Dog walking, cat sitting and canine bakeries were all popular pet businesses last century. But the pet businesses of the future are a whole different breed.

Forward-thinking entrepreneurs are focusing on pet enrichment, luxurious pet spas, all-natural pet foods and technology-enhanced pet apparel to attract pet-loving customers. Today’s pet industry is large, growing and beset by powerful currents of change that are attracting previously unseen levels of innovation and creativity.

Market Changes

Americans spent a record $53.3 billion on their pets in 2012 and were expected to spend even more last year. According to the American Pet Products Association (APPA), pet lovers were predicted to shell out more than $55.5 billion in 2013, an increase of 4.1 percent over the previous year's sales. Supporting the growing number of pet-related businesses is a long-term expansion in the rate of pet ownership, up from 56 percent of U.S. households in 1988 to 68 percent of households last year, growth that's expected to continue.

“This trend is largely fueled by increasing numbers of single-person households and seniors, two groups that often purchase pets for companionship, and these populations will continue to grow in the coming years,” explains Doug Poindexter, president of the World Pet Association, a trade group and show organizer. These changing demographics are also driving a demand for new products but especially for new services.

Pet-related services grew at nearly twice the rate of the overall pet market last year and still have a rosy future. “Anything that’s a service is going to continue to build,” says Donna Holick, co-owner of Whiskers Barkery, a two-location Sedona, Arizona-based retailer that, in addition to toys and treats, offers by-the-hour drop-in pet sitting services for shoppers who don’t want to leave their pets in their cars.

Other growth areas Holick predicts include arranged pet play dates, specialized training and luxury spas that go beyond everyday grooming salons by offering the same sort of tranquil atmosphere, well-tailored attendants and high-priced services and products that spas for people do.

The same changing owner demographics are said to be driving higher-end service growth, as well as the expansion of premium products, such as natural pet foods. Holick’s experience in Sedona—a popular retirement destination—foreshadows tomorrow’s market. Older pet owners, Holick says, require clear explanations and plenty of personal attention. They also have different physical needs.

“We searched high and low for dog harnesses that don’t have any buckles yet are also secure," Holick says, "because a lot of our aging customers can’t pinch the clips.”

A Member Of The Family

Fortunately for business owners, older pet owners can afford to spend more, and when it comes to their pets, they’re willing to. For many, a pet isn’t just part of the family—it’s their only family, or at least the only family living with them. That situation is fueling previously unheard-of offerings like pet plastic surgery and grooming products from up-market people brands like Paul Mitchel, says pet association president Poindexter.

And if you're not interested in getting up close and personal with people's pets, you can still participate in the industry by selling health insurance for pets. This sector of the pet industry is booming. APPA predicts premiums for pet insurance will grow from a current $510 million to more than $750 million by 2015.

One rule of thumb to follow if you're thinking about starting a pet-related business: If people have been willing to buy something for themselves, they’re likely to now buy it for pets. That even includes technology. For instance, Barkcode, which makes collar tags with smartphone-scannable QR codes to help reunite lost pets with their owners, last year announced an NFC Touch Tag. The tag employs state-of-the-art near-field communication—the same technology behind mobile wallets—to allow pet finders to simply touch a phone to the tag to retrieve owner contact information.

But it's not just the products and services that are changing. The way pet enterprises do business is also changing, in part due to competition from big-box retailers and online sellers. Tomorrow’s successful pet business has to make a warm connection with its customers, says Curt Jacques, owner of West Lebanon Feed & Supply in West Lebanon, New Hampshire. This is more true of pet businesses than any other business that's battling superstores and e-commerce, Jacques says, because of the emotional human-animal bond.

“Because of that, buying decisions will continue to be emotional,” Jacques says. “We find that a big part of the reason consumers will spend a little more and opt for premium-quality products, whether it’s food or supplies, is an emotional charge.” He adds that people will bypass cut-rate sellers to patronize pet businesses that engage them with special in-store events such as holiday pet photo days, with proceeds benefiting the local humane society, and with activity on social media.

Red Tape Rules

Tomorrow’s pet business will also have to deal with increasing regulation. Today, government oversight extends from classifying popular animals as endangered species, which makes it difficult to sell them, to, in some cases, the outright banning of the sales of some types of animals by retail stores. Those two initiatives in particular were cited as future concerns for pet business owners by the Pet Industry Joint Advisory Council, an industry lobbying group.

Of course, not all regulations are bad. In fact, pet businesses support some regulations. Jacques successfully spoke out against a New Hampshire legislator’s attempt to overturn a ban on dyeing baby chicks with different colors around Easter. “That’s not responsible animal husbandry,” he says. He'd also like to see standards for natural or organic pet food labeling and improved government testing for pet food contaminants.

Pet business owners are hoping that their businesses will continue to be recession resistance. According to APPA, pet-related sales rose steadily straight through the Great Recession years of 2008 and 2009. And that doesn’t surprise pet business owners like Jacques. “If people have tough times, they’re going to feed their animals before they feed themselves,” he reasons. “They still manage to find that extra dollar to buy that pet treat they want.”

Businesses already in or entering the field today can't count on the boom lasting forever, however. Some experts predict falling pet ownership rates as baby boomers age, Poindexter notes, although factors such as childless millennials and higher spending per pet may help mitigate that.

Meanwhile, today’s pet businesses anticipate rosy profits for the near future. “The pet industry is still in the growth phase of its life cycle,” Poindexter says. “New companies are still entering the market, new products and brands are being introduced, and the industry is growing faster than the economy.”

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