Interview with Michael Frizell, CEO and Co-founder of Pet Circle: “I bet on getting the right product quickly, not the wrong product quickest”

Pet Circle accounts for 60% of the total online pet market in Australia and it believes that the local market still has room to grow by up to 500% in the coming years. The Sydney-based e-commerce retailer, which currently serves 800,000 customers, aims to hit the 1 million mark within the next 5 years. And if there is customer demand for it, the company will consider opening its own physical stores nationwide.

Sales increased substantially in 2022, varying by product between 20% and 30%. And contrary to the trend in other Western markets, “solid double-digit growth” is the company forecast for the next 5 to 9 years.

How’s the Australian pet industry doing?

Overall, the industry has been very strong for the past 3 years. While the rest of the world is seeing a slight decline in the non-essential categories, our market is looking pretty robust. All our sales, including those categories, are growing and there’s not much of a gap with the growth that we see in food and consumables.

Why this different trend?

Europe and the US are suffering from a much higher inflation than ours, and consumer confidence there is lower than here. Inflation in the pet food category in Australia has not reached 10%, and the discretionary category is even lower.

Do you see any change in consumer behavior?

We are starting to see some customers trade down a little in food, but it is not a huge trend for us yet. We’re still not seeing any of the low-cost brands significantly accelerate on our platform.

Do you expect a change anytime soon?

I believe towards 2024 we will have an issue with interest rates impacting on mortgages and home ownership, and this will affect pet parents. In the next 12 to 24 months, I expect more demand for private labels, and this category will grow as consumers look for quality products at more competitive prices.

You have 10 or more private-label brands. Are you planning to expand that range in the near future?

I think so. There will be more gaps for us to fill as there is more consumer change. The more consumer behavior changes, the more gaps there are.

What’s behind the recently announced multi-million dollar investment?

We raised A$125 million ($86.5M / €80.1M) and invested this into building a faster delivery service, expanding our warehouses from 20,000 sqm to 60,000 sqm, and growing our range, which is twice the size of our nearest competitor. We now have sites in Sydney, Brisbane, Perth and Melbourne, and we have built a fleet to get deliveries to the customer 7 days a week. We have also made a reasonably large investment in making sure we have the right advice for our customers. We have 30 registered vets on staff, 24 hours a day, who can give advice to any pet owner in the country.

You have reduced delivery times to 1-2 days. Is same-day delivery the next step?

Absolutely. When we launched the business 12 years ago, 4 days was fine. Now 1 day is convenient, but we will soon be launching delivery on the same day.

The question is: how much do you pay for consumer value? There are some players that deliver generic pet food brands in 15 minutes. I bet on getting the right product quickly, not the wrong product quickest.

What can you tell us about the customer journey on your platform?

On average, we get between 6 and 7 purchases a year from each customer. Most of our customers are quite loyal, especially cat owners. It doesn’t mean they’re the most valuable, but they’re the most loyal, as they make the most repeat purchases and stay for a long period of time. They also buy a lot, about every 2 weeks. The premium engaged dog owner usually makes fewer purchases and it is more sporadically.

Australia’s largest retail group has recently entered the pet industry with the acquisition of 55% of the retail chain PETstock. What will be the impact on the sector?

I think it’s a good thing that the industry has a large well-funded player interested in getting high-quality products to customers. Competition in the market is good for our customers, as it makes everyone better.

You have a strong presence in big cities. What about less populated areas?

Between 70% and 80% of our customers do indeed live in urban areas. While we are doing a good job in the 5 biggest Australian cities, we are not as good at a regional level. The demand for premium food in cities is slightly bigger than in the rest of the country. In the city, we get more food orders, while regionally we send more toys, treats, accessories and medications.

We haven’t built our own supply chain to serve all the regional areas, and we will not push hard into regional until we really believe we’re doing a better job than the physical shop in that local area.

What are the opportunities for growth?

The Australian pet market has phenomenal growth ahead of it. We have a big pet population and average spending is high, so the macroeconomics are very good. But some of the fundamentals, like mass versus specialty, are still lagging behind the rest of the world. And that humanization trend you see in the rest of the world will get here too.

And what about expanding your footprint outside Australia?

We always talk about being great before you get big. Our vision is not to be the biggest pet company in the world; our vision is to be the best. We spend a lot of time making sure what we build in this country is truly great, and there are lots of layers to that. We want to be great and then we’ll take that overseas. Right now, our main focus is Australia. But eventually, we will go beyond Australia.

What’s next for Pet Circle?

Our main focus is to do the same thing we’ve done in the past, which is to understand customer needs. Consumer expectations around shipping quality and speed are changing; we will need to be faster and better. We are launching an app soon where customers will be able to place their orders, manage auto-deliveries, and access our vet advice tool. We are also spending a reasonably large amount of money on data, to know how we give the right product to the right pet, which is different from getting the right product to the right customer. That’s probably an evolution we will see over the next 12 to 18 months.