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Huge Opportunities Loom in Mainland's Underdeveloped Pet Toys Sector

With the number of mainland households that are home to a least one pet having surged in recent years, China's pet-supplies industry has struggled to keep up, with the biggest shortfall, in range and quality, in the pet-toys sector.

Photo: Pet toys: Currently lacking in innovation, quality control and variety.
Pet toys: Currently lacking in innovation, quality control and variety.
Photo: Pet toys: Currently lacking in innovation, quality control and variety.
Pet toys: Currently lacking in innovation, quality control and variety.

Between 2008 and 2012, the number of mainland pets soared from 30 million to 130 million according to a study by Sootoo Research, a Beijing-based online research consultancy. The same figures also suggest that this number is set to soar still further, with the mainland likely to be home to about 360 million pets by 2019.

The corollary of this, of course, is that the value of the pet-care sector has also grown enormously. A recent report estimated that China's pet economy was worth RMB100 billion (US$15 billion) as of 2016, with that figure set to double by 2020.

Of the 2016 figure, sales of pet toys accounted for about RMB12.5 billion, about an eighth of the total spend in the sector. For 2017, it has been estimated that pet-toy sales will grow by a further 20%. At present, the sector is subject to no strict classifications, with most pet toys defined purely in terms of function, with play, learning and teething accounting for the use of the majority of them.

Demographic Shift

As in many other sectors, the rise in the disposable income levels of many mainlanders has led to increased spending on pet toys, with the typical pet owner now allocating about RMB690 a year to such items. As well as this increased commitment to spending, the sector has also benefited from a demographic change among pet owners.

Overall, the average age of pet owners has dropped in recent years. While keeping a cat or a dog was once primarily the preserve of the elderly, today an increasing number of young people own pets, with the majority now below 40. Typically students, clerical workers or housewives, the sector is now also dominated by women, who account for 70.4% of all pet owners. Perhaps less surprisingly, pet ownership also tends to be concentrated in the more economically developed regions of the country.

Commenting from her own experience, one university student, who is now in her early 20s, said: "When I lived at home, I didn't buy my pet toys all that often. Since leaving to go to university, though, I buy more toys as I worry she has no one to play with. I also treat her to a new toy every Spring Festival.

"Primarily, I buy plastic teething toys, as well as some small stuffed playthings. Typically, about RMB300-400 is spent on my pet per month, largely on food. My spending on pet toys, though, is less regular, probably averaging out at about RMB400 a year."

Offline and Online Suppliers

The Liyuan Wholesale Market in Beijing's Tongzhou district is one of the largest outlets for pet supplies in China. Typically, the majority of the shops on the site specialise either in pet food or pet-care products, with none of them seeming to focus solely on pet toys. Within the sector, toys are largely viewed as non-essential items, a status that has seen most retailers reluctant to take them on board as flagship products.

Typically, the range of toys available in most pet outlets tends to be rather small, with those items on offer usually solely targeted at either cats or dogs. All such items are also largely focused at the lower end of the market, typically made from poor quality rubber or cloth and selling for RMB10 or less. Indeed, among the 53 vendors active in the Liyuan market, only two offered higher-end items, most notably a dog-friendly treat-dispensing rubber ball.

Photo: One of only two pet toy shops at Liyuan market.
One of only two pet toy shops at Liyuan market.
Photo: One of only two pet toy shops at Liyuan market.
One of only two pet toy shops at Liyuan market.
Photo: Limited choice: Rubber and rope pet toys.
Limited choice: Rubber and rope pet toys.
Photo: Limited choice: Rubber and rope pet toys.
Limited choice: Rubber and rope pet toys.

Given the paucity of choice offered by many conventional retailers, it is not surprising that the e-commerce operators active in the sector seem to be thriving. Most notably, sales via m-commerce platforms are said to be particularly brisk, a sign perhaps of their compatibility with the outdoor lifestyles favoured by many pet owners.

Compared with conventional retailers, e-commerce platforms, given their wider geographic reach, have far greater freedom to specialise in a particular sector. This has given rise to a number of mainland-based sites emerging with a particular focus on pet products, with Boqii (shop.boqii.com) and ePet (epet.com) seen as the two front-runners in the sector.

Currently, Chongqing-based ePet has three dedicated divisions, focusing on dogs, cats and aquarium-related sales. As well as selling food, snacks and daily supplies, the site offers more than 3,000 different pet toys, which together account for 10.2% of the site's total product range.

The majority of the site's toys are geared towards cats or dogs and come subdivided into seven distinct categories, including cotton, rubber, plastic and handmade. Overall, ePet's best-selling dog toy is a small talking felt turtle (RMB9), while its most popular items for cats is a toy mouse attached to piece of string (RMB3.5).

The larger of the two sites, in addition to the three divisions operated by ePet, Shanghai-based Boqii also offers two additional sections – small pets and reptiles. Although its range of toys is still dominated by items for cats and dogs, it also offers a range aimed at smaller pets (including rabbits, hamsters, chinchillas and guinea pigs) and one targeted at aquariums.

Clearly satisfied with his purchase of an RMB9.8 running wheel, one Boqii customer said: "My hamsters love to run around inside the wheel I bought them. Now, even when they are outside their cage, I don't have to keep an eye on them. They can run around the house in the wheel and it is always easy to track them down."

In part, the changing demographic of pet owners has also proved to be a windfall for e-commerce operators in the sector. Commenting on his own shopping habits, one young high-school teacher and the owner of two cats, said: "When it comes to pet toys, it is not as important to check the quality beforehand as it is with food, so I tend to buy all such items online."

Opportunities and Challenges

Despite the surge in pet numbers and the concordant rise in spend, the mainland pet-toy sector is still in its relative infancy, a state of play that has left the industry facing a number of challenges. Most obviously, the sector is still characterised by a lack of innovation.

According to a report by the Qianzhan Industry Research Institute, a Shenzhen-based market research consultancy, the mainland's pet toy manufacturing sector is still stuck in a 'made in China' rut, a state characterised by mass-market, low added-value production, with little or no innovation or product development. As such, genuinely new toys with contemporary designs are few and far between, while no domestic brands have really begun to build their reputation and profile in the market.

In an additional problem, among those pet-toy manufacturers active on the mainland, the domestic market has yet to be deemed worth targeting, with the majority of pet toys manufactured in China destined for the export markets. As a sign of this, few pet toys come with Chinese packaging, with nearly all of them branded in English, Japanese or Korean.

The final problem – and, perhaps, the most significant – is quality. As it stands, the mainland pet-toys sector is not obliged to confirm to any industry-wide product standards, a situation that has resulted in an overall lack of quality in many of the products currently on the market.

Photo: ePet.com’s top-four best-selling dog toys.
ePet.com's top-four best-selling dog toys.
Photo: ePet.com’s top-four best-selling dog toys.
ePet.com's top-four best-selling dog toys.
Photo: Boqii.com’s four most popular hamster toys.
Boqii.com's four most popular hamster toys.
Photo: Boqii.com’s four most popular hamster toys.
Boqii.com's four most popular hamster toys.

As a result, many consumers have frequently expressed dissatisfaction with their purchases. In this respect, the comments of one dog-owning university student can be seen as typical – "On one occasion, when I bought a stuffed toy online for my pet, I found it had a sharp needle-like object inside. It was only by chance that I discovered it in time."

Given that the 2016 report identified pet toys as the second-most profitable of the four categories of pet products (food, supplies, medical treatments and toys), it is clear that the sector has huge potential. In light of both this and the ever-growing number of pets now being kept on the mainland, it seems all but certain that a more properly regulated and innovative sector will ultimately emerge to fully capitalise on these dynamic opportunities.

Li Nan, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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