“Everyone is having a hard time.”

In recent years, the pet economy has been in full swing, and pet hospitals of all sizes have sprung up like mushrooms after a rain. Recently, in a conversation with "Pet Industry Light Years", Li Xue, founder of Pet International, said that in the three years since the epidemic, the number of pet hospitals in Beijing alone has increased by 300 to 400, now reaching more than 1,100.

However, the ensuing intensification of competition will directly lead to a decrease in the company's turnover and even losses. "The supply side will further reduce costs, and there will definitely be more complaints on the demand side, leading to a further deterioration in the supply-demand relationship, but there is no way. Maybe every industry needs to experience such pain."

In addition to her observations and thoughts on the industry, Li Xue also shared with us her thoughts on Pamper International's planning and arrangements.

She said that she is more willing to invest capital in technological innovation and technology research and development, and does not want to spend money to open so many hospitals in the future. The overall operating strategy of Pet International this year is to focus on differentiation.

It is reported that Pet International is already a "veteran" in the pet industry and was established in 2013. There are currently more than 60 pet hospitals across the country, located in Beijing, Shanghai, Hangzhou, Chengdu and other places.

As for financing, Li Xue said that if the investment team is willing to believe in the current model of Chongai International (mainly self-construction), then financing will be carried out normally. "It is estimated that it will take 3-5 years to go public. Entrepreneurs should be responsible for value creation. Your company is really valuable. It is just a matter of time. For me, time is an advantage over others. " she said.

#01

“Life is hard”

Pet Industry Lightyear: What are the new trends and characteristics of the current pet medical field? What are the obvious changes in the industry since the epidemic?

Li Xue: The changes have been huge, especially during the epidemic, including now. During the epidemic, the number of hospitals increased two or three times. When I first entered the industry, there were more than 700 pet hospitals in Beijing. Before the epidemic, there were basically no changes. However, the number of pet hospitals increased by 300 to 400 in the past three years due to the epidemic. Beijing now has more than 700 pet hospitals. There are almost 1,100 pet hospitals.

Pet Industry Light Year: Why does this phenomenon occur?

Li Xue: First of all, I think it is still driven by capital. Many brands have capital to enter the market, whether during the epidemic or not (during the epidemic), they must complete the expansion. And this push will indirectly affect other practitioners, who will feel that if they do not expand, they may be eliminated.

This change has definitely brought about competitive pressure in all aspects. It is obvious that the industry is very difficult now. Demand has not increased in a short period of time, but supply has increased so much, and everyone is having a hard time.

Pet Industry Lightyear: What are the specific impacts?

Li Xue: I participated in 5 industry conferences in the first half of the year. When everyone saw each other, they said that the situation this year was not good. It is remarkable that the turnover does not drop. Most of them will drop by 20 to 30%. .

In fact, it can be seen from public materials that the overall gross profit rate of this industry is not high. If it drops by 30% under this situation, it will basically be a loss or on the verge of loss. And, I think it’s going to be hard for a long time.

Pet Industry Light Years: The number of pet hospitals is increasing, but the quality of operations is declining. Is this an opportunity or a challenge for leading companies?

Li Xue: I think it is a challenge. For example, when it comes to acquiring hospitals, brands are now acquiring profitable hospitals, and the profit margins must be very good. But the current situation is that first of all, many hospitals have just opened and are not profitable. Secondly, many hospitals' revenue has dropped by 20 to 30% and they are facing losses. In this case, the options for brands to acquire hospitals will become much smaller.

Pet Industry Lightyear: What type of hospitals are generally losing money?

Li Xue: In fact, at this stage, losses do not necessarily mean that the hospital is good or bad. It has something to do with the market conditions. On the one hand, competition in the industry has intensified, making it extremely difficult for hospitals to acquire new customers. On the other hand, 20 to 30% of old customers have been lost due to urban migration caused by the epidemic. Therefore, compared with before, new and old customers are being lost, and losses are inevitable. Of course, you can also grab customers through price wars, but most of the customers brought in by this method are just to "gather wool" and you can't make any money.

Pet Industry Light Year: Have you ever calculated how much it costs to acquire a new customer?

Li Xue: For this industry, the number of first-tier cities is around 200 to 300, and the second-tier and third-tier cities are more than 100. However, now second-tier cities are growing at a rate of two to three times, and prices are basically approaching those in first-tier cities.

Pet Industry Lightyear: What are the channels for attracting traffic?

Li Xue: This aspect is very limited, mainly Meituan and Dianping. Because platforms such as Douyin and Xiaohongshu have restrictions on medical vocabulary, related content cannot be posted. In other words, everyone is still increasing prices in the original reservoir to grab existing customers. Alipay and Douyin can also do this, but there is still a big gap compared with Meituan-Dianping.

Pet Industry Light Years: Are there any other trend characteristics? For example, personnel structure, products, etc.?

Li Xue: In fact, these have not changed much. Mainly due to the situation mentioned above, I think once you enter this vicious cycle, the supply side will further reduce costs, and then the demand side will definitely complain to you more, causing the supply and demand relationship to further deteriorate. This is very bad, but there is no way. Enterprises must survive first, and every industry may have to experience such pain.

Pet Industry Lightyear: How are pet medicines and equipment developing in the upstream of the pet medical industry chain?

Li Xue: It is definitely good for upstream medical equipment and pharmaceutical companies at present, because demand is constantly increasing. About 80% of domestic pet hospital equipment is domestically produced. The positioning of hospitals is different, and the equipment costs are also different. For example, if we open a new hospital, the equipment cost must account for at least half of it. The same is true for smaller hospitals, but the total investment is less.

Pet medicine has not changed much. The monopolies are still the same, and it is difficult to launch new products. Nowadays, domestic pet drugs are increasingly appearing in pet hospitals, which is also related to cost reduction. Upstream equipment and medicine should be quite profitable, and I think it is difficult for the upstream landscape to change in a short period of time.

Chongpai Lightyear: Chongpai attaches great importance to the cultivation of talents. What will you do specifically?

Li Xue: We do a lot of talent training. Whether it is professional skills training or job promotion system, it is relatively mature. Because we are one of the few brands in the industry that does self-construction, we have to employ people for self-construction. In addition to people who are ready to work, there must also be some reserve talents, which requires time to cultivate. Therefore, we have invested a lot in this area, and our labor costs are relatively high in the entire industry.

Pet Industry Light Years: Hospital brands such as Xin Ruipeng and Ruichen are also engaged in continuing education for pet doctors. Does this reflect the shortage of pet doctor talents? What is the current situation of the pet doctor talent market?

Li Xue: I think it mainly depends on the competitiveness of the company. If a company is not competitive enough, no one will come. To be honest, it is not easy for job seekers to find a good platform at present, especially for those who want to develop in specialized hospitals. If they go to a hospital with ordinary equipment and medicine and a small number of customers, how can they use their talents? Therefore, capable people are more inclined to move into competitive companies, which is helpful for their career advancement and professional skills.

At present, centralization is an obvious trend in the field of pet talents.

The pet industry is light-years old: Is the barrier to entry for pet doctors high? How do you recruit people? What is their typical salary?

Li Xue: In fact, the threshold for entry into the industry is not high. After graduating from school, students can practice as a pet doctor after obtaining a pet doctor certificate. Part of our talents are cultivated by ourselves, and the other part comes from external recruitment. However, because we have not expanded much in recent years, the external recruitment is relatively small.

The annual salary of good doctors is five to six hundred thousand, or even more than one million. However, for students with average ability or fresh graduates, the monthly salary is about 7,000 to 8,000 yuan. In fact, many hospitals now have a monthly turnover of about 150,000 yuan. In this case, considering labor costs, a doctor's monthly turnover is about 8,000 to 10,000 yuan.

Pet Industry Lightyear: In the past, pets had accidents due to unprofessional veterinarians. What do you think?

Li Xue: The accident must be viewed dialectically. At present, there are no one or two accidents on our platform in a year. However, problems arise due to lack of cooperation between doctors and patients during treatment. This is the majority. For example, when a doctor treats a pet, he or she needs to perform tests and examinations on the pet as a basis for diagnosis. However, if the pet owner does not agree, the disease diagnosis may be missed or even misdiagnosed, leading to problems.

Pet Industry Light Years: Looking at it now, the pet hospital track is actually a track driven by capital, but rapid development does not mean that it is easy to make money, and many hospitals are in a state of loss.

Li Xue: The overall situation is that the original gross profit was high because the price could be maintained on the client side. Later, competition intensified and the price could no longer be maintained. The original price was 50, but now it can only be sold for 20. There is no room for negotiation on the part of the supplier. The middle 30 can only be subsidized by the company, so naturally there will be no gross profit. And now many pet hospitals have not returned to their main business. They are competing with e-commerce platforms and some pet stores. They have no differentiated products and no real treatment methods, so their gross profits can only get lower and lower. .

For us, we should do as little as possible those things with low gross profit. Medical care itself does not rely on selling products. If a hospital only relies on selling medicines or retail products, it will not make money in the first place. Real medical services, namely surgery, hospitalization and treatment, are the core. Any hospital's improvement in gross profit is achieved through treatment.

Pet Industry Lightyear: For consumers, the cost of pet medical treatment is also a problem. Why is it so expensive to treat pets? Can you give some answers to the outside world from the perspective of a pet hospital?

Li Xue: For people, a major surgery costs hundreds of thousands. You don’t think it’s expensive because you know that medical insurance will reimburse it. In fact, people now think that medical treatment for pets is expensive mainly because no one pays for it. Although there is pet insurance now, the categories and proportions that can be reimbursed are very small. We are also actively seeking cooperation from insurance companies to help pet owners solve the cost of pet medical treatment.

Pet Industry Lightyear: Do you think pet insurance is a blue ocean market?

Li Xue: This thing itself definitely has development prospects, but it is unlikely to make money. But you can use these customers to make money with other products, treating it as a link in a closed loop, which may be okay. So it depends on how the insurance company positions itself in the early stage. If it just wants to treat it as a money-making business, there is no ideal business model in the world.

#02

“I won’t spend more time opening new stores”

Pet Industry Light Years: Judging from the current domestic pet hospital chain brands, equity acquisition is the first step for major brands to realize One of the main means of expansion is to build self-built hospitals. What is the reason for this?

Li Xue: Regarding expansion, I think we can either introduce capital to continuously acquire hospitals, or we can expand through self-construction as a benign business with good gross profits. The latter method may take a long time, but in fact, if you are a traditional enterprise, it will not last ten or twenty years. I think it is difficult to achieve a virtuous cycle. What's more, if we want to make money from pet medical care, we must first enter the era of aging pets. Aging of pets will only happen after several years.

So there are two choices, either insist on self-construction or join in mergers and acquisitions. Maybe because I am a relatively young entrepreneur, I am willing to choose the former.

In the meantime, we are more willing to invest capital in technological innovation and technology research and development. In fact, investment in domestic pet medical care is still insufficient in terms of innovation and core technology competitiveness. Hundreds of millions of pets across the country will face the problem of aging in the future, which requires updates and advancements in medical technology. If the streets are full of hospitals in the future, but there are no good medical solutions for diseases of elderly animals, it would be terrible if the industry is still so backward by 2030.

Pet Industry Light Years: How does Pet International lay out this area?

Li Xue: We have invested in technology research and development every year since 2017. It was difficult to calculate the input-output ratio at that time. For example, for pet radiotherapy, we started applying for a license in 2017 and got the approval this year. Although the license has not been officially awarded to us, we are the first in the country. In this, we have communicated countless times with relevant departments, conducted countless treatment plan discussions, and invested tens of millions.

There is also cardiac surgery. Any equipment or machine costs millions. Sending a doctor abroad for training also costs 600,000. So far, we are still in the research and development stage. But someone has to do this. If you don’t do these things, what will happen to these pets in the future? They are all necessary treatments.

Chongye Lightyear: Will you consider equity acquisitions or franchises in the future? Why?

Li Xue: We may consider franchising in the future, so that everyone can unify one system and unified procurement.

Pet Industry Lightyear: How much does it usually cost to build a self-built hospital? How long does it take to achieve profitability?

Li Xue: Starting from at least 3 million, it will take at least three or four years to achieve profitability, and the input-output ratio is not high.

Chongpai Lightyear: After the new store opens, does Chongpai have a unified management system? How to improve store operation capabilities?

Li Xue: In fact, looking at it now, our operating methods are already very mature. If we want to improve, it will mainly focus on differentiated competition and optimization from customer attraction. The current undifferentiated price war does attract customers, but customers do not recognize your differentiation and are unwilling to stay longer for you.

Pet Industry Lightyear: At present, various hospital chain brands are expanding crazily to seize the market. Xinruipeng also stated in the prospectus that the company will use about 35% of the funds raised to expand its business in China. pet hospital network. In March this year, Chongai International officially announced that it currently has more than 60 hospitals across the country. In comparison, pampering seems to move slower. What is the main reason? How does Chongpai plan for store expansion?

Li Xue: Our average revenue per unit is the highest in the industry, but we don’t want to spend money to open so many more hospitals. Three years after the epidemic, more competitors have emerged, and the aging of pets is approaching. Under this situation, I hope there will be more investment in research and development, and may not spend more time opening new stores.

Pet Industry Lightyear: In recent years, there has been more chaos in the industry, and there have been more disputes over medical accidents involving cats and dogs. How does Pet International conduct internal management in this area?

Li Xue: We strictly implement everything from personnel admissions to inspections at various department levels. But to be honest, you can't find all the problems through interviews or inspections, so there will be fish that slip through the net.

Of course, from a large perspective, it would definitely be better if the industry or relevant departments could have higher restrictions on access to this matter, but this is difficult for us as individuals. Do it. To be honest, we have also seen that many doctors should not exist in this industry at all, but they do exist. He is not here today because we have been practicing for a long time and we have our own blacklist, but he can go to other hospitals.

But there is no other way. We can only do our best, strengthen internal management, and do it by force.

#03

“It’s just a matter of time to go public”

The pet industry is light years away: According to the official website, in addition to pet medical care, pet care also includes pet products and beauty care. SPA care, pet shipping, pet medical insurance, pet cloning and other services. What is the revenue from these businesses? How are these businesses currently planned?

Li Xue: These are all cooperative, which means we are just a service point for others. The current focus is still on medical care.

Pet Industry Light Year: What was the overall revenue of Pet Industry last year?

Li Xue: The epidemic has actually had a huge impact. In 2022, it will basically reach 2/3 of the budget.

Pet Industry Light Years: What is the development strategy of Pet Industry International this year? Are there any adjustments or changes in the business?

Li Xue: We have been investing in R&D. In addition, our overall operating strategy this year is to focus on differentiation and make changes from the original way of attracting customers. This is necessary.

Pet Industry Lightyear: Every industry and every company will face different market pain points. What are the pain points currently faced by Pet Industry International?

Li Xue: I think the pain point now is the undifferentiated and disorderly competition in the market. We are really differentiated and difficult to promote. This is a big pain point for us at the moment.

Pet Industry Light Years: If you look at the time in the longer term, say 3 to 5 years or more, what do you want Pet Industry International to be like?

Li Xue: I think it’s about adhering to the essence of being a hospital and really being able to do that. It can treat all diseases that come and make them cured. Of course, some diseases cannot be cured at a certain stage, but at least we can help pets relieve some pain. I think these are what hospitals should do.

Chongpai Lightyear: Chongpai has received several rounds of financing before. What is the current valuation of the company? Are there any future financing plans and listing plans?

Li Xue: Our valuation in this industry is actually not high.

We are currently negotiating with investors. The hospital brands on the market now are either large-scale mergers and acquisitions models, or like us, they do not do large-scale mergers and acquisitions. Currently, we are the only ones led by the founding team. If the investment team is willing to believe in our model, then we will proceed with financing normally.

It may be a bit far away before it goes on the market, estimated to take 3-5 years. Entrepreneurs should be responsible for value creation. When your company is truly valuable, it will not be without that day, it is just a matter of time. For me, time is an advantage over others.