, PetFlow has created a subscription-based model to help it address the challenges of selling bulky pet foods. Currently, around half of PetFlow’s new customers automatically sign up for regularly scheduled deliveries. The company claims to be shipping more than a million pounds of pet food on a monthly basis.
“Dogs need the exact portion of the exact same food every day,” Alex Zhardanovsky, co-founder of PetFlow, told The Wall Street Journal. “It’s one of the only industries that lends itself to a subscription-based delivery system.”
While the startup PetFlow is not making money yet, the Journal article pointed to the debate over whether online pet sites can be profitable even as firms such as Forrester point to the category’s online sales growing from $2.5 billion in 2011 to $4.8 billion in 2015.
Count Michael Rubin, CEO of Kynetic, among those who say it’s going to be tough to turn a profit selling pet food online. He told the Journal that the three elements of being successful online “high margin, high price and low weight” are all missing from the pet products model.
BrainTrust
Recent Discussions
Discussion Questions
Discussion Questions: Is online a viable channel for retailers pursuing pets and their parents? What will it take for retailers, both brick and click, to be successful in the pet products market going forward?
Poll
Pets are mega-big business. Pet owners, including my wife and me, put their beloved pets first. The click business will flourish simply by being out there. Price will be a strong asset for those who will be the most successful.
It sounds like Petflow has hit on a key point — the regularity of the pet diet and the opportunity to make shopping for the basics very easy for the consumer. The next logical step is an Amazon type business that meets other pet owner requirements for treats, gifts, etc. The click side of the business will continue to grow as we move to even more of an online consumption economy.
Heretofore, the only pet food I’ve seen online was ridiculously expensive. If online/delivery services can offer a good model with value, enough pet owners would sign on to make it at least viable. But with shipping costs thrown in, and mega pet stores and club stores already doing a pretty decent job, this isn’t a slam-dunk.
This makes sense for many pet owners — the predictability makes it a good potential business. To make it work, products have to be absolutely consistent, of good quality, fairly priced and great execution. Struggling with 50 lb bags of food from the big box stores as part of stock-up shopping trips would be a chore many many would happily hand over to a concept like Petflow.
There are a myriad of opportunities for pet related goods and services online. While there is some evidence of some customers “trading down,” there was plenty of trading up during and coming out of the recession. Beyond foods, simply look at the investments companies in the pet health and pet insurance have made in digital capabilities. If you need a single piece of evidence, try to buy Flossies locally and then look online!
Given the success of e-commerce across a broad variety of industries, online must clearly be considered a viable channel for retailers pursuing the pet market. The challenge in the past has been the weight of dog food, which drove shipping costs to a point where the overall total price was uneconomical.
For retailers online to be successful at selling dog food and other pet products, they must move to a model more like Amazon Prime, where consumers prepay freight for the year and then receive all shipping for free from that point.
Once the economics issue is overcome, online is a fantastic way to build relationships with consumers about their pets. The stories and photographs are always great, and consumers form such strong attachments with their pets that relationship marketing should be like “falling off a log.”
With consumers starting to pinch their pennies even on their pets, it may be the right time for retailers to start promoting more aggressively PL options in pet food. In the past, the market has been tough for PL since pet owners tend to treat their animals better than themselves. Maybe pet owners are willing to trade down to a PL brand if they see a cost savings and are comfortable with the quality.
I like the online subscription model, but don’t agree with Alex Zhardanovsky with regard to his comments on pet food being one of the only industries that lends itself to subscription based models.
If shoedazzle.com can pull it off, I believe there is plenty of room for subscription based models across several industries.
There’s always room for boutique online retailers in niche markets. Pet food delivery has obvious challenges but if directed toward the right demo it will find an audience. Many consumers feel that rewarding their pet for always excitedly greeting them at the door is money well spent. Feeding the pet in a premium manner is easily justified.
Those who watch the TV channels I frequent the most, FoxNews and ESPN, are familiar with the 1-800-PetMeds ad campaign. They sell online or by phone, by subscription, and for less than veterinarian offices charge. Free S&H! They’re doing great, and their pet food offering is extensive. I think this ship has already sailed — into a viable channel.
Good selection, availability, value and service will virtually guarantee success of these retailers. Hey, wait a minute, that’s true for ALL retailers. It ain’t rocket science!
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Pets are mega-big business. Pet owners, including my wife and me, put their beloved pets first. The click business will flourish simply by being out there. Price will be a strong asset for those who will be the most successful.
It sounds like Petflow has hit on a key point — the regularity of the pet diet and the opportunity to make shopping for the basics very easy for the consumer. The next logical step is an Amazon type business that meets other pet owner requirements for treats, gifts, etc. The click side of the business will continue to grow as we move to even more of an online consumption economy.
Heretofore, the only pet food I’ve seen online was ridiculously expensive. If online/delivery services can offer a good model with value, enough pet owners would sign on to make it at least viable. But with shipping costs thrown in, and mega pet stores and club stores already doing a pretty decent job, this isn’t a slam-dunk.
This makes sense for many pet owners — the predictability makes it a good potential business. To make it work, products have to be absolutely consistent, of good quality, fairly priced and great execution. Struggling with 50 lb bags of food from the big box stores as part of stock-up shopping trips would be a chore many many would happily hand over to a concept like Petflow.
There are a myriad of opportunities for pet related goods and services online. While there is some evidence of some customers “trading down,” there was plenty of trading up during and coming out of the recession. Beyond foods, simply look at the investments companies in the pet health and pet insurance have made in digital capabilities. If you need a single piece of evidence, try to buy Flossies locally and then look online!
Given the success of e-commerce across a broad variety of industries, online must clearly be considered a viable channel for retailers pursuing the pet market. The challenge in the past has been the weight of dog food, which drove shipping costs to a point where the overall total price was uneconomical.
For retailers online to be successful at selling dog food and other pet products, they must move to a model more like Amazon Prime, where consumers prepay freight for the year and then receive all shipping for free from that point.
Once the economics issue is overcome, online is a fantastic way to build relationships with consumers about their pets. The stories and photographs are always great, and consumers form such strong attachments with their pets that relationship marketing should be like “falling off a log.”
With consumers starting to pinch their pennies even on their pets, it may be the right time for retailers to start promoting more aggressively PL options in pet food. In the past, the market has been tough for PL since pet owners tend to treat their animals better than themselves. Maybe pet owners are willing to trade down to a PL brand if they see a cost savings and are comfortable with the quality.
I like the online subscription model, but don’t agree with Alex Zhardanovsky with regard to his comments on pet food being one of the only industries that lends itself to subscription based models.
If shoedazzle.com can pull it off, I believe there is plenty of room for subscription based models across several industries.
There’s always room for boutique online retailers in niche markets. Pet food delivery has obvious challenges but if directed toward the right demo it will find an audience. Many consumers feel that rewarding their pet for always excitedly greeting them at the door is money well spent. Feeding the pet in a premium manner is easily justified.
Those who watch the TV channels I frequent the most, FoxNews and ESPN, are familiar with the 1-800-PetMeds ad campaign. They sell online or by phone, by subscription, and for less than veterinarian offices charge. Free S&H! They’re doing great, and their pet food offering is extensive. I think this ship has already sailed — into a viable channel.
Good selection, availability, value and service will virtually guarantee success of these retailers. Hey, wait a minute, that’s true for ALL retailers. It ain’t rocket science!