Pet product online retailer sees growth in a bullish market
In the real world, Michael Day has a poodle named Cookie. But it’s Mr. Chewy, the dog he created for his virtual world, that he’s banking on to fetch him success.
With an initial investment of $50,000, the 28-year-old entrepreneur created MrChewy.com last year. The company’s website offers dog and cat food, treats and health products at prices competitive with brick-and-mortar retailers, and those selling strictly online.
Day’s entrée into the pet care market comes at a time when revenue from pet stores, groomers, boarders, veterinarians and online suppliers is expected to total $51.6 billion in 2012, according to a recent report by IbisWorld, a market research group.
Day, a college dropout, decided to parlay his experience developing website software for others into his own ecommerce business. The idea grew out of a dream he and a friend had to open a no-kill animal shelter. Recognizing how difficult it was to sustain a nonprofit organization, he decided to focus instead on creating a business with better prospects that could be used as a vehicle to raise money for existing shelters.
Three animal welfare organizations are beneficiaries of MrChewy.com. The average customer spends $70 on the site, and the company reached $1 million in revenue for January, according to Day.
“We will do $1.5 million in sales this month, and we are looking to do $25 million this year,” he said.
While the North Miami Beach-based company is not yet profitable, Day expects to be by the fourth quarter.
“It’s a matter of getting to a certain volume,” he said. “The most significant barrier to entry is getting to that scale because you will lose money on every order until you are there.”
The company, that Day started marketing in September and went live in June, has shipped more than 1.5 million pounds of product.
MrChewy.com’s warehouse is in Pennsylvania because most of the company’s customers are on the East Coast.
Revenue from online sales of pet food reached $484.7 million in the five years ending in 2011, and is projected to increase to $595.8 million during the five years ending in 2016, according to IbisWorld.
“Rising pet ownership in the United States and growth across the e-commerce sector has caused the industry to experience overall growth, despite the recession,” IbisWorld analyst Kevin Culbert said.
In recent years, the number of companies offering pet-related products online has grown. MrChewy.com is going head-to-head with the likes of Pompano Beach-based PetMed Express (Nasdaq: PETS), which sells its products exclusively online. In the third quarter ended Dec. 31, it reported sales of $50.5 million and net income of $3.9 million. CEO Menderes Akdag said in a news release that the company acquired 150,000 new customers in the quarter, up from 111,000 new customers in the prior-year period.
Other companies – such as Phoenix-based PetSmart (Nasdaq: PETM), which operates more than 1,200 stores, and Pet Supermarket, a privately owned company based in Sunrise – sell products in stores and online.
IbisWorld’s Culbert predicts niche operators will continue to enter the industry during the next five years, “especially those that specialize in targeted markets, such as supplies for exotic animals or health-oriented products.”
But Day isn’t discouraged by the competition: “I saw a huge opportunity to shake things up.” --
Source: Susan R. Miller, Senior Reporter- South Florida Business Journal