The idea that led to the foundation of Brazil-based pet e-commerce Zee. Dog in 2012 was built long before that date, when CEO Felipe Diz was in college in the U.S. with his twin brother, Thadeu Diz, in mid-2005.
At that time, Skullcandy, an American headphone company, was up and coming. “We went into an electronics store in Miami and saw the Skullcandy headphones for the first time. We thought ‘these guys saw the future of the category,’” recalls the CEO.
The Diz brothers have not forgotten the feeling of seeing the SkullCandy headphones. That insight motivated them to “Skullcandize” a “dinosaur” sector – in the words of Felipe –, which is the pet industry. Not surprisingly, Skullcandy’s and Zee.Dog’s logos have some similarities.
Both brothers were passionate about dogs but couldn’t find products they could identify with in pet shops; it was all “commodity,” just like the black, white, or grey pre-Skullcandy headphones.
“We had just adopted our first dog in the U.S. and started going to pet shops. It was then that we began to understand a bit more about the pet market. This was the spark for Zee.Dog,” says Felipe Diz, who co-founded Zee.Dog with his brother and their friend and the startup‘s CFO, Rodrigo Monteiro.
In mid-2011, they started attending investor roadshows, and in the following year, they received their first investment of BRL 3 million.
Last year, the company raised its second – and possibly last – round of BRL 100 million from TreeCorp Investments. But, as a profitable company, the executive does not see Zee. Dog raising funds anytime soon and evaluates only two possible roads for the startup: M&A or IPO.
In addition to Zee. Dog’s core business of selling pet products through e-commerce, the company launched in August 2019 the Zee.Now, an on-demand delivery app that had a boom during the COVID-19 pandemic, with a 600% Y-o-Y growth. It turns out that the pandemic didn’t affect the business so much since Zee.Dog and Zee.Now have only 7% of their revenue coming from brick-and-mortar stores.
Zee.Now’s revenue went from BRL 3 million in 2019 to BRL 28 million in 2020 and is likely to grow a lot more in 2021 (at least 300%). According to Neotrust/Compre&Confie, a market intelligence company focused on e-commerce, the pet shop category earned 80% more in the first half of 2021 compared to the same period last year. Brazilian e-commerce as a whole saw sales grow 38% in the same period.
Present in over 40 countries (not only with its own stores but through partnerships and local representatives), Zee.Dog’s overseas business accounted for almost 50% of its BRL 125 million revenue in 2020, and this share should reach 60% as early as next year. The startup projects revenues of BRL 250 million in 2021 and something around BRL 400-500 million in 2022. The bold projection is also based on the diversification of verticals. Recently, the company launched Zee.Dog Human, a line of clothing for humans.
Check out the interview with Felipe Diz, CEO, and co-founder of Zee Dog, below:
Isabela Fleischmann – Thinking about Skullcandy and the t-shirt brand that you guys did and now Zee.Dog, design is a big driver of your business, right? Is that why the company started targeting retail for people as well, with Zee.Dog Human?
Felipe Diz – It’s funny to say this, but we never considered Zee.Dog to be a pet company. In our mind, it’s a product brand like any other that could be applied to headphones or anything else. We started in the pet vertical because we were passionate about it, and it was where we identified the greatest margin of disruption since we only had dinosaurs (traditional companies) working.
Design is Zee.Dog’s essence when it comes to disruption. Everybody talks about technology, but technology itself without good design is not disruptive enough.
Zee.Dog’s workforce is primarily designers rather than developers. The majority of Zee.Dog’s partners and directors are from the design world. This is very rare. Design today is sort of related to low wages. But not at Zee Dog.
So Zee.Dog Human is a lateral movement of our passion for design; it’s about how we apply it to different verticals. Obviously, doing this ten years ago didn’t make sense because of focus, working capital, and team. But a decade later, we have critical mass, know-how [to do it]. We are passionate about fashion. Our inspirations come a lot from this world. We look to Nike, streetwear, or performance fashion brands as a reference, so it was natural to say, “let’s do things for us.”
And it’s always been like that at Zee.Dog, we’ve always created a product for us first. A type of t-shirt that we like to wear, a kind of minimalist design that we would like to have and in Brazil we don’t see so much.
Investors ask us what the strategy is. There’s nothing strategic about it. We do “us for us” things like we’ve always done for the past ten years. In the same way that there were people liking the collar and the leash, on the pet side, there are many people now enjoying the sweatshirt, the shirt, the cap.
IF – Where do Zee.Dog make all this? Is it in Rio de Janeiro?
FD – I wish it was in Rio de Janeiro; my life would be so much easier. Everything that is Zee.Dog pet is made in China. We have almost thirty partner factories there—the big difference between Zee.Dog and the competition is that Zee.Dog designs all the products in-house, like Nike. We develop from creation, prototyping, the fabric, and we use partner factories in China to produce it.
On the other hand, the competition goes to China, orders the Chinese catalog, chooses and slaps the logo on a package, and sells it like that.
Zee.Dog Human is all made in Brazil, Sao Paulo and Minas Gerais, because Brazil is still very strong when it comes to knitwear. Here we have good knitwear, good suppliers, professional factories, a supply chain behind us that sustains this. But on the pet side, we don’t. The components we use, we don’t even have the machinery in Brazil to manufacture.
IF – Where do you have operations today?
FD – It’s complex; there’s a lot of things going on. The Zee.Dog brand is present in every city in Brazil, with distribution in every state. We also sell the Zee.Dog brand to 42 countries.
We have our own Zee.Dog operation in the U.S. and Europe with fulfillment warehouses and our own sales team.
In Brazil, practically all the cities carry Zee.Dog in some way. It is very democratic in terms of distribution, from upper classes and prime neighborhoods to lower-income people.
The delivery app Zee.Now, our retail arm, delivers not only Zee.Dog products but everything else, food, pet medicines. We are in 11 cities, give it or take it. Every month we add cities.
IF – Zee.Now is like a Rappi of pet products, then?
FD – Rappi is an intermediary. You have the seller and the customer; Rappi simply acts as a middle man; it charges, fetches, and delivers. Zee.Now is a different model; we are 100% verticalized, we operate a dark store, we carry the inventory, and the fleet is ours.
It’s almost as if we were Petz [one of the largest retail chains of pet products in Brazil] and Rappi all in one, give it or take.
Instead of having megastores, we have several small dark stores, what we call hubs, spread around the city. We buy stock and leave it there. When customers place an order, their order is routed to the hub closest to their postcode.
This is all done in-house; we programmed it from scratch, front and back. So it is as if we were a Petz, with a VTEX [a Brazilian company focused on e-commerce software], with a Rappi all in one; that’s basically what it is.
IF – How many people do you have on the team, and where are they?
FD – We have teams in Rio de Janeiro, Sao Paulo, Los Angeles, Madrid, where our European team is based; we have a distribution center in the Netherlands and a team in Shenzhen, China, that does all the supply chain, which is the oldest team. We have 350 employees, more or less.
IF – Does Zee.Dog has a unicorn valuation?
FD – Yes. But I confess that we don’t care about the unicorn game.
We don’t do what we do to get unicorn status because we don’t need this round after round thing. It’s the VC game; you go through rounds and get a SoftBank that increases the valuation for itself, so it’s kind of crazy. We got caught up in the game. How much is Zee.Dog worth? Man, who knows, in a couple of years, we will see.
IF – Do you think about doing an IPO in the U.S. in the short term?
FD – We don’t know yet whether in the US or Brazil; it depends on the moment, but about two, three years from now. There is still a lot to do.
IF – And the idea is to replicate Zee.Now’s model in the United States too?
At some point, yes. We don’t know when because there are still many things to do in Brazil.
Brazil serves very much as a sort of experimentation hub for everything we do. We test our products in Brazil before taking them globally and Zee.Now will be no different. It is almost as if Brazil was an incubator.
IF – What is Zee.Dog’s revenue target and goals for 2021?
FD – The goal for this year is BRL 250 million, give or take. We have three levers for this. The first one is the expansion of Zee.Now; not to lose the pace of expansion of almost one city per month, and maybe do a pilot of Zee.Now as a Service.
The second is global expansion, to start building that brand awareness in Europe. The third is the new pet food vertical division of the group.
We have recently bought a nature foods company called Eleven Chimps, and we are going to use all their manufacturing structure but folded down under a new brand called Zee.Dog Kitchen. The idea is to do that for this year, October and November.
IF – What is the Zee.Dog Temple?
FD – The Zee.Dog Temple is an old dream. It’s a 600 square meter, four-story flagship store in São Paulo, a concept never seen before in the pet industry. If you don’t understand who we are, in five minutes in the brand’s temple you will.
On the first floor, we built a dog park, a kind of underground. The second floor is only for Zee.Dog pet. And upstairs is Zee.Dog Human’s floor, with a completely different architecture from the previous floor. And on the fourth floor, the terrace, there will be an operation by The Coffee, a coffee startup.
We’re releasing a collab with Stranger Things (Netflix series) in November; the launch party will be at the Temple.
We officially open in October. Let’s hope that vaccination against COVID-19 is more advanced by then.