Pet product e-commerce has become a Colossus. In our recently released U.S. Pet Market Outlook (March 2020), Packaged Facts estimates that pet product e-commerce (including internet sales by store-based retailers) will increase 10% to reach US$13.5 billion in 2020. That’s twice the growth rate projected for the pet industry overall, given coronavirus-triggered slowdowns in the more discretionary product and service spending areas, though pet food volume (and to a degree dollar sales) should largely be spared.
Internet increases hold on pet product sales
By extension, overall pet product retail sales gains and losses increasingly revolve around the internet. The household customer base for pet product e-commerce rose from 3.7 million in 2009 to 15.5 million in 2019, according to Simmons data — for a 15% compound annual growth rate (CAGR) over the period, surging to a 24% CAGR over the most recent five years.
Packaged Facts estimates that the customer base purchasing pet food online increased more than ten-fold over the decade, spurred in no small part by 40% sales growth in fiscal 2019 (ending February 2, 2020) for pet food-centric Chewy.com. With US$4.85 billion in 2019 sales, Chewy now equates to nearly a tenth of the pet products market.
The ramifications of pet product e-commerce, moreover, have never simply been about online gains in dollar share or an expanding customer base, as shown by divergent brick-and-mortar sales growth between the mass market and the pet specialty channel. In 2019, in terms of product sales through physical stores, discount mass merchandiser/supercenter revenues grew 8% while chain pet store sales fell by 5%.
This follows from the “mass premiumization” trend, whereby superpremium pet food brands jumped over pet specialty channel gates into mass merchandisers and supermarkets. Though these channel-crossings have happened before, the driver this time was the spike in pet product e-commerce since 2016. Once Blue Buffalo was side-by-side with Purina One on Chewy’s virtual shelves, the protectionist reasons not to have the same at Walmart or Kroger became insufficiently compelling. Products will increasingly be sold where consumers increasingly buy them.
More retailers entering veterinary sector online
In the footsteps of PetSmart and Chewy — and of Mars as a veterinary chain consolidator — Walmart is also moving into veterinary services, both in-store in partnership with PetIQ and through the launch of WalmartPetRx.com. The increased involvement of major retailers and marketers with veterinary services, store-based and online, both responds to and escalates the pet industry’s focus on using technology to redefine pet health care possibilities, now including a COVID-19 spur to veterinary telehealth.
The sales being racked up by pet product e-commerce, along with the re-mix occurring online of non-emergency veterinary services, translate not only into dollar re-distribution but into influence over consumer mentalities about pet health care and pet spending. Packaged Facts survey data from February–March 2020 — largely before coronavirus pandemic lockdowns forced a temporary separation between vets and most of their clients — show that veterinarians’ level of influence over pet owners, though maintaining pride of place, is slipping across generations (see Figure 1). Among Boomers and older seniors age 55 or over, 77% identify veterinarians as a most important source of pet care information compared with 66% of millennial/Gen Z pet owners ages 18–34. This pattern of who or what is influential flips in the case of the internet, pet specialty stores, general retail stores and especially social media.
FIGURE 1: There are definitely generational differences among the sources pet owners most go to for pet care information. (Sapann Design I shutterstock.com)
Pet food’s place in the technology revolution
Not only is e-commerce about consumer mindshare as well as dollar share, but internet shopping for pet products (and especially pet food) has been the “killer app” in technology’s increasing role in contemporary pet care and pet parenting. Packaged Facts’ recent survey of pet owners shows that 20% strongly agree and 17% at least somewhat agree that technology is allowing them to save time on pet care, compared with only 7% strongly disagreeing.
The pet product e-commerce juggernaut takes place, of course, in the context of the larger tech revolution. Behind e-commerce’s poaching of pet product sales is the overarching role of internet information searching, product/service shopping and entertainment streaming in our lives through tech kingpins such as Alphabet, Amazon and Apple — and also of Facebook, YouTube and Netflix, especially in the current coronavirus period of social distancing and staying at home.
And behind this larger context is an older context: e-commerce is old omnichannel wine in new digital bottles. As has been variously noted, Amazon descends from Sears, whose long struggles may end with the coronavirus closure of non-essential retail (Motley Fool, May 17, 2020). Amazon has assumed a high tech/highly amplified version of the role that the once-mighty Sears stores, catalogs and mail/phone orders played in consumer shopping across the middle decades of the last century. Online shopping’s increase in usage by U.S. shoppers came at the expense of mail/phone order shopping (from 43% of households in 1994 to 10% of households in 2019) not because online shopping was something completely different, but because it wasn’t.
In the same vein, tech-driven mutations in pet industry practices in the wake of COVID-19 will not wholly recede once the pandemic is in the nation’s rearview mirror, because these changes form part of a sometimes wrenching continuum rather than representing a break from an historically enduring norm.