Pet Supplies Plus is combining its considerable corporate resources with a passionate base of franchisees to drive a new era of expansion for the pet store chain.
Pet Supplies Plus’ secret to success is not much of a secret at all. In fact, officials at the Livonia, Mich.-based pet retailer are very open about what has helped fuel an incredible ride that has seen the company grow to more than 360 stores—divided almost equally between company-owned locations and franchise units—in 27 states across the country.
“We own the local neighborhood,” says Chris Rowland, the company’s CEO. “We believe that we own the area between two and three miles around each of our stores. Of course, that comes with a lot of responsibility on our end, including having a local focus and being a big part of the communities we serve. But we are ready for it.”
That strategy has taken the privately owned company a long way. In the face of heated competition from big-box retailers, mass retailers and even some savvy independents, Pet Supplies Plus, with annual sales approaching $1 billion, is growing at a rapid rate and company officials have no plans to slow down. The chain added about 50 stores in 2016 and plans to add more units—at about a steady 15 percent increase annually for the foreseeable future. “We have the potential to operate more than 1,000 stores in a few years,” Rowland says.
For those reasons as well as the impact the company is making on the overall retail pet landscape, Pet Business has named Pet Supplies Plus as its 2016 Retailer of the Year. The company will be honored at a dinner in Las Vegas on the first night of the annual SuperZoo show this month.
Emphasizing the local edge is obviously the strategy that Rowland and his executive management team, including CFO Dan Boose and vice chairman and executive vice president Dominic Buccellato, are honing in on. Whether corporate or franchisee-owned, the chain’s units have a decidedly neighborhood feel that allows for consumers, who are usually referred to as “neighbors” by company officials, to browse the store—often with their pets in tow.
“The key is to get our neighbors to see our sign, give them easy access to the store—including parking—and get them to come in,” says Rowland, who joined the company in 2011 and became its CEO in late 2014. “We want the consumer to be curious about who we are and give them as many reasons as possible to enter one of our stores.
“The magic happens once they walk through the doors. First, our in-store teams are educated and experienced with pets, and it is very clear to everyone that they enjoy what they do. Our cashiers are just five feet from the front entrance, which is done to help them immediately connect with people as they walk into the store. They pick up on this immediately and, often, they become loyal customers. Then we are confident that our product mix, the store atmosphere and even our own private-label items (including foods marketed under the Redford Naturals label) will get the shopper to keep coming back.”
Pricing is another point of demarcation between Pet Supplies Plus and the competition. Rowland says that the pricing structure is designed to give the chain a value proposition compared to the national competitors. “We do that even if it means cutting our margins to maintain our value equation,” he says.
Rowland adds that the company’s marketing programs also help draw in shoppers and boost customer loyalty. In-store promotions are a regular occurrence, and the wide range of products is designed to entice shoppers into the store. The company carries about 8,000 SKUs in a typical unit, which ranges in size from about 4,000 square feet to as much as 9,000 or 10,000 square feet in areas where space is not as expensive or more room is needed. He says that about 65 percent of sales are from the consumables side of the business.
The personal touch is not ignored either. Individual storeowners and corporate store managers play a huge role in building ties with the local communities. Each store has between 10 and 15 employees, many of whom have been with the company for years. “Focusing on individual communities is a big deal for us,” Rowland notes. “I think we all realize that trying to get consumers to focus on one big company-wide event may not resonate well throughout the country. So we focus on creating local events, and people in each local community just love it. We encourage the stores and the store managers to do what they believe will draw in more of the local neighbors.”
Another marketing tool is to source some products locally, even if it means that just a handful of units carry the items. “We have a lot of stores that feature unique local foods that may only be available in one region of the country,” he adds. “We intend to continue to let local management have a big decision in what goes into their stores.”
Pet Supplies Plus was started in 1988 by Jack Berry and Harry Shallop, two entrepreneurs who thought that a retail pet chain run like a supermarket could make a difference. Slowly the chain started to gain traction in the Midwest, adding both corporate and franchise units throughout the area. In fact, Buccellato eventually became the largest franchisee, with 64 stores in five states.
But Pet Supplies Plus may have remained a relatively small player in the retail pet industry world had management not started to look for an outside revenue source to both level the playing field with the big players in the industry and fund growth. In 2010, management picked Irving Place Capital (IPC) from among eight bidders to take over the ownership of the retailer. The deal was completed in September of that year.
“We sold because the stockholders at that time were all 75 or older and it was pretty clear that they did not want to make the re-investment needed to take the company to the next level,” says Buccellato. “Officials at IPC made it clear to us from the start that they were interested in growth, and they had a good record working with retail. They are investing for the long haul.”
Calling the company a “30-year-old adolescent,” Rowland says that one very important goal of the new management has been to keep the local flavor while quickly enhancing the corporate infrastructure and bringing more sophistication to the company in terms of analytics, as well as merchandising and marketing tools. Employment doubled, and IPC purchased a distribution center and 92 stores from franchisees. In 2012, the company opened its own 500,000 square-foot warehouse in Seymour, Ind., to supply food and hard goods to stores in the Midwest.
Now the company is looking to keep expanding. It moved into California in 2016 with the purchase of the Pet Extreme chain, providing a foothold in the west. Future growth, it appears, will come in the fastest-growing parts of the country, including Florida and Texas. Plus, Rowland says that the company is adjusting its strategy to be more amenable to small towns. “There are a lot of towns out there with 20,000 people,” he says. “While we are still learning just how small a town we can go into, we now have a much better understanding of what locations are best for our units.”
That growth, Rowland emphasizes, will come from both corporate stores and franchisees. A franchise fee is $49,500 with an investment of about $450,000 to $700,000 needed to get the store up and running.
“We know that we have to help our franchisees,” Rowland adds. “So for the first 12 months, we reduce our royalty payments to just two percent. We want to show them that we are a true partner and want to help get them up and running.”
In fact, running such a large percentage of stores through franchise operators also sets Pet Supplies Plus apart from the competition. “We are really pushing the franchises now because in an industry that thrives on such strong personal attachments, combining our abilities with an owner/operator who truly cares makes us unique,” he says. “We are looking for people who understand what we do and how we do it, and are willing to learn about the pet industry and teach their own employees.”
In the end, Rowland is quite confident that Pet Supplies Plus has all the bases covered. He is happy with the product assortment, the pricing structure and the store décor. With the support of the private equity group, Rowland is also confident that he is are building the infrastructure needed to keep the operation moving in the right direction.
“We think we are doing everything right, but we are still open to learning more,” he says. “Right now, we think we are winning.”