Mexicans are increasingly using the internet to acquire consumer goods. According to the National Statistics Institute (INEGI), 52 percent of Mexican households had internet access in 2017, representing more than 17 million homes. Furthermore, INEGI states that 3.5 million internet users in Mexico purchased products online in the same year, at least once a month, meaning a vigorous 85 percent growth compared to the previous year.
In this context, how are online pet food sales performing given the rapid development of e-commerce in the country?
Internet pet food sales still very low
Internet pet food sales are still negligible as the Mexican pet food market is in its first stages of development. Our estimate for online pet food sales is at around U.S.$3.7 million in 2017, which represents just 0.1 percent of total Mexican pet food sales in the same year.
Although online sellers started offering pet food products a few years ago, the fierce competition posed by traditional retail stores, based on attractive prices, has impacted the pace of development of online sales. Another reason for sluggishness is higher logistic and delivery costs associated with online transactions, particularly in the Mexican market.
In terms of the players participating in this market segment, Amazon Mexico is leading efforts due to its size and shipping capacity. Petco, on the other hand, leads on the specialty side with attractive discounts. Walmart is also on the verge of becoming a relevant player supported by a cutting-edge platform. Other companies participating in this market include Maskota and Pet N´ Go, both offering a wide array of products. The former company is a well-known pet supplies specialty retailer with over 300 stores in Mexico, while the latter is a recently founded online pet supplies specialist.
Why are online sales of pet food underperforming in Mexico?
The answer is straightforward. Online pet food sales are largely focused on premium and superpremium products. This signifies a constraint given the relatively small size of the premium pet food market in the country. The majority of dog and cat owners prefer economy and standard priced-products, leaving premium products with just 10 percent of total Mexican pet food volume sales in 2018.
We estimate that premium pet food products feed around 2.5 million dogs and cats in Mexico. Thus, if we consider the totality of internet shoppers in Mexico and the actual number of pets fed with premium products, the resulting combination leaves just a few thousand online shoppers of pet food per year.
Therefore, for online pet food sales to further develop, internet sellers must target not only premium and superpremium pet food shoppers, but also people who usually buy economy and standard priced-products and are likely to shop on the internet. Local e-commerce players may also have to implement new strategies and understand the requirements of pet food owners in terms of service, price and product attributes.
Once online retailers overcome the challenge that logistics and delivery costs entail (at least in urban areas of Mexico), pet food e-commerce could possibly expand and become a sizable market.