I maintain a dignified distance from pets. The closest I come to one these days is when I avoid the pet dog of my neighbor while climbing the stairs. Humans, in general, have warmed up more to pets now than ever. They don’t wear masks, catch COVID or monkeypox. Humans need a bond and it helps that pets don’t kill you with deadly viruses.

Who knows pets and their owners better than Amazon? Amazon declared May 2022 as the National Pet Month. They also did a 24-hour event featuring loads of deals and savings on pet products, pet-friendly electronics, and offers on select pet-themed movies. While people spend on high-quality food, wellness, grooming, and accessories for their pets, the market is now flooded with pet-friendly electronics, pet screen doors, automatic pet feeders, dog cameras, and more. Pets are kids in perpetuity.

The market performed extraordinarily well amid uncertainty and a slowed economy. According to the American Pet Product Association, pet industry sales grew by 19% Y-o-Y in 2021. Two third of US households own a pet and their adoption increased during the pandemic as people looked for cuddles. High inflation in the US, which has been making headlines for quite some time, hasn’t impacted pet owners' spending on their pets.

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The pet industry in the US was valued at USD 123B in 2021, of which pet food, pets, and supplies accounted for around USD 80B.  eCommerce accounts for around 20% of this and according to Insider Intelligence, as of February 2022, Amazon accounted for $7 billion in sales of pet products with a 21% growth Y-o-Y. Amazon dominated the online pet market with a 45% share in 2021, followed by Chewy, PetSmart (37% combined), and Petco (7%).

Then there are Nestle’s Purina, Orijen, Acana, Royal Canin, a subsidiary of Mars, Colgate-Palmolive’s  Hill’s, etc. – well-established premium brands but with no direct online channel of their own. Instead, they sell through online retailers and Amazon.

If you look at the mid-market of US eCommerce, the Pet and Pet Care category is not too big. There are relatively fewer merchants who generate a much lower gross merchandise value than brands in other categories. The mid-market for pet eCommerce does not exist yet, it looks like.

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If you thought the action is all in the enterprise end of the market, well here is that map. The average GMV per merchant is much higher than most other categories. Interestingly, the enterprise pet eCommerce segment is dominated by retailers, marketplaces, and speciality eCommerce players and not by DTC brands.

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There are several distribution options for pet care products. A brand can be distributed via independent, pet-specialty channels (like Chewy)  large pet chains (Petco, PetSmart), multicategory retail formats, farm and feed outlets, e-commerce (Amazon), or food, drug, and mass (FDM) channels.

DTC brand Jinx predicted in April that 60% of its 2022 business is likely to come from retail, which is double of  their previous prediction of 30%. This may not all be surprising.  Traffic to online pet care stores doubled between Q3 2017 and Q3 2020 (based on PipeCandy’s monthly traffic estimates). Through the pandemic, online stores saw their traffic grow phenomenally year on year; yet by the end of Q3 2021, growth ebbed and turned negative. Pet Care eCommerce traffic seems to have hit a plateau even as pet care sales remained steady despite price hikes.

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The online pet care category is an omnichannel world. For decades, while pet owners bought established products in stores, eCommerce made it easier for new brands to enter the market and offer customers a wider selection of high-quality products. Retail however gives brands the presence to reach beyond their core demographics and be placed in the national market faster. While inflation-driven price hikes haven't dented the purchase intent or volume of purchase, it has motivated more buyers to buy smaller pack sizes instead of buying larger, bulk items. In the case of pet food, just as in the case of groceries, it makes sense to buy in-store or via multicategory online groceries saving on shipping and delivery time.

Pet humanization is a thing now. Consumers prefer premium food products, and gourmet meal kits, even for their pets. Consumers are willing to spend money on minimally processed, all-natural food. These are straight up the DTC alley with their customizable and personalized appeal. Yet the top premium brands have not opened their DTC presence.  The presence of strong, at-scale, national pet-focused retailers seem to have delayed or made DTC channel unattractive so far, for even national brands. When it comes to pet foods and pet care, the big retailers are still the big dogs. Woof, woof!