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According to authoritative data, of the global pet consumption market size of USD159billion in 2020, the North American region currently accounts for 44%, while the Asia-Pacific region only accounts for 11%. With the rapid development of China’s economy and the continuous changes in the demographic structure, the pet market in China is ushering in excellent investment opportunities.
General Situation of Global Pet Market
According to Eur Economic data, it can be seen that the European and American markets with the largest market size are the core part of the pet industry in the global market. North America region accounts for the highest proportion of the global pet market, at about 37%, while the lowest proportion in Australia, only 3%. Although the Asia-Pacific region accounts for only about 24%, it is determined that there is a greater growth space in the future due to the advantages in the population size and economic level in the Asia-Pacific region which is dominated by the Chinese market.
In 2019, the global pet food market expanded to USD 94.677 billion. The United States is the world’s largest consumer of pet food. The sales of pet food in the United States reached USD 34.345 billion, accounting for 36.28% of the global sales, followed by USD 5.151 billion in the Chinese market, USD 3.899 billion in the Japanese market, and USD 1.022 billion in the Korean market. Divided by region, the sales in Western Europe, Asia Pacific, and Latin America in 2019 were USD 22.413 billion, 13.073 billion, and 11.06 billion, respectively, accounting for 23.67%, 13.81%, and 11.48% of the global market.
At present, as the global pet market has gradually matured, keeping pets has been regarded as a sign of social development. In the past 8 years, the global pet market has always been at a year-on-year growth rate of about 5%. The Asia-Pacific region is the fastest-growing region throughout the world and the pet market dominated by China is rising rapidly. There is currently a large growth space, in the period of rapid growth, in China’s pet food industry.
The pet market in China sprung up probably after 1990. With the lifting of the Chinese policies and the entry of Western brands, the development of the pet industry has started.
There are two main reasons for the rise of China’s pet market: the increase in China’s per capita GDP and the aging of China’s population.
① Previously, both China’s per capita GDP and per capita disposable income were at a relatively low level, which led to the failure of the pet industry to develop. Since 2019, China’s per capita GDP has exceeded 10,000 U.S. dollars, and per capita disposable income has increased a lot.
② Regarding the aging of China’s population, the United Nations has established a benchmark that identifies a society with a population of over 60 years of age accounting for more than 10%of the total population as an aging society. In 2019, China’s population of 60 years old and above accounted for 18.1% of the total population.
Up to now, for China, there is still a large development space in terms of the prevalence rate of pet food and the annual consumption of a single pet per capita.
Inferior to countries with mature pet markets, the prevalence rate of pet food in China is as low as 22%. China’s current penetration rate is far lower than that in the United States (95%), the United Kingdom (90%) and Thailand (50%), which indicates that there is still a lot of room for development in the pet market in China. With the low prevalence rate, we realize that the pet market is still in an early stage.
(Source: collected by Mantou Finance according to public information)
According to statistics, from 2017 to 2020, China’s per capita annual consumption for a single pet is around 5,000 yuan, while the average of that in the United States in 2020 is USD1,200 (approximately RMB 7,781 yuan), which is 1.5 times that of China. In 2020, the consumption for the pet industry in China, Japan, and the United States accounts for 10.10%, 3.20%, and 40.10% of the global pet industry, respectively. China’s pet market is still in the development period compared with that in the United States.
(Source: collected by Mantou Finance according to public information)
According to Euromonitor statistics, the sales of pet food in the Chinese market in 2019 was USD
5.151 billion, and the compound annual growth rate for the past four years from 2016 to 2019 was 30.86%, which significantly exceeded the world average of 3.77%. Regardless of the prevalence rate, per capita consumption ratio, expenditure, quantity, or food in the pet industry, the domestic pet industry is in a stage of rapid growth in both volume and price.
Consumption Scenarios of Pet Retail Industry in China and the United States
From the perspective of major scenarios of offline retail in the United States, Petsmart and Petco WOOF are the major forces. In specialized channels, Petsmart (the parent company of Chewy) and Petco WOOF are representatives in the large pet chain stores. In the offline channels in the United States, traditional stores and supermarkets captured 53%while 45% by specialized channels.
Since the establishment in 1986, Petsmart (the largest pet chain in the United States) has been engaged in low-cost mass sales, focused on warehousing and logistics management while reducing store services to achieve a low-cost operation. After more than ten years of mergers and acquisitions, the number of stores has been rapidly increased.
In the United States, the stores of it can be found in almost every state, with the largest number of stores in California (137), Texas (118) and Florida (76). In 2017, in the GDP rankings of US states, California first, Texas second, and Florida fourth. PetSmart’s decision on store layout is closely related to local consumption power.
Nowadays, there are more than 1,650 chain stores owned by Petsmart in the United States, Canada, and Puerto Rico, as well as over 800 shop-in-shop pet clinics and 200 pet boarding hotels.
After over 10 years of development, the Company has undergone a sweeping transformation in its development strategy and positioning, and a comprehensive experience model of “retail + service” has been established. Since then, focusing on its positioning, the Company has never stopped to optimize, enrich and expand the model, which avoided price competition with large stores and
supermarkets in addition to optimizing the revenue structure and increasing store efficiency.
After PetSmart, the largest pet offline franchise retailer in the United States, acquired the online e-commerce of Chewy CHEWY, the business development of offline stores is still prioritized as an important strategy in PetSmart’s tactics. On this issue, the executive vice president of PetSmart has ever stated in public that in the future, PetSmart will keep focusing on meeting the needs of pets and owners in all aspects. One of the most important strategies for achieving that goal is to keep developing offline stores.
From the perspective of major retail scenarios in China, pet retail stores in the Chinese market are extremely dispersed, mainly with independent stores as the mainstay supplemented by chain brands. At present, an extreme dispersion of the offline stores in China’s pet industry can be seen. According to statistics, there are approximately 200,000 offline stores and hospitals. PETDOG (5000 stores), FAVOR PETS (3000 stores) and Boqii (nearly 10,000 offline cooperation) are the main representatives among the chain brands.
The independent store acts as a mainstay of pet stores in China, and offline pet stores are mainly in a small scale, with few large-scale pet stores which can offer a comprehensive service. According to the Industry Data Research Report of pet stores in China, the covering areas of most domestic pet stores are less than 100 square meters, of which that with 50-100 square meters account for up to 42%, followed by that with 50 square meters or less accounting for 33%, and that with 200 square meters and above accounting for only 8%.
As the first one of pet e-commerce in China, Boqqi BQ has three business sectors, Boqqi Mall (online e-commerce), Boqqi Pet Service, and New Retail (offline), and Pet Social (pet communities, pet encyclopedias, and so on).
During the integration of online and offline business, Boqii BQ connects franchise stores by the SaaS system to further release its own advantages in the supply chain to franchise stores, break the regional restrictions on franchise stores, and get through the circulation path of “staff, stores, and goods”, realizing online-offline interaction. Relying on the online advantages in the Chinese market, it creates a business combination of Chewy+Petco offline.
The business operation model of Boqii BQ focuses on services with an excellent membership system as an adhesive. By online-offline collaborative integration, each channel emerges as a traffic portal for expanding the influence of the brand. Besides, the business revenue
model has been transformed from “income generated by users’ consumption in various channels” to “income generated by the single pet owners’ dependence on the full-service platform.”
In offline integration, in addition to independent layout, Boqii BQ has also made strategic investments to accelerate the implementation of the offline blueprint. According to public information, Boqii BQ made an investment of tens of millions of US dollars in pet dog, the largest franchise chain brand of pet stores and professional organization for talent training in China, in 2019. According to the official website of PETDOG, there are currently nearly 5,000 franchised stores and 7 training campuses with many majors including pet beauty, dog training, and nursing.
Currently, the consumption in the Chinese pet market almost covers all pet products throughout the life cycle of pets, from birth to death. The complementary services for pets, increasingly abundant and diversified, are provided. Up to now, many well-known investment institutions, such as Hillhouse Capital, IDG Capital, GGV Capital and Goldman Sachs Capital, have successively made investments in the pet industry in China.
We believe that there is a huge consumer market in China, the world’s most populous country. With the increase in per capita GDP in China and the aging of population, the pet market in China is thriving in a sound environment where all favorable conditions are available. In the future, the pet market will rapidly expand with the fast economic development in China, especially in super first-tier cities and first-tier cities in China. And the family status of pets will gradually be improved. From the above, it can be seen that it is quite promising and valuable to make the investment in China’s pet industry.
Text by Mantou Finance
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