Key considerations in the direct-to-consumer shift

The shift in people’s buying behavior – from bricks-and-mortar stores to online channels – has accelerated growth in the direct-to-consumer (DTC) space across all industries, and the pet food sector is no exception.

DTC pet food market

As companies look to enter the DTC market for pet food, there are a number of ways to expand their business online, including selling through e-tailers, working with marketplaces, or setting up their own DTC channel. Therefore, it is important to align the approach with the specific business needs.

A brief overview

By 2032, the global DTC pet food market is expected to reach $18.6 billion (€19.7B), up from $2.1 billion (€2.22B) in 2022, with an expected yearly increase of 25.1%.

This global DTC growth can be attributed to several factors:

• the demographic split of pet owners is skewing younger (millennials and Gen Z consumers account for 49% of pet ownership nowadays)
• owners are placing an increased priority on pet health and wellness
• more than half of the world’s population is estimated to own at least 1 pet.

Opportunities

Younger consumers are generally more active online and more open to establishing direct connections with brands. The skewing demographic among pet owners therefore offers growth opportunities for pet food companies. The most successful DTC pet companies create unique, value-added experiences for pet owners that are not available in stores, through strategies such as recurring product subscriptions, personalized food and product offerings, and a superior digital experience.

Subscription-based models

Pet product subscriptions offer a flexible yet managed way to guarantee replenishment of pet owners’ favorite items, and the ability to customize DTC orders appeals to a specific niche in the industry. In the US, HelloFresh recently capitalized on this opportunity by launching personalized meal subscriptions for pets through its Pets Table brand.

A subscription model is a great way for pet companies entering the DTC market to manage a smaller set of products while increasing the likelihood of repeat purchases. Subscriptions also tend to provide unique and exclusive benefits, such as free delivery or discounts, to encourage pet owners to buy online over traditional in-store purchases. Customization can be one way to differentiate from the competition.

Personalized food and product offerings

Premiumization in pet food and other pet products has grown in recent years and shows no signs of slowing down. Pet owners seek the best for their pets – and that often means turning to human-grade food in the form of fresh, frozen and freeze-dried varieties. Several digitally native brands including Maev, Ollie and Freshpet have tapped into this trend, offering a personalized diet based on the pet’s life stage and health needs.

Humanization of pets is also fueling the desire for accessories and products tailored to each pet. Pet owners enjoy ordering personalized collars, bowls, pictures and other items for their furry friends. For companies, these items can serve as add-ons to help grow the online business footprint.

Controlled and user-friendly experience

The biggest benefit of owning the DTC experience is the ability to control the brand messaging to best resonate with pet owners and stand out from the competition. For example, a growing number of pet companies are testing the use of ‘petfluencers’ to develop their brand’s messaging. Petfluencers serve as brand ambassadors, portraying the benefits and usage of products in social media channels to attract like-minded pet owners. A survey by OnePoll on behalf of Mars Petcare showed that 30% of pet owners follow petfluencers on social media platforms.

Additionally, it is imperative to create a user-friendly online experience for customers. Pet owners are more likely to consider purchasing products online when they have access to detailed information about the brand and products. Moreover, prioritizing a superior pet owner experience through clear Frequently Asked Questions (FAQs) and contact methods on the website will reassure pet owners that the brand provides sufficient support.

Not unimportantly, these touchpoints across the DTC website (and associated social channels) can help to capture valuable first-party data that translates into insights to drive future business decisions.

Challenges

Before diving into the DTC pet market, it is critical to assess the financial, technological and operational investments to identify the possible level of ownership over the end-to-end process. The biggest challenges companies face are often related to logistics and marketing execution.

Warehousing, shipping and logistics management

Manufacturers should keep in mind that supply chain logistics are a critical first step when expanding into a new channel or entering a new market. Home delivery is more expensive than wholesale deliveries to retailers, and most pet owners expect to receive free shipping.

Selecting a distribution partner or building logistics capabilities close to a dense urban population will make it easier to reach the highest number of pet owners while keeping shipping and fulfillment costs down. This is how Chewy opted to cost-efficiently expand operations into Canada, for example.

Investment in technological infrastructure

Developing a DTC channel typically requires investment in new technologies to enable ordering, engagement and fulfillment. Given the steep upfront costs and recurring fees to manage the backend systems for an online shop, companies need to be intentional about investing in DTC.

Could omnichannel selling be an option to test and learn before making a bigger investment in the necessary DTC infrastructure, such as advanced enterprise resource planning (ERP), payment and tax options, customer service and order fulfillment? Selling products online through partnerships with leading bricks-and-mortar or e-commerce retailers could be more cost-effective in the near term.

Looking ahead

Expansion into DTC presents numerous opportunities for pet food companies to both establish an incremental revenue stream and build deeper relationships with pet owners. Offering a DTC experience can also open doors for emerging brands to reach pet owners online in regions where there is limited retail store distribution.

Before entering the market, however, it is necessary to have a clear understanding of the business goals in order to evaluate whether owning the DTC model is right for the company in question. A ‘pet owner-first’ mindset can help to drive the critical decisions around investment in technology, operations and resources.