IBISWorld estimates 7.8 percent annual growth in online petfood sales
Rising pet ownership, e-commerce sector growth contribute to increases
IBISWorld estimates that revenue for the online petfood and pet supply sales industry has increased in the past five years an average of 7.8% annually to $3.2 billion.
Rising pet ownership in the United States and growth across the e-commerce sector have caused the industry to experience overall growth, despite the recession. Furthermore, increasing demand for premium petfood and online animal pharmaceutical sales also contributed to industry growth during the past five years.
While most 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. Rising profit has caused the number of industry firms to increase at an average annual rate of 1.2% to 3,612 in the five years to 2014. Niche players like 1-800-PetMeds and discount retailers like Walmart have rapidly gained market share within the industry. Niche 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. During that time, stores will benefit from an increasing number of pets in the United States and rising per capita disposable income. However, online pet retailers also will 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.
For more information, visit IBISWorld's Online Pet Food & Pet Supply Sales in the US industry report page.