Amazon’s Foray Into Pet Food Fails to Faze Germany’s Zooplus

(Bloomberg) -- Zooplus AG, Europe’s biggest online seller of pet-related products, got a scary new competitor last year.

Amazon.com Inc. began selling pet food in Europe under its own brand names in the fall. While the news dented Zooplus’s shares, the German company’s chief financial officer remains bullish about its prospects.

“We see no sign that Amazon is snatching away our customers,” Andreas Grandinger said in an interview. The company’s sales-retention rate hit a record of 95 percent last year, helping revenue to climb 21 percent as its (mostly female) customers snapped up around 8,000 products ranging from cat-litter bags to bird seed.

In order to win their loyalty, the 20-year-old company has created an online community that offers discounts on products and advice on everything from how to fit a horse’s saddle to what to name your pet poodle. At the same time, it has set up about a dozen warehouses -- known in the industry as fulfillment centers -- across Europe to improve delivery times.

Amazon’s decision to sell pet food under its own Lifelong and Solimo brands in Europe threatens to take business away from Zooplus and brick-and-mortar giants like the U.K.’s Pets at Home Group Plc. Amazon, the world’s biggest e-commerce company, hasn’t published sales figures for the business.

“We’re constantly working to increase our offering, and the own-labels product help us it to sell a growing number of valuable products to our customers at attractive prices,” Amazon said in a statement.

In response, Zooplus plans to lift the share of own-label sales of pet food to 20 percent from 14 percent. The company is also trying to offer a more personalized service by collecting and using data to get a better idea of its customer’s preferences. That has helped keep the return rate at less than 1 percent.

“We are extremely data-driven,” Grandinger said while discussing shopping transactions and top-seller lists featuring dog snacks and cat litter displayed on monitors across the halls of the company’s headquarter in Munich.

Zooplus plans to reinvest most of its earnings rather than paying a dividend, at least for the time being. In the long term, the company plans to target a pretax margin of between 4 percent and 5 percent, Grandinger said.

Zooplus has lost about a third of its market value in the past 12 months and its shares hit a four-year low on Feb. 1. They peaked in 2017, when the $3.35 billion acquisition by Arizona-based PetSmart Inc. of online rival Chewy Inc. fueled speculation that Zooplus “would be next,” as Grandinger put it.

Investors will get a better idea of Zooplus’s prospects on March 20, when the company is scheduled to publish its annual earnings.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editors responsible for this story: Erhard Krasny at ekrasny@bloomberg.net, Andrew Blackman, Iain Rogers

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