The largest e-commerce acquisition ever surprisingly occurred in the pet industry when PetSmart announced its purchase of for $3.35 billion last month. It was only a couple of years ago that PetSmart and Petco were considering a merger of the two largest brick and mortar pet store chains. In 2016, PetSmart had 37% of the pet retail store company revenue according to IBISWorld. Now, PetSmart clearly sees its future competition more from online retailers than from other pet retail stores.

PetSmart DealThere’s no denying the growth of online purchases of pet food and products. Packaged Facts estimates that in 2015, the most recent year for available data, online sales of pet products in the U.S. accounted for approximately 4% of the $45 billion sales total, or about $1.9 billion in value. Online sales are expected to grow annually at double digit rates.

Consumers certainly value the competitive prices and convenience of the channel. Subscriptions for auto-delivery of pet food enable further price discounts and help pet parents avoid a trip to the store when their pets run out of food. When it comes to pet food specifically, beat out all other online competitors with 50% of sales in the first quarter of 2016 (most recent data available).1

While Amazon and PetSmart had a sizable share of all pet product purchases, they trailed at 35% and 2% of online food sales, respectively. The American Pet Products Association (APPA) recently released its biannual National Pet Owners Survey, which indicated that for pet owners who purchased products online in the past year, over 50% had ordered from Amazon.

With e-commerce clearly trending up in the pet industry, Chewy looks like a smart bet for PetSmart. We will be on the lookout for responses from other pet retailers as they continue to address the online market, specifically mergers that achieve synergies to help them either compete on price or drive in-person services that cannot be purchased from a website.

1Note: Fung Business Intelligence and 1010Data (Statista)

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