A Widening Gulf
While it is clear that the owners of mid-sized and large pet store chains find themselves in a great period of sustained growth, I’m afraid things may not be so rosy for smaller retail operators. And this could have negative implications for the pet industry overall.
As you will read in this month’s cover story, the chains included on Pet Business’ Top 25 Pet Retailers list continue to add new locations at a brisk pace. In fact, the retailers on the list accounted for more than 600 new store openings over just a two-year period.
Taken at face value, this looks like great news for the pet industry—after all, it is a sign of continued strong spending on the part of pet owners and an indication that independent retailers can still thrive in the face of competition from outside channels, especially the Internet. However, juxtaposing the growth of the top 25 chains with data from the latest edition of IBISWorld’s annual Pet Stores in the U.S. report paints a somewhat more foreboding picture for the pet specialty channel.
According to IBISWorld—which bases its report on U.S. census data—there was only a net increase of a little more than 400 stores between 2013 and 2015. That means even as the top chains increased in size, smaller pet store operators closed individual locations or even shuttered their total business altogether. The gulf between the haves and have-nots in pet retail becomes even more stark when one considers the fact that the top three chains—PetSmart, Petco and Pet Valu—accounted for more than 50 percent of new store openings on Pet Business’ Top 25 list.
What may be most troubling about the diverging fortunes of the top chains and their smaller counterparts in pet retail is that the divide is almost sure to get wider. As these chains expand and become more formidable as a result, it will be even more difficult for new pet retail businesses to gain a foothold in the markets where these growing chains compete.
So, what does this mean for the pet industry at large? While there are certainly positive signs that can be taken from the growth of the top tier of pet specialty chains—for example, economies of scale are almost certain to make these predominantly brick-and-mortar retailers more price competitive with online outlets like Amazon—the general decline in smaller operations could ultimately suppress product diversity in the industry.
Most of the chains on the Top 25 list have been successful, in large part, because of the consistency that they offer in their carefully constructed brands, which includes offering a uniform product selection from store to store. As these chains grow larger, it is likely to become harder and harder for new, emerging brands to find a place on their shelves. The unfortunate result could very well be more homogenization and less innovation in the industry. And that cannot be good for anyone.