to IBISWorld’s Online Pet Food & Pet
Supply Sales market research report, the online market size for petfood,
treats and supplies sold on the Internet will reach US$3.2 billion in 2014.
That's an annual growth rate of 7.8% (from 2009â€“2014, projected). Online
petfood sales totaled US$666 million in 2011, according IBISWorld. The food and
treat category comprised roughly 33% of the US$2 billion online pet-related
sales in 2011.
rising pet ownership among US households and more owners humanizing their pets,
online petfood and supply stores have fared well over the five years to
2014," says IBISWorld. "Increasing popularity of premium petfood
supplies has also fueled industry growth over the period; since premium goods
are typically priced higher, they provide a good source of revenue for players.
Nevertheless, increasing competition will likely constrain profit
margins." Rising pet ownership in the US and growth across the
e-commerce sector have caused the industry to experience overall growth,
despite the recession.
the online petfood and treats industry exhibits a low level of concentration.
The top four companies in this industry comprise a combined share of about
16.8% of total revenue from all online sales of pet supplies in 2014.
Meanwhile, the majority of revenue is distributed among several other operations.
"Some competitors, like Walmart, are large retailers that earn substantial
overall revenue, but only a marginal share is relevant to the pet
industry," explains the market report. "Other companies, like
PetSmart, are wholly pet-related, but they earn only a marginal share of their
revenue from online sales." Market share concentration has remained
relatively stable during the past five years.
pet owners indicated they reduced spending on pet supplies during the
recession, according to a survey conducted by Pet Business, many consumers
gravitated online to purchase more-affordable substitutes in lower quantities.
Per capita disposable income, expected to increase 3.1% in 2014, is expected to
cause revenue growth of 2.5% in 2014. With rising revenue, industry profit
margins have increased over the five-year period. According to IBISWorld
Industry Analyst Andy Brennan, “Industry profit has risen due to improvements
in automation, which caused wages to decline as a proportion of revenue.”
Furthermore, premium petfood and supplies have boosted profitability because
they typically have higher markups.
operators will likely continue entering the industry during the next five
years, especially those that specialize in targeted markets, such as supplies
for exotic animals or health-oriented products. IBISWorld forecasts that
industry revenue will increase in the five years to 2019. However, online pet
retailers will also experience increasing competition from brick-and-mortar
stores that also sell petfood and supplies, including grocery stores. “This
trend is largely due to the closing of a tax loophole that has allowed many Internet retailers to forgo charging sales tax,” says Brennan. This factor is
expected to cause profit margins to decline, since firms will need to reduce
prices to remain competitive.
faces increased competition from online sites of virtual stores like
PetFoodDirect, MrChewy and PetFlow. Specialty retailers such as Petco and
PetSmart also run active online businesses. PetSmart recently revamped its
website and offers over 8,000 products which are not found in its stores.
IBISWorld estimates virtual retailers like PetMeds Express, the parent company
of 1800PetMeds.com, garner the biggest online market share in the industry.
PetMeds Express has about 8.3% of the total share. The specialty retailer
offers about 1,200 products online and through direct mail—71% of its sales
are derived via the Internet.
who earn more than US$70,000 per year represent the largest market segment for
online pet supply retailers, according to the report. In 2011, IBISWorld
estimated that this income segment accounted for 53% of total industry revenue.
According to the Bureau of Labor Statistics, on average, these consumers spend
nearly $700 a year on pets and supplies.
competitor nipping away at market share is New York-based PetFlow.com. The
online company says it shipped more than US$2.5 million to online customers in
July 2012 and posted annual sales of US$30 million that year alone. The young
company attributes its success to a subscription business model that
automatically delivers the petfood to a customer’s front door. “Since our
inception, PetFlow.com has experienced extreme growth, but the statistic we’re
most proud of is the very high return rate of our pet-owning customers,” said
Alex Zhardanovsky, co-founder of PetFlow.com. “The company’s growth
demonstrates that our customers see their pet as a true family member and they
profoundly prefer PetFlow.com’s subscription approach to purchasing petfood and
supplies when compared to the traditional, big box retailer approach to
says it stocks more than 100 premium brands, more than three times the amount
of its traditional retail competitors. The company also actively uses social
media channels to create an ongoing dialog with its customers, introduce new
products and engage the pet parent demographic.
On the global scale, online sales of petfood are going up in Australia,
with the Internet market in a growth phase, brought on by expansion of products
and services, according to Euromonitor. Over the past five years, online sales
of cat food and other pet products have doubled. And a trend that is true in
all petfood-purchasing countries, according to Euromonitor: Pet parents are mostly
buying their petfood at retail grocery chains, at pet superstores and on the