2015 Pet Retailer Survey
The results of the latest edition of Pet Business’ Annual Pet Specialty Retailer Survey paint the picture of a retail channel that is thriving as consumers continue to seek out the very best care for their animal companions.
While much has been made of the potential negative impact that shifting customer demographics and increasing competition from other retail segments could soon have on the pet specialty channel, it appears that pet stores are well-positioned to have another banner year. In fact, according to the 2015 Pet Business Pet Specialty Retailer Survey, 69 percent retailers reported an increase in sales over the past 12 months—a high-water mark over the past three editions of the survey, in which the portion of retailer respondents reporting sales gains consistently hovered around 60 percent. Nearly 50 percent even reported growth of five percent or more. Conversely, just 19 percent of retailers indicated that their businesses experienced declining sales over the past 12 months, which also represents an improvement over the past three years.
Another positive indicator of pet store success can be found in what retailers reported about staffing changes over the past year. The 44 percent of respondents who indicated they added staffing hours in their stores represents a significant increase over previous years, in which an average of 25 percent of retailers reported such increases. On the other hand, the number of retailers reporting a decrease in staffing hours (13 percent) remained similar to previous editions of the survey.
Given these results, it should come as no surprise that an overwhelming majority of pet specialty retailers have a positive outlook for the coming year (95 percent). And there are indications that many plan to take action based on this optimism. Thirty percent of retailers who participated in this year’s survey said that they expect to expand their stores over the next 12 months, results that again represent an improvement over the past three years, when only approximately 20 percent of respondents reported similar expectations.
Of course, operating a pet specialty retail business is not without its challenges. Competition from other retailers looking to cash in on consumers’ apparent commitment to keep spending on their pets still poses a considerable threat to the continued growth of the independent pet specialty channel. Far and away the leading cause of concern among pet store owners and operators when it comes to competing for market share is the growing impact of online retailers. Fifty-six percent of survey respondents pointed to these Internet-based businesses as their biggest source of competition. In comparison, No. 2 on that list of top competitors—big-box pet specialty retailers Petco and PetSmart—garnered just 22 percent of the vote, and mass-merchandisers like Target and Walmart came in at No. 3 with 14 percent.
Aside from competition from other retailers, respondents pointed to the increasing cost of doing business (64 percent), pricing increases (48 percent) and uncertain economic conditions (36 percent) as the top three challenges currently facing their businesses. At least one of these challenges is also reflected in another area of the survey that dealt with trends in retailer’s product margins. Here, the study revealed a mixed bag for pet stores, with 45 percent reporting margin growth and 40 percent reporting declines. This polarization is almost surely the result of opposing forces. On one hand, pet retailers must deal with price increases that drag down the margins of existing products; but at the same time, the continued emergence of high-margin product categories such as natural, specialized and raw diets is providing opportunities to make each transaction in the pet store more profitable. Moving forward, it can be expected that retailers’ individual results will ultimately hinge on their ability to successfully balance these two trends.
Understanding the need to tip the balance in their favor, retailers are increasingly looking to certain high-margin categories to fuel growth over the next 12 months. Fifty-three percent of survey respondents indicated that they are bullish on Made in the USA products, while 45 and 44 percent point to services and grain-free food and treats as growth leaders in their stores, respectively. Rounding out the top-five product categories that retailers expect to drive the success of their business are natural and eco-friendly products (34 percent) and raw diets (29 percent).
Of course, whether or not retailers’ expectations for these categories is justified—and enough to overcome the negative dynamics at play in the marketplace—remains to be seen in next year’s survey.