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Adventures in Pet Food

Debbie Phillips-Donaldson, editor-in-chief of Petfood Industry, shares her insights and opinions on all things pet food, addressing market trends as well as news and developments in pet nutrition, food safety and other hot topics for the industry.
Pet Food Market Trends
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Among US pet owners purchasing pet food and pet products online, 54 percent purchased from Amazon.com, Packaged Facts says.

Amazon: the 800-pound pet food gorilla (or guerrilla?)

April 24, 2017

The percentage of US pet owners purchasing pet food online jumped nine points in just two years, according to the American Pet Products Association’s (APPA) 2017-2018 National Pet Owners Survey. And among those pet owners purchasing pet products online within the past 12 months, 54 percent ordered from Amazon.com – by far the most popular option. (The next, most-frequently used sites for pet product purchasing, PetSmart.com and Walmart.com/SamsClub.com, registered only 29 percent usage each.)

The data on website leaders for online pet food and other pet product purchasing comes from Packaged Facts’ own National Pet Owner Survey, conducted in February and March of 2017. That Amazon.com dominates is not really a surprise; what I didn’t expect was to see names like Chewy.com and PetFoodDirect.com so low on the list (18 percent and 10 percent usage, respectively), when each site specializes in ecommerce of pet food and other pet products. While Petco.com reached a 27 percent share, other pet-oriented sites (Pet360.com, DrsFosterSmith.com) hit only the single digits, and sites such as PetFlow.com didn’t make the list at all.

Perhaps this is why PetSmart just announced its acquisition of Chewy.com. How else can any business selling pet food or other pet products expect to compete with the 800-pound gorilla, Amazon.com?

Dominating pet food, like most other categories

As an Amazon Prime customer myself, I suppose this dominance in pet food, as with so many other product categories, should make sense. (Full disclosure: I have ordered my cats’ food from Amazon.com.) After all, you can order nearly anything you need or want, often at a lower price and with free, two-day (or less) shipping. And you can save even more money by setting up your pet food purchases as a subscription, with your dog or cat food automatically re-ordered at set intervals.

Packaged Facts’ data seems to corroborate this is happening: among pet owners in its survey who buy pet products online and those who purchase 20 percent or more of their pet food or treats online, 58 percent do so from Amazon.com. (It goes up a tick, to 59 percent, for pet owners who buy 40 percent or more of their pet food or treats online.)

This is definitely adding pet product sales to Amazon.com’s coffers. In March 2017, One Click Retail reported that the online giant is now selling US$2 billion in pet products annually, with about 35 percent of that, or about US$700 million, coming from pet food. That’s a lot of pet food, more than most other experts or analysts have likely projected. For example, Euromonitor estimated online dog and cat food sales in the US reached about US$1 billion in 2016. Was 70% of that really through Amazon.com?

Packaged Facts estimates that about 8 percent of the total US$46 billion pet product market (all products, not just pet food), or about US$3.7 billion, was sold online in 2016. In terms of overall pet product sales, through all channels in the US, pet food accounts for about 67 percent, or US$31 billion. If you apply that same percentage to online sales of pet products, that puts online pet food sales in the US at US$2.48 billion – meaning Amazon.com’s share (US$700 million) would be closer to 28 percent.

David Sprinkle of Packaged Facts has a caveat to all this: “Internet sales are notoriously difficult to quantify.” Regardless of Amazon.com’s share of pet food sales, One Click Retail’s data showing that those sales on the site are growing 60 percent a year, with pet treats at 40 percent growth, seem valid.

Convenience, pricing drive pet owners online

Robust pet food sales growth on Amazon.com seems likely based on increasing online pet product shopping in general. APPA’s survey showed that 48 percent of US pet owners had purchased pet food online within the 12 months preceding the survey, up from 39 percent in 2014. For pet treats, the percentages were 45 percent in 2016 vs. 37 percent in 2014. Dog owners particularly have increased their online shopping for dog food, with 50 percent saying they had done so within the past 12 months, up from 40 percent in 2014. The percentages for cat owners/cat food were 48 and 39, respectively.

Packaged Facts’ data breaks sales levels down to the category level, showing that among dog owners who buy pet products online, 49 percent had purchased dry dog food within the previous 12 months, while 43 percent had bought pet treats or chews online and 30 percent had purchased wet dog food. Among cat owners who buy pet products online, 42 percent reported purchasing dry cat food; 35 percent, pet treats; and 31 percent, wet cat food.

Not surprisingly, the primary reasons for buying pet products online given by respondents to Packaged Facts’ survey were convenience, competitive pricing and good value due to free shipping. All fit Amazon.com’s model to a T. Its pricing strategies especially – in particular, its practice of dynamic pricing, in which it constantly changes the prices of some items based on demand and popularity – qualify almost as guerrilla tactics to some people, making it very difficult for small brick-and-mortar retailers, such as independent pet shops, to compete. Is this level of competition – already decreasing with acquisitions like the PetSmart-Chewy.com deal – the best option for consumers or the market in the long run?

“Logistically, these strategies aren’t as easy to execute in a brick-and-mortar store, as physical price tags have to be changed by hand as well in a point of sale system,” wrote Brittany Kimble, assistant manager of a pet retail store, in the March issue of Pet Product News. “Some product lines come with a set price from the manufacturer that stores cannot adjust or tweak, lest they get caught and lose the contract to carry and sell the products.”

Thus, many pet retailers are calling on manufacturers, particularly those of pet food, to establish minimum advertised price (MAP) or minimum retail price (MRP) policies, or to extend the policies they have to ecommerce sites. More and more pet food companies are doing so; Health Extension just announced that it is stepping up enforcement of its policy with MAPP TRAP, a “sophisticated online price monitoring and enforcement software system.”

Kimble argued that independent retailers offer not only exclusive products and in-depth knowledge about them, but they also provide that human connection we all need, even more so as our lives become increasingly digital. Yet it’s hard to believe that will counter the pull of ecommerce to consumers, including pet owners. Perhaps MAP and MRP will at least level the playing field and keep that 800-pound gorilla from becoming even larger.

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dphillips@wattglobal.com

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