The pet economy

PetSmart, for one, has shifted its mission from being the top seller of pet food to helping consumers become better "pet parents." Along with making his 928 retail locations homier and hosting pet parties, Francis is rolling out blue-shingled "pet hotels" (kennels) in his stores. They feature private suites with raised platform beds and TVs airing shows from Animal Planet for $31 a night, as well as "bone booths," where pets can take calls from their owners, and porous pebble floors where dogs can pee. Cats get live fish tanks to watch in their rooms and separate air filtration systems so their scents dont drive the dogs crazy. The hotels, along with services such as grooming, training, and in-store hospitals, have helped PetSmart expand its service business from essentially nothing in 2000 to $450 million, or 10% of overall sales, this year. Pet owners are now less driven by price than "emotion and passion," says Francis, who shares a bed with his wife and their mutt, Bit o' Honey.

Those are the same primal urges that drive the fashion world. Mario DiFante, who staged New York's first Pet Fashion Week last August, has an elevated view of the place of dogs and cats in the family hierarchy. As he puts it: "Many of us consider pets as the new babies." That means clothing furry little ones in an ever-expanding range of sweaters, raincoats, leather jackets, and dresses. For Lara Alameddine, co-founder of Little Lily, a better word might be "babes." Her four-year-old company clears $1 million a year selling products including doggie slippers, bikinis, and even canine versions of Oscar-night gowns. It's popular with celebrity dog owners such as Paris Hilton, who often dresses up her Chihuahua, Tinkerbell. "We're catering to the owner's sense of style," says Alameddine. "There are no bones on our clothes."

Pet products now aim to make people feel they're being extra good to their little ones—much as toymakers have long encouraged parents to spoil kids. Along with doggie spas, there are mobile pet-grooming vans, pedicure services, professional dog walkers, and massage therapy for animals. Trainers like Cesar Millan—better known to millions as the Dog Whisperer—find that their expertise is suddenly in greater demand. Along with having the No. 1 series on the National Geographic Channel, Millan boasts best-selling books, DVDs, a line of products, and his famous Dog Psychology Center of Los Angeles that's a favorite with Hollywood clientele.

The growing willingness of owners to spare no expense for their animals has also made the outsourcing of the yucky aspects a burgeoning business. More than 350 service agencies with names such as Doody Duty, Scoopy-Poo, and Pooper Trooper have sprung up solely to relieve owners of the need even to pick up a pet's waste in their yard by doing it for them. With annual growth nearing 50%, "the pooper scooper industry is now experiencing a lot of consolidation," says Jacob D'Aniello of DoodyCalls, which has 20 locations nationwide.

But few parts of the business have seen as much diversification and expansion as the pet food business. As with humans, there's a growing concern about the nutrition, taste, and even ethical standards of what goes into a pet's stomach. Owners increasingly mirror their own preferences—for vegetarian cuisine, kosher meals, and even locally sourced food—in feeding their pets. And when things go wrong, the reaction is as explosive as if the victims were children. Consumers were outraged by a massive recall of melamine-contaminated pet food that killed or sickened thousands of U.S. cats and dogs. Because pets are now such valued members of the family, says Duane Ekedahl, president of the Pet Food Institute, "it had a higher impact than maybe it would have had 10 years ago."

As food becomes a more emotionally charged issue for people, owners are more inclined to get emotional about what's on their pets' menu. Witness the growth of what one industry executive calls the "Godiva-ization" of food, with a demand for meats fit for human consumption, visible vegetables, and nutritional supplements. It has become common to reach for a canine or cat equivalent of ketchup, such as Iams Co.'s (PG ) popular "savory sauce" for dogs that comes in Country Chicken, Savory Bacon, and Roasted Beef flavor—descriptions that are, needless to say, lost on the actual consumer.

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