The pet industry in South Korea is experiencing a notable surge in investments, with a widespread perception of it being a promising business sector. Factors such as the prevalence of single-person households, the rise in the elderly population, and a growing trend of individuals opting for a pet-centric lifestyle are increasing the pet population in Korea. This eventually led to the pet industry expanding from 1.9 trillion won in 2015 to 3.4 trillion won in the current year, with expectations of reaching the 6 trillion won mark by 2027.
However, despite these favorable market conditions, major startups in the country are facing challenges in translating this enthusiasm into financial success.
Why is it that companies are struggling to make a profit out of the advantageous conditions?
The common problems behind these companies’ losses are:
- Excessive expenses
Most companies have continually increasing sales up to 2024; it is just that their spendings are too great for the sales to keep up with it to make profit. Due to the nature of the online shopping mall business, maintaining inventory and conducting deliveries cause substantial outsourcing and transportation costs. Additionally, significant expenditures on investments for the technological enhancement of the platform, marketing, and other related costs further contribute to the financial burden.
- The presence of larger scale online shopping malls
Smaller-scale pet shopping platforms face significant challenges in competing with larger, more comprehensive shopping malls. Specifically, platforms such as ‘Coupang’ or ‘SSG.com’ (which are basically similar to Amazon), have integrated pet sections on their website and regularly execute promotional activities to attract pet owners. The only major difference between the new pet shopping platforms and the existing ones is that the products offered by pet shopping platforms are personalized. Therefore, customers already subscribed to major shopping malls may not perceive significant advantages in utilizing these new pet shopping platforms over others.
So what should be done for success in the future?
While researching the major pet-related companies in Korea, it was found that Fit Pet’s easy test kit has achieved sales of 400,000 units both domestically and internationally, which makes it one of the best-performing products. (Despite this, Fit Pet is also under operating loss.) This success is most likely due to its ability to address a significant market need by providing a solution at a fraction of the cost of traditional veterinary tests. While similar tests cost between 30,000 to 50,000 won at veterinary clinics, this product offers the same benefits at only around 10,000 won. Furthermore, although items such as pet clothes or toys may be available on other shopping sites, medical products may be unique to a specific platform and are likely to be in demand by many pet owners. As a result, this reveals that products offering medical or healthcare benefits are more attractive to customers and thus profitable than mere pet supplies.
Currently in South Korea, prescription pet food or medication is exclusively available for purchase at veterinary clinics. Consequently, despite the availability of personalized health records on platforms like Fit Pet, customers are unable to gain the required medications through these platforms. This negates the incentive for customers to engage with online platforms if they ultimately need to seek medication from a veterinary clinic.
Therefore, providing health records and collaborating with the medical field to sell corresponding medications on the same platform would likely generate revenue. For example, companies like Chewy in the United States collaborate with veterinary clinics and provide prescriptions directly, and they are generating substantial profit.
In summary, there is a need for collaboration with the medical field for the success of the pet supply industry. Since 2023, Korean governmental efforts have been directed towards fostering collaboration between the pet industry and the medical sector, particularly to promote businesses such as pet insurance. Continued efforts in this direction are needed until eventually, medications can be sold through these pet shopping platforms and generate profit.
As the global pet industry continues to grow, many emerging companies worldwide are facing similar challenges as those in Korea. Therefore, the adoption of these strategies could apply to many companies and lead to success across the global pet supply market.
