Pet market trends are well past the pandemic’s boom and bust

What’s a better bet? A puppy or a Patek Philippe watch? With central bankers still trying to wrestle with inflation, there is one category where retail prices have actually been plummeting—household pets.

[In the West,] demand for cats, dogs and rabbits soared amid covid restrictions. But as economies reopened, lockdown loneliness eased. People in general became less keen to add an animal to the household, and therefore the market prices charged for pets slumped. The [rich-world’s] pet trajectory has broadly mirrored the boom and bust in the value of second-hand timepieces, as stock market and cryptocurrency gyrations as well as higher interest rates took their toll on those who had speculated on pricey Rolex watches.

Over the course of this year, the UK pet market has stabilized, according to the latest report from Pets4Homes, a digital platform that connects breeders and shelters with those seeking to purchase or adopt an animal. The number of buyers per advertised pet has increased and prices are rising, albeit at far less dramatic levels than three years ago.

That’s good news for breeders, less so for those looking for a furry companion. And the spectre of inflation haunts the pet sector: With the cost of household essentials still rising, and now higher borrowing costs added to the mix, there is a danger of people giving up their pets.

As pandemic restrictions were introduced and people around the world were stuck at home, many turned to dogs, cats, rabbits, rodents and even reptiles. In the UK in April 2020, there were around 400 buyers for every advertised pet, according to Pets4Homes.

It took time for pet breeders to react to more people wanting puppies and kittens and enhance supply. As they did so, covid restrictions were lifted and fewer people were looking for animals. Consequently, the number of buyers per advertised pet on the Pets4Homes platform was less than 100 a year ago, but has now increased to about 170, as breeders bring fewer litters to market.

As a result, puppy prices, which peaked in early 2021 but then slid, have begun to stabilize. Kitten prices tend to be more seasonal, so it is more difficult to discern trends. They have also ticked up recently.

The average price of a puppy has increased by just over 1% over the past year, according to Pets4Home, outperforming Rolex, Patek Philippe and Audemars Piguet watches, the brands most in demand on the secondary market from 2020 to 2022. However, dachshunds still underperform Rolex Daytonas on a three-year basis.

There is a possibility that the current balance in supply and demand does not last. Pets4Homes found that it takes breeders six to 12 months to respond to market signals. So it’s possible that supply comes back over this period.

This is in fact a similar dynamic to what is seen in the watch market. One of the factors that will determine whether prices for the three most in-demand names continue to contract is how much inventory speculators and dealers still need to liquidate. A recent report from Morgan Stanley and research platform WatchCharts found continually falling supply levels for Rolex and Audemars Piguet timepieces since the beginning of this year, although they are still at elevated levels. Supply of Patek Philippe models remains near all-time highs.

But animals are not inanimate stores of value like watches. They need feeding and veterinary care. That is good news for retailers such as the US’s Chewy Inc and Britain’s Pets at Home Group, as well as pet food manufacturers such as Nestle. Less so for cash-strapped pet owners. Amid a cost-of-living crisis, some owners are being forced to cut back on the care of their pet, or give them up altogether.

London’s Battersea Cats and Dogs Home has been seeing a high level of owners bringing their animals to its centres because they can no longer afford to keep them or pay for vet bills. In July, for example, 14% of animals were brought to Battersea for this reason, compared with less than 1% in December 2021. The number of inquiries from people looking to give up their dogs was up 14% in July from the year earlier, while inquiries from people seeking to rehome their cats was up 68% year on year.

Thankfully, Pets4Home has found that the numbers of dogs and cats over six months old—a proxy for unwanted animals—being put up for re-homing via the site has not significantly increased.

But given Battersea’s experience, this trend is worth watching. Unwanted Rovers shouldn’t be added to the glut of unsold Rolexes. ©bloomberg