Wang Pingxi set up the first pet products chain store in Beijing in 2001. Provided to China Daily

Kudi looks to the future with listing dreams as industry poised for rapid growth

Raising pets has not only become common with urban lifestyles in China, but has also opened the floodgates for the domestic pet supplies industry, as customers from across the globe are increasingly turning to China for inexpensive but high-quality pet products.

But that was not the case in 2009 when Wang Pingxi, the chief executive officer of Kudi Pet Store Inc, a Chinese pet supplies company, decided to showcase his products at trade exhibitions in the United States and Germany.

Wang says most people were amazed that there was such a company in China.

"What? Do Chinese people also raise pets?" was the question that came to most people' lips when they saw us appearing in the exhibition. Over the last few years, Kudi has seen phenomenal growth and expanded rapidly to become the biggest specialist pet supplies retailer in China.

For Wang, the journey has been a culmination of the dream he nurtured in 2001 when he set up the first pet products chain store in Beijing.

In 1999, Wang founded the Association of Small Animal Protection Beijing out of love for animals. He also introduced competitions for pureblood dogs and cats in 2000 and 2001.

"While organizing these events, I came into contact with several foreign professionals and got a preliminary idea about the pet supplies industry. Though I was aware that the industry was dominated by bigger players in mature markets like US and Europe, I decided to start the business in China, much to every one's disdain.

"Ten years ago, no one in China knew what dog food was. I had to convince each owner that it was food specially made for dogs."

Wang says much of his time in the last few years have been spent on education of pet owners in China.

"The development of pet-related industry relies largely on a country's pet culture. In the West, dogs, cats or other pets are often raised as family members. But Chinese people used to consider pets as helpful domestic animals, more like horses."

But the rapid economic growth in China and the changing lifestyles have brought about a shift in the mindset, he says.

According to data from the China Agricultural University, pet-related industries flourish when the per capita gross domestic product of nation lies between $3,000 and $8,000. In China, the per capita GDP is about $4,380, providing the right impetus for growth.

Along with rapid economic growth, rapid urbanization and changing social structure are also helping the pet supplies industry.

"Many people call their pets 'sons' or 'daughters'. They are generous with their animal friends, and want them to have the best products and services," says Wang Pingxi.

Kudi Pet chain stores are outlets that provide one-stop services. Owners can find everything for their pets, including food, toys, beauty services, spa, photography, veterinary care and hotel services.

With two of its big stores spread over an area of 1,500 square meters each, Kudi also has two 60,000-sq-meter pet parks, where dogs can run unrestrained on the grass, swim, and stay at dog hotels. The company also has camps for the pets to stay when owners need to go out of town.

Such services are, however, expensive. Residential charges for pets at the doggie camp are around 120 yuan for each dog. But Wang says cost is not an issue for most of his middle-class customers aged between 30 and 50 with huge incomes.

"Many of my customers are famous people from the entertainment industry, such as Gong Li (named best actress at the 49th Venice Film Festival and the leading lady of the Zhang Yimou film Raise the Red Lantern), and Faye Wong (a singer from Hong Kong)," Wang says.

President Hu Jintao used to have his dog Huan Huan, a Japanese Spitz, sent to Kudi every two months for bath and beauty services, he says.

With 52 outlets in Beijing and several in other cities, the biggest pet retailer in China nets around 50 million yuan in annual revenue, with annual growth rates of 10 to 20 percent.

"But compared with the US-based PetSmart stores, which are around 3,000 square meters, we are still small," Wang says.

"I don't really know whether the Chinese market is still ready for big players like PetSmart as many people in the third- and fourth-tier cities still don't consider dogs and cats as pets."

Online shopping is another challenge that is hindering most companies.

"Two years ago, our stores could grow at an annual rate of 30 percent, but online shopping has become so popular in China that the profits of many old stores have been squeezed," Wang says.

Unlike the markets in the US and Europe, where the retail system has been long established before the Internet age, the immature Chinese retail system has been hit hard by e-commerce, he says.

However, the future is still bright in China, he says. "I think the market started maturing in 2010. Over the next three to five years, we will see an industry consolidation."

Wang says the consolidation will center on quality. "Quality is our forte. If we can maintain the first place in the Chinese market in the next three to five years, we will surely become the first Chinese pet retailer to go for a public listing."

The market potential for pet products in China is tremendous. In 2009, around 4.25 million dogs and 2 million cats were registered in China, only one-third of the whole estimated dog and cat population, which grows annually at 30 percent, according to Kudi data.

In 2010, the total pet supplies consumption in China exceeded 40 billion yuan, and is expected to grow 20 percent a year in the coming years, according to consulting firm CI Consulting.

Last year, a mere 1.7 percent of households in China kept dogs, compared with 55 percent in the US and 29.4 percent in Japan. In Beijing and Shanghai the figures were 7.5 percent and 4.5 percent respectively. In 2008 the value of pet product sales nationwide in China was 6 billion yuan; in the US sales totaled $15 billion and in Japan $3.5 billion.

That clearly leaves a lot of room for growth in the Chinese market, particularly as a result of changing lifestyles and rapid urbanization. A Kudi reports forssees annual growth in the industry of 35 percent in coming years.

"The time has come when the pet-related industries in China will start to boom. With such a huge market, all big brands in the world will try to enter China to compete for market share. The cake will surely become bigger," Wang says.