Know Your Own Strengths
Independent pet retailers of all shapes and sizes are taking advantage of their unique models to combat growing competition.
Even as the revenue generated by the U.S. pet industry continues its steady climb into the stratosphere, pet stores find themselves facing unprecedented level of competitive pressure.
An increasing number of both brick-and-mortar and online retailers are attempting to cash in on the growing market for pet products by incorporating this type of fare into their business models—a trend that seems to be taking a toll on pet retailers of all shapes and sizes, particularly the independents.
Evidence of this can be seen in the panel of neighborhood pet stores that New York-based market research firm GfK works with to gather insights into broad pet retail trends. According to the company, the number of stores represented on this panel has declined in recent years, dropping from 8,300 stores in 2014 to 7,800 in 2015.
Still, many independent retailers are not only surviving, but thriving in the face of increased competition by continually finding new opportunities and approaches based on their size and customer base. From single-store operators leveraging their community involvement to small chains perfecting supply chains and merchandising, these businesses are drawing on their distinct position in local markets to find ways to succeed.
Pet Business spoke with three such retailers—each highly regarded and representing differing sizes and geographic locations—to get a sense of the unique obstacles and advantages they face. While each cited some formidable challenges, they are all finding ways to prove their value to their customers, whether it’s in one store or three dozen. And although the different strategies they use may need to be adapted to suit larger or smaller business models, retailers of any size can glean new ideas from their fellow independents.
The growth of the internet’s role in the pet industry poses a challenge to virtually every independent retailer, offering ease and convenience that is difficult for brick-and-mortar businesses to compete with. Even those retailers who had previously seen little impact on their business due to this rising class of competition are now starting to feel the effects.
For example, Heidi Neal, owner of the Loyal Biscuit Co., a four-store business founded in Rockland, Maine, is just beginning to see e-retail encroach on her customer base. “For a while, I felt like I lived in this little bubble where online wasn’t as much of a threat as I was hearing from my friends who have stores throughout the country,” Neal says. “This fall I really started to hear ‘Oh, I get my food online, and it’s shipped right to my door.’”
For Joe Morton, general manager of Pets on Broadway in Portland, Ore., a single-store retailer, online outlets clearly represent the biggest source of competition, especially if potential customers are focusing on price as the sole factor in where they choose to buy their pet’s food.
“It’s very difficult to compete with them if the only issue is price, unless they give you a chance to establish yourself as the expert that can really help them with their pet’s entire life,” he says. “If people walk in and say, ‘It’s five bucks cheaper on Amazon, I’m just going to buy it there,’ it’s hard to compete with that if you’re not even given a chance to show your value.”
Internet-based retail is also a growing competitive threat for Chuck and Don’s, a 36-store chain with locations in Minnesota, Colorado and Wisconsin. To combat it, the Mahtomedi, Minn.-based company is adding online retail to its own offerings, in addition to its in-store customer service.
Chuck and Don's
“We have started a home-delivery program and we’re trying to enhance that,” says Bob Hartzell, CEO of Chuck and Don’s. “We want to become that omni-channel provider and allow people to get their products delivered right to their homes in addition to coming into our stores.”
With dozens of stores in three markets, Chuck and Don’s has the scale to create a robust online retail element to its business, from creating an e-commerce platform to shipping logistics. But for many small retailers with only one or a handful of stores, this may not be possible. Both Loyal Biscuit and Pets on Broadway, for example, must fight internet competition with marketing and customer service strategies designed to draw in new shoppers and keep existing customers coming back into their stores.
“For us, it’s constant education,” Neal says. “It’s perceived that what you buy online is cheaper, and it really isn’t. We do a lot of product comparisons with what we sell certain foods for and what you can buy it for online, and 95 percent of the time we’re actually less expensive.”
In addition, Loyal Biscuit supports manufacturer frequent-buyer programs and has its own shopper-loyalty program, creating further savings for its customers. The challenge, however, lies in getting that information out to current and potential customers to avoid losing them to supposedly lower prices online.
While e-commerce has not been a focus of Pets on Broadway’s strategy for fighting back against web-based retailers, Morton says the store is working to establish a bigger online presence as a go-to resource for pet owners through content marketing.
“We’re trying to find ways to establish ourselves as partners in a pet owners life by delivering online content that we can push out to them through things like Facebook advertising,” he says. “The idea is that we become such a resource to them that when it comes time to buy something, they say, ‘Of course I’m going to buy it there.’”
Both Loyal Biscuit and Pets on Broadway also go to great lengths to show customers that shopping local can benefit their community by emphasizing their involvement with the surrounding area and other nearby organizations. For example, Loyal Biscuit organizes fundraisers to donate supplies to local shelters, which Neal believes is a real draw for her customers.
Morton takes a similar approach. “We work with schools, we were at the big reptile expo in our area,” Morton says. “It’s just showing them that we’re part of their community and what matters to them and finding ways to get in front of them that aren’t necessarily sales focused.”
When it comes to working with distributors and manufacturers, size can seem like an obvious advantage. As Neal has expanded Loyal Biscuit from one store to four, she has seen her business grow to a position of greater strength in these interactions.
“My distributor relationships have definitely changed,” she says. “We have better pricing, I get a bit more attention and I can ask for things I couldn’t have as a single store.”
However, she points out that single stores may have a slight edge in working with smaller suppliers, allowing them to maintain a consistent stock of products that just can’t be found in chains or big-box stores.
“For me, finding and stocking smaller items that come direct from small companies has become more challenging,” she says. Although Loyal Biscuit instituted a POS system that has improved inventory management, Neal still finds that keeping those small, unique items consistently stocked across all four stores is no easy task.
But no matter the size of the business, maintaining strong relationships with manufacturer and distributor partners is key to success. As Hartzell observes, the distributor environment is constantly changing as consolidation removes some players from the board and new ones start up, so dependable, long-term relationships are invaluable.
“The success of our company is partly due to one particular local distributor that has a regional and national presence,” he says. “That firm has made a significant contribution to our company in helping Chuck and Don’s from the beginning.”
While mid-sized chains like Chuck and Don’s may gain more clout in vendor partnerships as their buying power grows, they must find ways to maintain the feel of a welcoming local business as they open locations in new towns or different regions.
“We want to keep that atmosphere of high employee involvement, of giving the local small store feel,” Hartzell says. “We don’t want to become just a cookie-cutter chain. We pride ourselves on being that warm neighborhood store.”
Meanwhile, Pets on Broadway relies on its relationships to overcome the difficulties faced by a single store in a network of regional and national distributors. Although at 9,000 square feet the store has more buying power than a lot of other single-unit retailers might, Morton says successful partnerships often come down to individual relationships.
“We try to be very good partners to them and we ask the same of them so when there are problems or opportunities, we can act in each other’s best interests,” he says. “In general, a lot of the people we work with want to do the right thing and want to help support everyone.”
One of the advantages Hartzell has seen in Chuck and Don’s ongoing expansion is the company’s ability to specialize within its management. Whereas one person may have to fulfill many roles at a smaller retail operation, a larger organization can dedicate specific groups or managers to perfecting different aspects of the business.
“As you grow, you can really fine tune the supply chain and the merchandising team,” he says. “Going back to the days when we had five stores, everybody did everything. Now we’re able to have people really specialize in particular parts of our business, which really allows them to do a better job and gain more knowledge in a small area.”
As her business continues to grow, Neal is transitioning to a more formal management team that can handle Loyal Biscuit’s expanding operational needs. With an eventual goal of eight stores, Neal is working to build more of those specialized roles that will keep the expanded business in sync, including creating general manager, events manager and inventory manager positions.
“I’m starting to get that management team in place, which we’ve never really had before,” Neal says. “The next store that I open is going to be at least two hours away, so I need to be able to walk away and focus on that new store and know that everything else we’ve got is going to run smoothly.”
Understanding that smaller independents may not have the resources to expand their management team to the same extent as a chain, Morton suggests looking outside one’s own organization for ideas and guidance on subjects like marketing and business logistics. Retailers can seek out business mentors in their community, find an informative podcasts or attend conferences and seminars for small business owners.
Morton has also found success through talking with other small retailers at trade shows, trading ideas and developing an informal network. Through such relationships with other small businesses, retailers can learn from each other’s ideas and successes, whether in marketing, analyzing sales or reaching out to potential customers.
“I love chatting with people at trade shows and seeing what they’re working on and how they’re doing,” says Morton. “It’s a great way to network and see other ideas. I talk to people that are just so plugged into the business, you’re kind of blown away.”
He suggests arranging regular connections with likeminded retailers, whether its as informal as an occasional phone call to compare notes, or as structured as an annual meeting at a trade show.
The Personal Touch
Perhaps the biggest advantage the smaller retailers have is their ability to build connections with customers. Neal sees how important these personal relationships are to the success of her business on a day-to-day basis, with customers noticing a new hire or the absence of a particular employee.
“People enjoy coming in and seeing the same face,” she says. “In those bigger stores, they have a lot more turnover, and they’re not as programmed to have those conversations with those customers.”
While it’s possible to retain that quality as businesses grow, it may become more difficult. From Morton’s perspective, maintaining the original passion that a business was founded on is a significant challenge in expanding to more locations.
Pets on Broadway
“I think everybody starts out as that starry-eyed retailer, but I think it’s more and more difficult the bigger you get,” Morton says. “It’s easier for us to maintain that as a single store. I can go out and talk to customers very directly and be a part of the transactions and the hiring process.”
Single-store or small multi-store operations may also be able to respond and change more quickly, whether in response to new demand for a particular product or to test out new trends. The Loyal Biscuit has retained that nimble quality of a small operation, despite opening three new stores within just a few years after Neal purchased the original Rockland location.
“We’re still small enough in terms of products that we can change it out super quickly if it’s not working,” she says. ”We also have the ability to be very quick about pulling things off the shelves or putting things on the shelves, whatever the situation might be. We can just decide on something at a minute’s notice. We don’t have to go through a giant chain of command to make anything happen.”
Morton also embraces that spirit of change and innovation in managing Pets on Broadway, helping to keep the business up to date and thriving. In his single-store environment, it is relatively easy to get new ideas from staff members and test them out.
“It’s key that you continue to change and try new things,” Morton says. “We have both an owner who is open to that and a group of people who are excited to do so. Every year we try 25 new things, and if five of them stick we’re doing great.”
While larger retailers may bring some clear advantages to the table based on scale and buying power, single-store and small multi-store operations also have a lot of opportunities to make themselves the premier pet retail destination in their local market. Independents can also learn from other retailers’ experiences, perhaps striving to emulate the personal service of a single-store business in a growing chain, or finding ways to adapt larger retailers’ streamlined practices to a smaller operation.
Competition is only going to get fiercer as more businesses buy into the lucrative pet market, but independent retailers can continue to succeed by playing to their unique strengths.
“In business, you have to have your niche, and if you do your niche well, you can be a small player and still thrive,” Hartzell says. “You have to be able to differentiate yourself.”