Diversity in Decline
Even as dog and cat ownership continues to rise, other pet categories are dropping off. What does this mean for the pet industry, and can the trend be reversed?
There is just something about owning a dog or cat. These pets invoke deep feelings in so many people, and they interact with humans in a way that no other creatures on earth can. It is not surprising, then, that the latest American Pet Product Association (APPA) National Pet Owners Survey reveals a rise in the number of cat- and dog-owning households over the past few years.
Unfortunately, the same cannot be said for other segments of the pet population—the number of households with freshwater fish, small animals, birds and reptiles have been declining in recent years. Of course there are still scores of people who are simply fascinated by their aquarium or have great affection for a cold-blooded pet, a small mammal or a bird. Yet the numbers do indicate that less American households are going that route, and that cannot be good new for the independent pet specialty retailer.
Survey results, of course, cannot tell the entire story. Manufacturers in these seemingly struggling pet categories do not necessarily concur with the foreboding picture these statistics paint. Some say they have not noticed a dip in sales of accessories and products in these areas and are, in fact, investing further research and development dollars, expanding lines and introducing products to meet customer demand.
One point that many in the industry agree on, though, is that the survival of these animal segments is critical to the health of the pet specialty industry itself. So how can manufacturers, suppliers and retailers reverse these declines in pet ownership and ensure that generations to come will appreciate and support the diverse universe of pets the industry has to offer?
And perhaps more importantly, is it worth the effort?
The Survey Says
According to the APPA survey, the number of pet-owning households has kept pace with the overall increase in the number of American households—the number of American households increased 2.2 percent, while households with pets rose by 2.1 percent.
However, while dog- and cat-owning households increased (to 46.3 million and 38.9 million, respectively), other animal segments are lagging behind. Households with freshwater fish are down 11 percent (11.9 million households); birds, down five percent (5.7 million households); small animals, down six percent (5 million households); and reptiles, down two percent (4.6 million households).
Despite what the statistics say, there are manufacturers and retailers that will happily report that these business segments are thriving. Companies such as MIDWEST Homes for Pets, based in Muncie, Ind., which makes small-animal habitats and other pet products, report strong sales–strong enough to warrant investments in new product development and innovation.
Tara Whitehead, marketing manager at MIDWEST, theorizes that there has been a decline in the “casual” pet buyer, but the more committed enthusiasts keep the business going, often buying multiple pets. Two of the company’s best-selling products, she adds, are its Critter Nation and Ferret Nation habitats.
“We monitor blogs and small-animal pet communities, and I think those communities are thriving,” she says, adding that there is an amazing number of online communities revolving around pets such as rats. “We see a lot of activity.”
Debbie Wilson, director of marketing for Animal Supply Co. in Federal Way, Wash., says that while the downward track of some pet segments has been apparent for nearly a decade, the company is finding success in at least one area. “Small animal—rabbit, guinea pig and that category—is growing for us,” says Wilson.
These animals serve as “gateway” pets for many kids who hope to graduate someday to owning a dog, she says. Meanwhile, Wilson adds, rabbits are becoming increasing popular with apartment dwellers, who find them to be an easy pet to care for.
However, there is plenty of evidence to corroborate what the APPA survey numbers imply—these animal segments are losing ground.
Even heavy hitters, such as PETCO, have struggled to make these categories work for them. Jim Alvord, a former executive for the pet specialty super chain and the owner of JBA Marketing, Inc. in Escondido, Calif., says years ago, Petco endeavored to become the go-to destination for pet enthusiasts in several animal segments. The plan was to customize individual stores to feature one segment—whether it was aquatics, reptiles or other—in a particularly strong way, while continuing to stock the periphery of the store with all the other usual pet categories.
The plan, he says, “hit stumbling blocks all the way. Part of it was not having knowledgeable sales staff and the ability to attract and keep those people, so that there would be a familiar face there each and every time that reptile enthusiast came back to the store,” he says, adding that the chain also struggled to keep up with an increasing demand for more exotic fish, more sophisticated aquatic setups and a staff that could match aquatic wits with experienced enthusiasts. “It became clear that was probably not going to work well within the Petco model.”
Instead, the company backed off and headed in the opposite direction, deciding to focus on the more casual pet owner, Alvord says.
While Petco and PetSmart, as well as many independent pet retailers, continue to stock these categories in order to maintain their position in the market, selling fish, small animals and reptiles and exotics is not the quickest route to profitability. “Any pet specialty store that says they are making money on these [pets] is wrong,” says Alvord. “They’re not taking into account all the electricity, all the plumbing, and time and trouble necessary to feed and care for the animals. [On a net basis], it’s a losing proposition”
The Usual Suspects
If the survey results do, in fact, accurately reflect the state of the industry, the possible causes for these declines are not real head-scratchers. Many pet industry officials will list the usual suspects of market factors presumed to be behind decreases in ownership or sales in certain pet segments. The economy tends to stand out as the first and most obvious cause.
One of the hardest-hit segments seems to be aquatics. The segment has suffered over the past few years, according to many industry members, including retailers who say that even hard-core enthusiasts are hesitant to spend precious discretionary dollars on the hobby.
“Companies that invested heavily in the aquatic segment of the business kind of got their clock cleaned when that customer was not there, or they couldn’t cultivate enough additional customers and step them up in sophistication with better products and more expensive setups,” Alvord says. “It’s indicative of the larger economy as a whole. The customer understands that unless you are just going to buy a beta fish in a glass bowl, there is an enormous implied investment.”
Other segments of the industry have also suffered the recession’s impact on consumer behavior. Ken Oh, vice president of sales at JW Pet Company, based in Teterboro, N.J., says there will always be a core customer base for these pet categories, but they are vulnerable to shifts in consumer spending. Dogs and cats may have established their place as bona-fide family members in many American households; the small animal, fish, herptile and bird categories must still fight for their share of the pie.
“What happens in a good economy is that you tend to get people who have more discretionary funds and who will say maybe, ‘I’ll get a bird’ or ‘my son wants a small animal,’” says Oh. “People have a tendency to say yes more often in a good economy.”
The costs involved with the set up to care for birds, fish and other animals are often a deterrent, despite the fact that the cost of a dog or a cat over the long term can be significant. “There are just more hurdles in the way of the promotion of aquatics, small animals and birds,” he says.
It would be a mistake, however, to blame declines in certain pet ownership segments solely on a tough economy. Changing consumer demographics, the growing strength of the dog and cat culture that has washed over the country, and increased competition for consumers’ time and discretionary/disposable income are also contributing factors.
“It’s not just an economic condition—I think that [the economy] tends to exasperate the scenario—but there are so many things out there contending for the consumer dollar that there has to be a very compelling case for pet,” says Oh.
Some industry insiders cite the demographics of today’s typical pet owners as one of the principal factors that have dogs and cats reigning supreme over other types of animals in the pet market. APPA president Bob Vetere says the tremendous growth of the pet industry in recent years has been propelled largely by baby boomers, who historically have opted for dogs and cats, not fish, birds, reptiles and small mammals. This is a departure from the days when pet stores’ most valuable and reliable customers were kids looking for a cool pastime.
“The boomers are a lot of what is fueling growth right now, as children leave home, go to college and get married,” Vetere says. “So, as the helicopter generation, they are looking to hover over something else, and they are finding it more pleasing to hover over dogs and cats than over any other particular pet.”
Wilson concurs. “Aging baby boomers are replacing a child with one or two dogs or cats,” she says.
She adds that people perceive dogs and cats to be easy to care for and own. And recently, among the most popular dog breeds are the smallest, which adapt easily to various consumer lifestyles. “They’re portable,” Wilson says. “That’s difficult to do with a bird or fish.”
Add up all of these factors and the industry may be left with a shrinking customer base comprising only those hard-core enthusiasts who won’t give up their pet rats, reef tanks or bearded dragons, no matter the costs or effort involved in their care.
Many in the industry do not relish the idea of a market that caters mostly—or only—to cats, dogs and their owners, and they say that to ignore the signs of this impending reality could push whole segments of the industry to extinction.
“We are not a dog and cat industry; we are a pet industry,” says Vetere, adding that the strength of the market is fueled by this variety. “It makes a difference to have all [these animal categories] well represented and strong in the industry,” he says, adding that the industry needs to proactively promote them. “Somebody has to draw a line in the sand and say, ‘enough.’”
Alvord agrees that the independent pet market has a lot to gain by nurturing a variety of pet categories—and a lot to lose if it doesn’t. “Every effort to cultivate something beyond dog and cat is another brick in the wall of fortifying the pet specialty business and making it a must-have destination for your customers,” he says.
There is no shortage of reasons why the industry should support and nurture the small animal, reptile, bird and aquatic categories, and they range from the sentimental and nostalgic to the financially practical.
“The whole industry started with the sale of small furry creatures, birds and fish; I would hate to see that reduced further down,” says Michael Levy, co-owner of Pet Food Express, a regional independent chain of 38 pet specialty stores in the Greater San Francisco Bay Area.
While the idea of a pet industry devoid of small furry animals, reptiles and other creatures besides dogs and cats is indeed unsettling to many, the real loss could also be calculated in the dollars and cents. “An industry that is built on one narrow segment isn’t as healthy as one that has a broader base,” says Alvord.
Traditional full-line pet retailers have long known the power of having a variety of live animals for sale and on display. Animals, after all, are the star attraction and the heart of the business. Since the emergence of pet stores, they have relied on displays of animals on sale to draw traffic.
“It’s a mini trip to the zoo for a lot of people,” says Alvord, evoking images of pet shops bustling with families and excited children on Saturday mornings.
The value of staying invested in these categories, however, does not lie solely with a spike in business on Saturday mornings. Industry professionals say there are some more important reasons why pet businesses need to amp up their interest—and the interest of their customers—in creatures of all kinds. For one, independent pet store’s commitment to these categories may be among their most meaningful points of distinctions, setting them apart from the big-box pet stores and mass marketers that have so aggressively entered the pet market in recent years.
“There is a limit to how much inventory, floor space and resources a national-scope company like Petco or PetSmart, or even the large regional chains for that matter, can put into those categories, knowing there is a limited audience–certainly, far smaller than dog and cat owners,” Alvord says.
Even independent pet retailers that do not choose to go into the business of selling these animals—and these days, that is a large percentage—can stock food and supplies for a variety of animals, as well as serve as resources of information and guidance for pet owners of all kinds.
“Differentiation is a gigantically important subject for anybody in the pet specialty world,” says Alvord. “If it becomes a dog and cat game alone, then increasingly, the specialty stores will lose to the big boxes. You will end up turning the business into more of a commodity and that removes the allure and the idea of the neighborhood pet specialty store as a destination that customers have to go see.”
Supermarkets have also invested heavily in the pet market, capitalizing on the added convenience and budget-friendly pricing they can offer. But these retailers have their limits.
According to Vetere, “You’re not going to see fish tanks and a lot of those other products in your grocery store. You’re going to basically see dog and cat. Some of the grocery stores have gotten a little more exotic, but that’s not the crux of their fight.”
Demonstrating expertise in these areas—bird, herptile, small animal and aquatics—is a marketable point of distinction, he says.
Bucking the Trends
Fortunately, many small, independent pet retailers should be prepared to seize the opportunity to outperform their outsized competition. Levy, for example, is confident that Pet Food Express stores can outdo the competition by having a knowledgeable staff and becoming a reliable resource center for their customers. “Petco can try to look and operate like an independent, but that’s not really what they are, and the independents can easily outperform Petco if they so choose,” he says.
Meanwhile, on a broader scale, retailers are joining forces and mobilizing in an effort to reverse downward trends in certain pet segments and to ensure the market’s future. Pets in the Classroom, a program launched by The Pet Care Trust, is at the forefront of the push to spark children’s interest in a variety of pets and attract a growing demographic of future pet owners. The program provides funding for teachers in grades kindergarten through six to purchase a pet of their choosing, along with habitats and supplies to care for the animal.
Alvord describes Pets in the Classroom as an “enormously important program that exposes new consumers to the idea of owning a pet–other than a dog and cat—and teaches them responsible pet ownership along the way. It’s a great opportunity to train new pet owners.”
This sentiment is echoed by Oh, who says that it is important for the pet market to have a customer base that is well versed with the notion of responsible pet ownership. “We don’t want to lose that as an industry,” he says.
He also sees a clear connection between the efforts made by programs such as Pets in the Classroom and the industry’s bottom line. Even if the result was an increase in ownership of only one or two percent, the effort would have proved meaningful, he says.
“That doesn’t like a whole lot, but as a percentage of a $40 billion industry, that is a big number, and it can’t be ignored,” Oh says.
APPA’s Human Animal Bond Research Initiative (HABRI) is another program aimed at promoting pet ownership. The plan is to use scientifically sound research to substantiate and highlight how people benefit from owning a pet—and not just dogs and cats.
“It’s not limited to dogs and cats,” says Vetere. For example, having a fish tank, he says has been shown to lower blood pressure, and small-animal ownership teaches children responsibility. “That particular project as it continues to grow and flourish will be one of the stop gaps to help reverse these trends and to start to make a solid foundation to grow on going forward.”
Marketing, Wilson agrees, may go a long way in turning the tide for some categories. She says the bird category, for example, could benefit from some positive press and a concerted effort to demonstrate the merits of owning a bird. “Paris Hilton has a Chihuahua, not a cockatiel,” she says. “Making it seem more mainstream might be the direction to go.”
At a grassroots level, experts say there is plenty that individual retailers can do to promote pet ownership. Everything from turtle races to free weekend seminars on canary care to encouraging schools to visit on field trips can help, says Oh.
Once a retailer gets those potential customers inside the store, they have an opportunity to drive home the point that it can be rewarding to own a fish, a ferret, a lizard or other animals. “With a really good planogram, small retailers could sell a lot and make [these animal categories] look fun,” Whitehead says. “One of the best ways to do it, is to have a setup and display the pets they are trying to sell. Show the possibilities.”
Among the most important things stores can do is offer up the customer service independent retailers in the industry are known for.
“I think pet specialty has to dedicate itself to being knowledgeable, so you can answer those questions and not dumb it down to just dog and cat,” says Alvord. “You have to be the best ambassador for those businesses.”