"Insights and Analysis of the Pet Industry"

Background of the Situation

This year, the best-selling products during Double Eleven were pet food. As a pet owner myself, I have a premonition that the pet industry will enter a phase of rapid development, so I conducted some analyses of the industry.

Industry Background

According to the industry report issued by CBDATA's "2019 Pet Consumption Ecological Big Data Report":

User Scale: The number of pet-owning households in China is 99.78 million, with a year-on-year growth of 43.9% over the past five years.

Consumption Capacity: In 2018, the market size of the pet industry reached 172.2 billion yuan, and it is expected to exceed 400 billion yuan by 2023.

Consumption Behavior: 89% of users purchase pet supplies online, with 81% in the cat market and 72.2% in the dog market.

Age Distribution: Post-90s and post-95s are the main consumer groups, with 40% male and 60% female.

Regional Distribution: 2nd to 4th tier cities and 1st tier and new 1st tier cities each account for half of the market size.

Top Products: Mainly pet snacks, staple food, and health products.

Food Proportion: Domestic and imported pet food each account for half.

Vertical Division of the Industry

I researched companies that have received financing in the past 1-2 years and summarized several tracks currently in the pet industry.

Personal Insights

Pet E-commerce

Currently, there are already established companies in pet e-commerce, such as Boqi Network and E-Pet, along with e-commerce platforms from various channels. Personally, I obtain pet food through acquaintances; previously, I purchased directly from brand stores on platforms like JD.com and Tmall. Since pets are living beings with emotions, I am very cautious about food safety. I tend to be more careful when choosing unofficial channels, and price is not the fundamental reason for my purchases. For new pet owners, after learning about pet knowledge and establishing a personal social circle through platforms, they gradually move away from the platform and purchase food through word-of-mouth channels. For some peripheral pet products, such as scratching boards and toys, the purchase rate decreases over time, and the repurchase rate significantly drops. For consumables like cat litter, consumers tend to prefer reputable brands and purchase from specialized flagship stores; similar to cat food, price is not a determining factor.

Pet Socialization

The essence of pet socialization is a false proposition. Most platforms provide a space for people to showcase their pets, but top KOLs are concentrated on platforms like Douyin, Xiaohongshu, and Bilibili, which are more for general display. If one is involved in pet breeding, more consideration is given to the pet's lineage and the purity of the other pet, which is often led by acquaintances or purchased through specialized channels for live breeding. If the focus is on socializing people through pets, then why not just focus on human socialization? There is no need to redirect traffic for further loss in the process.

Pet Services

Currently, pet services are primarily offline pet care stores, including grooming, snack sales, and beauty services. There are several types of stores in the market: one type is self-operated offline experience stores, like Xiaopei; another type is franchise pet stores, like Bodoge; and there are also self-operated pet stores.

Currently, offline pet stores mainly operate on a membership card basis, with single grooming services costing between 60-150 yuan. The coverage radius of offline pet stores is about 1 km, so there needs to be sufficient density, and pet grooming is somewhat similar to offline nail and hair salons, leaning towards word-of-mouth.

Pet Boarding

Currently, pet boarding is divided into three models: one is boarding based on pet stores, with pet boarding costing around 80 yuan per day, mainly keeping pets in cages. The second is family-style boarding, where C-end users apply to become boarding families, and other users can choose to board their pets at these homes. The third is high-end boarding, usually located in relatively inexpensive areas, like Fengxian, with large houses and free-range methods, involving some training and interaction with pets, generally costing around 200 yuan per day, including pick-up and drop-off services.

Since pets are living beings and family members, many people are reluctant to board them in pet stores where they might be kept in cages. They may consider having friends come over to feed them or boarding them at a friend's place. The quality of pet stores varies, and there may be some infectious diseases among different live animals.

The issue with family boarding is that many C-end users cannot verify identities, leading to a lack of trust. For example, one might worry that the other party has tendencies to mistreat pets, so people are also reluctant to board their pets.

High-end boarding is somewhat like a summer camp, primarily based on word-of-mouth. Customers are filtered based on their pets' health; if a pet appears unhealthy, they may not be accepted. However, the overall experience is excellent, as you can see photos of your pet playing in social circles, generating positive word-of-mouth. But such stores are relatively rare, have high requirements for boarding staff, and the customer acquisition cost is relatively high.

Pet Smart Devices

Currently, the first tier includes brands like Xiaopei, pidan, and petree, with Xiaomi also investing in pet technology companies like Cat and Dog Technology and Tail Life.

Most leading players focus on iterating and updating common daily products like water dispensers, litter boxes, and feeders, primarily targeting small dogs and cats.

Currently, the domestic pet smart hardware market is still in its early stages, with many products boasting attractive designs but needing improvements in usability, pet safety, and stability. For example, there was a recent incident where Xiaopei's automatic feeder malfunctioned, revealing that the food dispensing was not linked to the machine. There have also been design flaws in heated and cooled beds that led to cats suffocating.

Pet Live Animal Trading

Currently, excluding unscrupulous breeding facilities, live animal trading is divided into online and offline. Online, there are platforms selling pets (like Xianyu) and specialized live pet platforms. The issue here is that many people end up purchasing sick pets that may die quickly. Currently, there are no relatively well-known brands or guarantees in the online market, but the industry is still viewed positively for future development.

Offline, there are private cat breeding facilities and sales through physical stores. Private cat breeders usually collaborate with offline stores, and some purchases are made through acquaintances. The advantage of offline stores is that customers can see and touch the pets, and there is a general perception that stores have a good reputation. However, the prices for live animals in offline stores are often too high, leaving many novice pet owners without a clear judgment. Market education will still require time to develop.

Pet Medical Care

Currently, there are already quite large enterprises in pet medical care, such as Pengrui, which has gone public and has many medical brands under its umbrella. This sector requires industry background and accumulation.

Currently, this area is still focused on pet medical care, with insufficient usability for drugs, B2B supply chains, and C-end services. For example, appointments are still made via phone, and medical records are still on paper.

Pet Travel

Currently, pet travel mainly targets hotels and restaurants that allow pets, focusing on how these establishments promote themselves within their circles. These stores primarily rely on private traffic for promotion. Currently, pet hotels in the market have not yet scaled to become a distinct segment, and this market is easily encroached upon by platforms like Ctrip and Mafengwo.

Pet Insurance

The main players are traditional insurance companies entering the pet insurance market, which has huge potential. Currently, pet medical expenses are quite high; for example, if a pet's eye is injured, the total medical costs can reach up to 20,000 yuan. The pet medical insurance and insurance industry will have considerable development potential in the future.

Pet Store SaaS & Pet Hospital SaaS

Pet store SaaS and pet hospital SaaS have developed significantly since 2014, essentially meeting the daily operational needs of pet stores or hospitals, and have incubated brands like Xiaonuan Doctor and Snail Store.

Pet Funeral Services

Currently, this area is mainly based on pet hospitals, and most people still lack the concept of pet funerals, often burying pets in random places. As pet owners' awareness increases, specialized funeral stores will gradually emerge.

Pet Food

Pet food is mainly divided into staple food and fresh food. Currently, there are some excellent brands of staple food, such as Crazy Dog. This depends on pet owners' views on staple food; in the future, imported and domestic staple foods will likely dominate the market, requiring at least ten years of accumulation to change the landscape.

Many companies are currently producing fresh food, but most people still prefer convenience, mainly eating staple food with some canned food. The market for fresh food feeding is likely to remain niche.

So where are our opportunities now?

Currently, in areas like pharmaceuticals, hospitals, pet food, and offline pet stores, these are not suitable for us. They require industry background accumulation and significant capital investment, making them unsuitable for small entrepreneurial teams.

The smart hardware sector already has mature companies, and the initial investment costs are quite high, making it not a good entry point for teams without hardware experience.

We could consider differentiating points, such as dog walking services or home feeding, but this requires careful risk management of personnel, as it can easily lead to customer complaints and the rapid spread of negative information, as seen in the recent incident involving pidan's home feeding service.

Connecting with offline pet stores for grooming and beauty services, helping them promote their stores within a 3-5 km radius, and combining it with a delivery service model for washing services. This requires building trust, as pets are different from food delivery.

SaaS for pet stores or pet hospitals is also a relatively suitable direction. Just like restaurant SaaS, there are already some giants in the industry, but there are still many small SaaS companies operating. However, SaaS in vertical fields can be quite a thankless task; it may survive, but it will be particularly exhausting. However, if a differentiation point can be found in the existing market services, it will have great potential.

Additionally, branding high-end pet boarding centers, similar to Ziroom, through standardized decoration services, creating pet summer camps, and standardizing training methods and pick-up/drop-off services.

Finally, the third one is a showstopper!