42.8 billion US dollars market size, with a gross margin as high as 50%. This is the “pet economy” for pets, a seemingly extremely profitable business.
But when big players entered the game, they found it was nothing like that.
The latest story comes from Costco. Jeff Bezos made a high-profile foray into the pet sector with 25.4 million US dollars, vowing to build the “Costco for pets”. As a result, all 18 stores of Pet Fresh closed after only 9 months, with an average monthly loss of over 28,000 US dollars per store. The money burned out without making a sound.
Similarly, Pet Home, which raised 57 million US dollars, Jichong Home, Asia’s largest pet store, and the internet-famous brand Bukaxing, have either closed down and run away or shrunk and closed stores. Consumers’ prepaid cards can no longer be used or refunded, and complaints have piled up.
These brands have efficient traffic. The supply chain and efficiency advantages of “human food” can be easily replicated in the pet sector. Coupled with higher profits in the pet economy, it seems to be a very attractive business.
However, although the pet economy is a good business, it is not a good business for big companies.
01 A loss-making business with high gross margins
Pet food is the hottest category in the sector. The gross margins of American brands generally reach 40%-50%. Wellness Pet Company’s high-end staple food even hit 44.7%. A bag of cat food priced at 286 US dollars brings a gross profit of 143 US dollars—much higher than dairy products and condiments in “human food”.
Service businesses look even more profitable. A dog bath and grooming are charged by size: 143 US dollars for small dogs and 428 US dollars for large dogs, with extremely high charges per unit time, not to mention dental services costing 2,860 US dollars. At first glance, it is a hugely profitable business.
Profitability may be true. There are many stories about people becoming middle-class by opening pet stores. But individuals are different from companies. Judging from the financial reports of listed companies, this business seems rather poor.
Wellness Pet Company had a gross margin of 28.16% and a net profit margin of only 9.33% in 2025. Petco Health and Wellness Company relies on OEM all year round and may only earn hard-earned money after a lot of work. These companies are already leaders, and many others have directly negative net profit margins. Pet Fresh wanted to build an offline “one-stop shopping” for pet food, but burned through 25.4 million US dollars in 9 months without ever seeing a positive profit. Bukaxing closed all offline stores and relies on low-price online sales, with an estimated net profit margin of less than 5%.
Some people say that the high gross margin of the pet economy comes from “emotional value”—dog food has costs, but the part owners pay for “love” has no cost.
But in fact, emotional value cannot be cost-free.
Wellness Pet Company’s sales expenses rose from less than 10 million US dollars in 2017 to 71.4 million US dollars in 2025, with money flowing to various channels including pet KOLs. Top pet bloggers can get a commission of up to 30% for product promotion. For a bag of cat food priced at 286 US dollars, 86 US dollars goes just to KOLs—this is the real profitable business.
With KOLs taking so much money, manufacturers can easily increase revenue without profit. Wellness Pet Company’s high-end brand Orijen achieved a 51% year-on-year growth in Black Friday sales by spending heavily on marketing. However, Wellness Pet Company’s sales expenses rose 46.31% year-on-year in 2025, with a net profit margin increase of only 2 percentage points compared with the same period of the previous year.
Those offline stores taking the “high-end emotional value” route are even bottomless pits for burning money. Pet Fresh launched “pet social + fresh food”, decorating stores like internet-famous check-in spots, mostly located in core business districts with a monthly rent of over 14,300 US dollars. As a result, passenger flow was sluggish, with a monthly loss of 28,000 US dollars per store.
Jichong Home, a thousands-square-meter large store equipped with various pet interaction facilities, looked lively but actually faced heavy daily water, electricity and labor costs, and finally could not escape closure.
There are also “soft value” services such as pet funeral and pet psychological counseling, where the cost for emotional value is even higher. A company providing pet farewell ceremonies has to rent venues, hire psychological counselors, make ash souvenir boxes, and spend a lot of money on promotion, otherwise no one will know. It seems to earn thousands of US dollars per order, but actually the net profit after deducting costs is lower than that of selling dog food.
Gross margin is the money earned from the product itself, but dog food is completely different from “human food. The main cost of “human food” lies in materials, logistics and production itself, while the main costs of the pet economy are KOL advertising fees, store decoration fees and platform traffic fees. It is truly profitable, but this profit does not belong to manufacturers.
Of course, in service sectors such as washing, grooming, live pet sales and pet medical care, there are many quite profitable businesses, stores and people in the pet economy. Although competition is fierce in these fields, once word-of-mouth and private domain traffic are established, they can also have a certain moat, thus creating a lot of profits.
It’s just that big companies cannot easily earn this money.
02 A good business for family-owned stores, a Waterloo for big companies
The pet economy is not the first sector where large companies have generally failed. Hairdressing, medical beauty and other seemingly high-margin industries have long been typical examples—Supercuts, Regis closed down after selling membership cards, RealSelf lost more as it expanded…
These businesses all have one feature: the people make money, not the business.
Is football profitable? Of course it is. Messi’s peak salary exceeded 100 million US dollars per year. When he wakes up every day, the superstar earns 400,000 US dollars, richer than many listed companies. But for Messi’s employer, FC Barcelona, football is really a lousy business. At its worst in 2025, 73% of the “company’s” revenue was used to pay salaries, with debts close to 2.5 billion euros, and its finances were on the verge of bankruptcy.
Obviously, it is not the business that makes money, but the people in it.
Similar troubles hang over many businesses.
Take the hairdressing industry for example. A haircut costs 43 US dollars, with costs only for shampoo, water and electricity, and a gross margin of over 80%. A perm or hair dye costs 714 US dollars, with costs only about 143 US dollars, and a gross margin as high as 80%. Although competition is fierce, it is not a hugely profitable business after rent, but it is enough for many people to make a living. The top ones can join the middle class or even higher through this business.
But if it is chain-operated, the haircut business is not so attractive.
It is an extremely fragmented market. Supercuts is regarded as a “giant” in the industry, but by 2025, it only had about 300 stores—nowhere near the level of chain giants in other industries. This number seems to be somewhat of a limit. Its actual controller was restricted from high consumption, and the core team changed frequently. This is already a leader. More often, the industry cannot even breed chain brands, only individual independent stores or regional “small chains” with three to five stores.
Chain operation means branding and standardization. But for haircuts, the priority of these two is lower than that of hairstylists.
An excellent hairstylist can get a 50% commission. After accumulating a group of regular customers, he has bargaining power—either the boss raises the salary, or he starts his own business. Many hairstylists rent a small store and open their own business after two or three years, with all old customers following, and the original chain store is instantly emptied.
For such a business, no matter how profitable it is, the profit has little to do with big companies.
Medical beauty is a thoroughly profitable business. The gross margin of injection projects exceeds 70%, and that of surgical projects exceeds 80%. But RealSelf, the “leader” in the medical beauty sector, posted a net loss of 9.2 million US dollars in Q3 2026, turning from profit to loss year-on-year. Its gross margin plummeted from 62% to 47%, and it burned through 43 million US dollars in cash reserves in 9 months.
After all, the core asset of the medical beauty industry is doctors, not platforms. For a well-known plastic surgeon, customers recognize his skills and reputation, not the RealSelf brand. Excellent plastic surgeons with customer sources can open their own studios and make money. The brand and standardized supply chain provided by large institutions are not scarce resources.
This is exactly the same as the dilemma in the pet industry: stores, decoration and goods can be replicated, but veterinarians, groomers and doctors cannot. The huge profits in these industries are essentially “technical premiums”, “high salaries” for capable people, not “scale profits” for enterprises.
As “Asia’s largest pet store”, Jichong Home opened thousands-square-meter large stores and launched one-stop services including pet supplies, grooming, medical care and foster care. It looked complete in business formats, but actually concentrated all pain points “relying on people”. Veterinarians had to be poached with high salaries, groomers needed training, and foster carers had to be responsible—every link cannot do without excellent people. Once expanding, talents may not keep up.
Pet Home expanded wildly after raising 57 million US dollars, but the more stores it opened, the worse the situation became. Finally, it had to close stores and shrink, leaving a pile of card-holding users to protect their rights.
Jeff Bezos broke in with Costco’s scale gene, believing that the discount store model had lower operating costs and could compete with e-commerce channels. But he found the logic did not hold. Fresh food did not bring obvious edible effects to pets, and besides, the pet business relies on trust between people and store owners, not how efficient the supply chain behind dog food is.
With different logic, 25.4 million US dollars also seemed inadequate.
This is a truth Duan Yongping saw through long ago: “Businesses that rely on people cannot grow big. Businesses that can grow big rely on systems, brands and products, not people.” Wang Jianlin also expressed a similar meaning: Wanda never trusts people, only systems.
But industries such as pets, hairdressing and medical beauty are precisely “people-reliant” businesses. Those pet businesses that live well are not in the financial reports of big companies, but in the stories of ordinary people.
A pet dental store owner in California revealed on social media that his store is not big, with only a dozen people, specializing in high-difficulty projects such as pet dental calculus and orthodontics. Because of scarce technology, the unit price per customer is thousands of US dollars, and customers almost never bargain. The monthly revenue can reach millions of US dollars, with a net profit margin of over 30%. But he never expands, because he knows excellent pet dentists are too hard to find, and expansion will only ruin his reputation.
A pet grooming store in Brooklyn, New York, is a counterexample. The owner and an apprentice took more than 10 orders a day, with a monthly net profit of 2,860 US dollars. Later, someone invested to let her open branch stores, and she suddenly opened 3, hiring 8 groomers. As a result, less than a year later, two closed—new stores had no customers and had to spend money on activities to attract traffic; groomers had uneven skills, and old customers kept complaining; rent and labor costs doubled, but revenue did not keep up.
The owners of those profitable small pet stores are “all-rounders”—they can bathe and groom pets, know common sense of pet medical care, and chat well with customers. Regular customers recognize the owner, not the store name. Even if a chain brand opens next door, old customers will not leave, because what they want is “reassurance”, which can only come from familiar people.
There is a pet nutrition customization studio on Ins with only 3 people, which customizes exclusive food according to pets’ age, weight and health conditions. Although the unit price per customer is high and the customer group is small, the repurchase rate is extremely high, with a monthly net profit of 7,140 US dollars. The owner said: “I don’t do chains, just serve these hundreds of customers well, which is more profitable than opening 10 stores.”
The 42.8 billion US dollars market size is true, and the 40%-50% gross margin is also true, but these belong to small bosses who “make money by relying on people”, not big companies that “make money by scale”. Just as most law firms are small-scale partnerships, and many film and television companies are centered on individual stars, such people-oriented industries are naturally anti-scale.
The successive big companies have also proved with losses that this is not an efficiency business like retail and chain catering. Just like the value of a puppy does not lie in how fast it runs, but in its uniqueness and irreplaceability for its family (community).
Frequently Asked Questions
What is the market size and general gross margin of the pet economy?
The pet economy has a market size of 42.8 billion US dollars, and its gross margin is as high as 50% on average; the gross margins of American pet food brands generally reach 40%-50%.
Why did Pet Fresh close all its stores after only 9 months of operation?
Pet Fresh, which was invested 25.4 million US dollars by Jeff Bezos to build the “Costco for pets”, launched “pet social + fresh food” and decorated its stores as internet-famous check-in spots, mostly located in core business districts with high monthly rent of over 14,300 US dollars. As a result, passenger flow was sluggish, with an average monthly loss of over 28,000 US dollars per store, so all 18 stores were closed.
Why do large pet-related companies often have poor profitability despite the high gross margin of the pet economy?
The main costs of the pet economy are not the production and logistics costs like “human food”, but KOL advertising fees, store decoration fees, platform traffic fees, high rent and labor costs. These high costs offset the high gross margin, leading to low or even negative net profit margins of large companies.
Why is the pet economy a good business for small family-owned stores but a failure for big companies?
The pet economy is a “people-reliant” business. Its profits essentially come from “technical premiums” and high salaries for capable people (such as veterinarians and groomers), rather than “scale profits” for enterprises. Small stores can rely on professional skills, personal trust with customers and private domain traffic to make profits, while big companies rely on systems and scale, which are difficult to adapt to the people-reliant characteristics of the pet economy. In addition, excellent professionals (such as veterinarians) are hard to recruit and retain, making it difficult for big companies to expand effectively.
What is the gross margin performance of well-known pet food companies?
Wellness Pet Company’s high-end staple food has a gross margin of 44.7%, its overall gross margin in 2025 was 28.16%, and its net profit margin was only 9.33%. Petco Health and Wellness Company relies on OEM all year round and only earns meager profits after a lot of work.
What are the typical examples of large companies failing in the pet sector?
Typical examples include Pet Fresh (all 18 stores closed after 9 months), Pet Home (closed stores and shrank after raising 57 million US dollars), Jichong Home (Asia’s largest pet store, eventually closed down), and Bukaxing (an internet-famous brand that closed all offline stores and only relies on low-price online sales).
References
Wikipedia – This page introduces the definition, development background and global market scale of the pet economy, explains the main components of the pet economy (including pet food, pet services, etc.), and provides an overview of the industry’s development trend, which is consistent with the core theme of the original text about the pet economy market and its composition.
Future Market Insights – This report provides authoritative forecasts and analyses of the global pet market, stating that the global pet market was valued at USD 20.1 billion in 2025 and is expected to reach USD 44.5 billion by 2035 with a CAGR of 8.2%, which is consistent with the original text’s discussion on the scale and development potential of the pet economy.
Fortune Business Insights – This page details the size, share and industry trends of the global pet care market, including the segmentation of pet food, veterinary care and other categories, and mentions that the global pet care market will grow from USD 273.42 billion in 2025 to USD 427.75 billion by 2032, supporting the original text’s content on pet economy segments and market scale.
PR Newswire – This news release analyzes the operational challenges faced by the global pet care industry in 2025, including profit margin compression, rising labor costs, and operational difficulties of physical stores, which verifies the original text’s view that large pet companies face losses and operational pressures.
