One of my favorite theories for pretty much everything is Maslow’s Hierarchy of Needs, originally a psychological study from the 1940s, that defines the progress of human development through the fulfilment of ever-more sophisticated needs, from shelter and food, all the way up to self-actualization and transcendence.
One of the reasons the theory has become so popular, even taught in high schools in many countries, is that it also helps us understand and conceptualize economic growth. As a society’s economy grows, so do the needs, going from ensuring housing and food for the population, to improving the quality of life, arranging infrastructure, and then on to providing comfort and upscale products and services, and investing in well-being and personal development of the inhabitants.
In the venture industry in Eastern Europe, we have long been operating under the adage that our markets are too small for venture-grade returns, and that we have to go global from day one, with the products and services that we build and fund locally. This thinking has definitely delivered a lot of great successes over the past decade, but as the global technology playing field has commoditized, new exciting opportunities are appearing closer to home. Our markets may not be big, but the “rising tide that raises all the boats” of European growth delivers regular windows of arbitrage opportunities, when the supply for fulfilling recently developed needs in a certain industry can’t catch up with the suddenly increased demand.
This is especially true when local new demand coincides with a globally growing trend. And few industries are as indicative of this phenomenon as the pet care and products industry.
Five years ago, twenty-eight year-old Nikola Ninov was shuttling back and forth between London, San Francisco, and Sofia, a successful young professional on a stellar career path with a large international consulting firm. On the side, he was also helping with a family hotel business back home in Bulgaria, and as he and his fiancée were making plans to spend more time together in their home country, they decided to get a dog.
And that’s when Nikola realized a simple thing: pet stores in Bulgaria were hopelessly stuck in the past. Anyone who’s visited specialized pet goods retail outlets in Bulgaria in the past knows what I’m talking about. Usually hidden in residential neighborhoods, often in makeshift spaces from transformed garage boxes, pet stores were stuffy and cramped places, with often grumpy and uninvolved shop-owners, who switched to pet goods not out of a passion for the business, but rather from a gut feeling that this kind of retail could make a marginally better profit than their previous neighborhood convenience store.
“And that’s not to mention the gray financial character of those old pet stores”, adds Nikola as we sit for lunch across the street from one of the ten new offline Sofia locations of his PetMall.bg retail formula. “Even today, in 2021, over a half of the legacy pet stores don’t have their administration in order, and evade taxes and declarations of incomes when they can, resulting in taking only cash and not offering refunds”.
Thus PetMall.bg was born, first as an online marketplace where Bulgarian pet-owners could find an unprecedented choice of products, with fast and friendly delivery, online card payments, a generous refund policy and an attractive loyalty program for returning customers.
Shortly after starting the PetMall.bg website with goods that he wanted to buy for his own dog, Nikola pitched the idea to one of his friends, who decided to angel invest in the business. A year later, another prominent Bulgarian angel investor joined, as the company quickly established itself as the leading online channel for pet goods in the country. About a year ago, the angel investors introduced the growing concept to my fund partner at Vitosha Nikola Stojanow, and we started tracking the progress of PetMall.bg, as it started its expansion to offline retail.
On this gray Sofia October afternoon, as Nikola shows me around of the ten offline retail locations of PetMall.bg, there is not a hint of the kind of ambiance he described to me earlier over lunch. The PetMall.bg store is in the bright yellow colors of the brand’s corporate style, a spacious and welcoming setting, with friendly customer attendants who guide clients between the rows of pet food and care products, categorized by type, breed, and food and wellness preference of your domestic companions.
“Consider it the Apple store of pet goods”, explains Nikola as he shows me the grooming salon at the back of the outlet, soon to be featured in every PetMall.bg location. Next to the grooming area, Nikola is planning a cafe space, where owners can enjoy a latte macchiato while their furry friend is getting their hair done.
“We have done incredibly well”, says Nikola, as he shows me the 100% year-on-year growth that PetMall.bg expects in 2021. “Part of it is that we have been innovating where others haven’t, as Bulgaria’s pet retail space wasn’t ready to catch up with the country’s steadily growing average incomes and increasing interest in a premium pet product experience”. The other part, explains Nikola, is the global trend, which further fuels local growth.
“There is a global development that has been going on for some years, called the familiarization of pets, as we are increasingly treating domestic animals as fellow family members”, says Nikola. “The spending on pets is the same as the spending on children in the developed world, and there is a big underserved opportunity to fulfil this need locally, not only in Bulgaria, but across the region”.
And that’s exactly the exciting path that we are joining PetMall.bg on with Vitosha. Our investment will serve for the further positioning of the company as the number one online retailer not only in Bulgaria, but in neighboring countries as well, and to expand the premium offering for the extended family members that our pets unmistakably are to us.