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Pet Pampering Spells Big Bucks for Bargain Sites

Friday, 29 Jul 2011 | 11:26 AM ET

Glance over at the yoga mat next to you, and your neighbor could be Fido stretching into downward dog.

GK Hart | Vikki Hart | Stone | Getty Images

While dog yoga might seem farfetched, it does indeed exist and is part of a larger trend in which humans are spending more money to pamper their four-legged friends.

As the boundary between what is normal for pet services and what isn't becomes increasingly blurred, many pet owners look to websites for deals to pamper their pets on any budget.

This year’s American Pet Products Association survey estimates that pet owners will spend $50.84 billion in 2011 on their pets—an increase from $48.35 billion in 2010. The survey also found that 62 percent of households own pets in the U.S., where more pets than people reside.

As the pet industry continues to expand, a string of daily deal websites have launched to capitalize on this emerging retail sector.

“People treat their pets like their children,” said Matthew Kunkel, president and founder of ThePetDeal.com, a New York City-based site that launched in May. “They’re going to be wanting the best services for their pet. If you own a pet, there’s hopefully something for you.”

Many of these sites operate using a similar model to Groupon, in which pet owners subscribe to receive daily emails from businesses offering limited-time deals.

"The pet industry is still very much in its infancy as far as using technology and social media to its advantage so we believe it is only one lap around a 100-lap race." -CEO, Barking Deals, Steve Watters

Although Burt Flickinger, managing director of retail consultancy Strategic Resource Group, claims the U.S. has just began a 500-day retail recession, pet products and services could be a sector that grows and dodges the overall retail downturn.

“Bad times are good times for sites like these because people are budget conscious and therefore that much more willing to try new ways to save money,” said Andy Hoar, a senior analyst at Forrester Research.

Hoar said the online pet industry is much less saturated than other online retail sectors due to high shipping costs for pet goods, entrenched consumer buying behavior and the convenience of purchasing similar goods locally. He added that the success of pet daily deal sites depends on their ability to save consumers money and to promote their companies cost effectively.

Steve Watters, CEO of Barking Deals, a daily deals site that launched in 2010 echoed the optimism that the online pet retail sector would continue to grow.

“The pet industry is still very much in its infancy as far as using technology and social media to its advantage so we believe it is only one lap around a 100-lap race,” Watters said.

In addition to providing consumers with bargains, these sites can also function as marketing tools for participating businesses.

Datacraft | Getty Images

“Most small and medium pet manufacturers have limited marketing budgets, and our model is to help these companies market their products via social media platforms and blogs,” Watters said. “We help these companies use inventory as the currency for their marketing platforms, and we turn the inventory into cash through Barking Deals via pet owners who want a great deal or just want to try a new product.”

Kunkel said websites such as his are a win-win for retailers and consumers because they can offer exposure for retailers without any up-front cost. While ThePetDeal.com does not charge any money for businesses to list a deal on its site, it receives a commission from each deal purchased through the site.

Hoar added that he thinks rising levels of pet spending is more than just a fad as consumers continue to spend money on extras, such as organic food, day care and grooming, to pamper their pets.

Although he said websites that cater to pet owners could be successful if they can market themselves cost effectively, he is skeptical of the long-term success of the wider daily deal market.

“We here at Forrester are dubious about the sustainability of the daily deals market overall because merchants can’t permanently support the margins, and users now seem trained to filter just for deals—meaning they don’t become full-price consumers later,” Hoar said.

Questions? Comments? Email us at consumernation@cnbc.com.

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