Mars, Chewy and Petco Double-Down on Pet Essentials

The Amazon and Walmart of pet product retailers — Chewy and Petco  — know that pets are more than just animals to many people — they are companions and family members.

Pet parents are more often than not willing to go to great lengths to ensure that their pets receive the best possible care and attention, including providing them with the essentials they need to thrive. This shared sentiment is the foundation of Chewy’s and Petco’s continued investment in pet essentials. These beliefs are also indicative of Petco’s and Chewy’s latest financial results.

According to Chewy’s CEO Sumit Singh’s remarks to investors, the U.S. pet industry is valued at $130 billion and continues to expand, even during economic downturns. In 2021, the web sales of pet care retailers in Digital Commerce 360‘s Top 1000 collectively grew by 20.1%, totaling $12.34 billion.

Chewy Saw Essential Orders on Repeat, Auto-ship

Singh told investors that in the fourth quarter, consumables and healthcare products were a major source of success for Chewy. Sales of these products saw an 18.5% increase compared to the previous year, comprising 82% of net sales.

Despite declines in less essential categories such as dog beds and toys, the growth of consumable and healthcare products was significant enough to offset those losses. Singh described these product categories as “pillars of strength” for Chewy during this period.

A significant portion — 73% — of Chewy’s sales now comes from recurring shipments of food and health products. In the fourth quarter, autoship sales increased by 18%, comprising 73% of total sales during that time. Chief Financial Officer Mario Marte reported that autoship products generated $1.98 billion in sales during the quarter.

These results further solidify investments Chewy has been making, which include pet healthcare. PYMNTS spoke to Mita Malhotra, vice president and general manager at Chewy Pharmacy & Healthcare, in early March about making healthcare affordable and accessible for every pet-owning household in the U.S. “That’s been our driving kind of mantra, to build out this Chewy health ecosystem,” said Malhotra.

See also: Chewy GM on Pet Care’s Next $43 Billion Market Opportunity

Petco Sees In-Store Experiences Are Preferred

Unlike Chewy, Petco’s has over 1,500 physical stores spread across North America, in addition to its online retail operations.

While Petco’s CEO Ron Coughlin did not disclose the exact proportion of Petco’s sales that were generated online, he did reveal that more than 90% of online customers prefer either same-day delivery or buy online, pick up in-store (BOPIS) option when available. With that, Petco takes advantage of its physical stores, strategically using them as “micro-distribution centers” to guarantee swift and economic order fulfillment.

But there are more reasons for Petco customers to make their return back to in-store experiences. Petco’s physical locations are also attractive to customers due to the presence of in-store veterinarians and groomers. In fact, the company has bolstered its veterinary team by adding 1,100 new veterinarians in 2022, resulting in 90% of its stores offering veterinary services. Petco said this investment is valuable because customers who utilize veterinary services tend to have a lifetime spending value 2.3 times higher than those who don’t.

In the quarter, services such as veterinary and grooming experienced a 15% increase.

A Shared Chewy, Petco Customer Trait — Pet Essentials

While Chewy noted that it’d seen its auto shipment service for pet essentials amplify, Petco also echoed the same findings, which surfaced as Petco observed the strength of consumables versus discretionary spending, which led to the launch of a new partnership with the Freshpet natural pet food brand to launch a customized meal subscription plan.

According to a separate press release, Freshpet Custom Meals will be available exclusively on Petco.com and start at $3 per day, customized for individual pets based on ‘pet parent’ completing an online questionnaire about their pet.

See also: Meal Kits Go to the Dogs With Petco’s Customizable Freshpet Subscriptions

Other Players Are Looking To Get Into Pet Health

According to a profile of the new Mars CEO Poul Weihrauch, published by the Financial Times (FT) on Thursday (March 23), the company behind well-known brands like Snickers and M&Ms has now generated 20% of its revenue from its pet care business.

He is now predicting that the company’s pet care segment will achieve an annual growth rate of 5% to 6% in the forthcoming years, surpassing the expected growth rate of its candy business. This is attributed to the changing role of pets in our lives.

“Forty years ago, a pet was living out in the garden,” he said, per the report. Now, “80% of millennials in the United States sleep in the same bed as their dog.”

In the report, Weihrauch said that with only 80% of dog owners and less than 50% of cat owners taking their pets for annual vet visits, there is ample room for expansion in pet care services, particularly outside of the more established markets of North America and Europe.

According to Chewy’s Malhotra, the pet care market is vast, with a total addressable market ranging between $40 billion and $43 billion, as she told PYMNTS earlier this month. One potential area for growth is in telemedicine, as only a few states currently allow complete virtual veterinary services.

See also: Mars CEO Aims to Double Sales by Investing in Pets

As the pet care industry is projected to reach a value of $230 billion by 2030, companies such as Chewy and Petco recognize this potential and have continued to invest in pet essentials. This trend has also inspired other companies, such as Mars, to compete for market share. Given the level of interest in this space, it remains to be seen which other players will enter the market.

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