The Little Chain That Could

Pet Food Express has carved out a niche in the San Francisco Bay area by stressing merchandising, service and selection. That’s why the chain has been named the 2010 Pet Business Retailer of the Year.


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Independent pet retailers take note: Officials at Pet Food Express have developed a blueprint to ward off the major pet retailers and establish its own niche in the crowded pet marketplace. In fact, the strategy has worked so well that the 35-unit San Leandro, Calif.-based chain has carved a growing and prosperous market for itself in the face of hefty competition from the big-box specialty chains and discounters.

Pet Food Express is a success story at a time when the retail pet business, especially the independent operators and small chains, needs examples of how to survive in an industry where price–and price alone–seems to be the only factor that determines profit from loss and success from failure. For that reason, Pet Business magazine has chosen Pet Food Express as its 2010 Pet Retailer of the Year.

The chain, which operates stores only in the San Francisco Bay metropolitan area, from Carmel in the south to Napa in the north, utilizes a merchandising strategy that is centered on offering consumers a good value on quality merchandise. Customer service is paramount, even to the point that it will spend its own money to ensure that only the best merchandise is on store shelves and, eventually, in consumers’ shopping baskets.

It does not  hurt that the chain also operates in one of the most lucrative markets in the country. “We are probably in the best market in the country for the pet business,” says Michael Levy, the founder and the president of the chain. “We are surrounded by a highly educated consumer base, which has an extremely passionate interest in pets and wants to do the best for their pets.”

But trust is a big part of the chain’s success, and that can be developed anywhere if the right measures are taken. Company officials are adamant that the chain’s success rests mostly on its relationship with customers. And it is designed to start early. Merrill Lehrer, the company’s vice president of merchandising, says that Pet Food Express works with rescue groups and other adoption agencies in the area to “develop a relationship with consumers when they first get their pets. It is amazing how much that helps.”

Pet Food Express even tests products to ensure they meet the company’s standards. “We have our own standards. Our customers know that they can trust us,” notes Lehrer. “If we sense anything even remotely wrong, we react quickly and completely. We do not leave our customers at risk, and they know this.”

Levy and Lehrer point out that during the now-infamous 2007 pet food recall Pet Food Express pulled all of the products from affected vendors off the shelves, not just the recalled items, so that consumers would not be confused and there would be no mistakes made. “We make our decisions based on what we believe is the right move for our customers, not the move that will make us the most money or save us the most money,” says Levy.

Since its founding in 1986 with a storefront in San Francisco, Pet Food Express has made a strong commitment to the communities it serves, primarily through educating shoppers about products, working with shelters and serving as a central location for pet needs. To accomplish this, the chain places a great emphasis on serving consumers in-store, and that can only be accomplished by having employees who know their business. “It is really about our employees,” says Levy. “We have an open-door policy here, and there is no red-tape bureaucracy. And, [senior management] constantly visits the stores every weekend to help our store level people do a bet ter job assisting the customer.”

A store employee backed up this claim, noting that when senior management shows up at the store during the week it is rarely unannounced. “They are here to help us, and it definitely helps with our customers,” the employee says. “Having senior management here builds more confidence with the store employees and helps us learn more about the pet category. The result, I believe, is a happier customer who is spending more time in our store and spending more money.”

Employee training is ongoing. New hires, no matter how much experience they may have at other retailers, must go through a week-long program where they learn the “Pet Food Express culture.” Lehrer, for example, had been in the industry for three decades and was asked to go through the program when he joined the company five years ago. “It helped a lot,” he says.

The program is backed up by regular monthly meetings where store employees and management get a chance to brainstorm, discussing ideas, concepts and any issues they may be having. “We want to give them a voice and let them know that we take what they say seriously,” says Lehrer. “Plus, we want to know what consumers are telling them. We want to know so that we can react properly at the store level.”


Onto the Shelves
Merchandising is also a big part of the chain’s success. Levy candidly states that the chain’s goal is to have every customer leave happier than when they walked into the store. That is a relatively modest goal, but it means Pet Food Express has to be a fun place to shop, as well as a store that offers the best merchandise at a competitive price.

To accomplish this, the chain, where store footprints can range up to 12,000 square feet, is constantly updating its merchandising sets to ensure that the best products are on store shelves. Consistency across the chain is also very important. Lehrer says the chain is about 98 percent plan-o-grammed, creating that uniformity and allowing company officials to better manage the inventory. “Yes, we want the best products available,” notes Lehrer. “But we also want these products to be fun, and we want this to be an easy store to shop in.”

Pet Food Express carries about 5,000 SKUs, with a big emphasis on national brands. While store brands are an important part of their business, both Levy and Lehrer say that a dramatic expansion of that end of the business is not in the cards. Store brands, under the “Smart” label, are found in the store in areas such as cat litter, treats and even poop bags. Pet Food Express has developed store brands whenever they’ve seen an opportunity to offer consumers a product that was higher quality, in categories that they felt were underserved. These brands generally cost more and are priced at higher retails than the national brands, but Levy says that his prices have not been a problem. “Our customers want the best products for their pets and are willing to pay for this quality.”

But branded items remain the backbone of this chain, though company officials are quick to point out that consumers usually don’t buy by brand name. “In this industry, there are very few brand names that are recognized by the shopper,” says Lehrer. “We are the brand. They shop our stores because they trust us and trust that we will offer them the right products that will keep their pets safe and healthy.”

That being said, Levy is quick to rattle off a half-dozen suppliers that appear to be close allies of the chain and work with Pet Food Express to give them the best deals on merchandise.  “We are extremely fortunate to be in an industry made up of great companies. The many pet industry people I have had the pleasure of working with over the years have become an important part of my life.”

A look around a store in Alameda, which opened in 2000, finds a big emphasis on food and supplies for dogs and cats, including an eight-foot glass-door freezer located near the back of the unit. There are also areas for other pet supplies, including birds, reptiles, small animals and fish. The store, which is about 6,200 square feet, has a self-serve dog wash area that can handle five animals at a time.

Signage plays a huge role in the merchandising efforts. However, traditional manufacturer signage is not used.  Pet Food Express has created its own signage to brand the company rather than individual manufacturers. The company hangs signs from the ceiling, on walls and in the aisle. The goal, obviously, is to make the shopping experience quick and easy. But it is also to offer as much education as possible, as well as make consumers aware of the pricing structure of the chain. Signage is used to emphasize the company’s “buy three get the fourth free” pricing structure. “We are not discounters, and we tend to offer products at the suggested retail price,” Levy says. “But, while we emphasize that we are not about pricing, we want to make it very clear that consumers can save money on volume discounts.”


Future Growth
A 147,500-square-foot distribution facility is slated to open in Oakland in October. Company officials are very confident that the facility is large enough to handle the needs of all current stores, plus their ambitious growth plans for the next decade or more. Levy says that over the next 18 months, Pet Food Express plans to open about 10 new stores.  While Levy would not say how big the chain will become, he noted that the new facility could handle up to 100 new stores.

“We are very happy with staying in our current marketing area,” he adds. “Our job now is to fill in those areas of the San Francisco Bay region that makes sense for us. We think there is a lot of room to grow here.”

But he promises that growth will not hurt the chain’s overall philosophy, one that he developed with partner, Mark Witriol, many years ago. “We are becoming a larger and larger business, and we view ourselves as a well-run operation,” Levy says. “But we are not going to forget where we came from and how important it is to act like an independent and to have a personal touch on everything we do.”

Levy says that independents are vital to the future success of the retail pet industry. “We want to empower other independents,” he says. “We want to show them that they can not only survive in this marketplace but continue to thrive and grow. We have done it. If they want some advice, please call us. We would like to help.”

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