Head of the Class
The 2014 Pet Business Top 25 Retailers List reveals that North America's mid-sized pet specialty chains continue to grow stronger-thanks, in large part, to a clear focus on service and nutrition.
All hail the mighty pet store chain.
During a period in which many retailers of all shapes and sizes are struggling to keep their doors open, a perfect storm of economies of scale, the public’s love affair with pets and a well-honed approach to retail has made pet specialty chains a powerhouse of growth. As evidenced by the 2014 Pet Business Top 25 Retailers List, many of these North American retailers continue to perform phenomenally year after year, even in the face of tight shopper budgets and a historic level of competition from outside channels like mass and grocery.
Every chain in this year’s Top 25 List—which is compiled based on the retailer’s number of locations—experienced at least some growth since the last edition in 2012. As a group, these chains added a total of 501 stores between the beginning of 2012 and the end of 2013, which represents a faster rate of growth than in years past. Not surprisingly, Petco set the high water mark by adding approximately 115 new locations (163, if counting new Unleashed by Petco stores) over the past two years, and PetSmart has also grown significantly over that period, adding 57 new locations and consistently posting strong year-over-year sales increases.
However, success has not been solely the domain of the big-boxes. While Petco and PetSmart store openings accounted for a large portion of Top 25 retailer store openings between 2012-2014 (45 percent), this percentage was actually significantly lower than it was in the 2012 and 2009 editions of the Top 25 List, in which Petco and PetSmart accounted for 59 percent and 91 percent of the new stores openings, respectively.
While the chains on the Top 25 List have certainly benefited from increasing pet ownership statistics, their progress has not been completely driven by this expanding customer base. Indications are that pet chain growth has come—at least, in some part—at the expense of smaller specialty retailers, or mom and pops. According to a September 2013 report from IBISWorld, a global market research firm based in Los Angeles, even as the total number of pet stores in the U.S. increased over the past five years, the number of retailers operating those stores declined—a trend that is seemingly reflected in Pet Business’ list. In fact, when the number of stores accounted for by the Top 25 retailers is superimposed over the IBISWorld figures, it becomes clear that, each year, these chains represent a bigger portion of the total pet specialty retail landscape.
Of course, the rate of growth varied between the individual retailers represented in the Top 25 List. Beyond PetSmart and Petco, some of the more notable increases came from:
Pet Valu (#3): This Ontario, Canada-based chain, which uses a small-format, convenience-focused model for its stores—located in Canada and the mid-Atlantic United States—has added 86 outlets since 2012. Propelled largely by an infusion of capital through an acquisition by a private-equity firm in 2009, this chain’s growth has been exceeded only by that of PetSmart and Petco over the past four years.
Pet Supplies “Plus” (#4): Billed as “America’s Favorite Neighborhood Pet Store,” Pet Supplies “Plus” (PSP) is the biggest pet store franchise in North America, though it does operate a significant number of company-owned stores. Since 2012, PSP expanded its brand with 26 new stores.
Pet Sense (#10): A fast-rising retail star in the pet world, Scottsdale, Ariz.-based Pet Sense was established by PetSmart founder Jim Doughtery in 2005 and is helmed by fellow PetSmart alumnus Bob Angstead, who serves as president and CEO. Pet Sense has added 29 locations since 2012, bringing its total number of stores up to 85 in just eight years.
However, these are not the only interesting stories to come out of the Top 25 List. Pet Food Express is another retailer that bears mentioning—not necessarily for its growth (although the chain, which came in at number 13 on the list, opened nine new stores during the past two years, bringing its total up to 50 locations), but rather for its expansion plans in 2014. According to president Michael Levy, Pet Food Express will be taking its first steps outside its home market in the San Francisco Bay area. In February, the chain will open a store in Pasadena, and it will add three more southern California stores over the following five months.
“The Pasadena store will have a somewhat unique look for us,” says Levy. “It is on a street that is literally an outdoor mall, with stores like Anthropology and Trader Joe’s. It will have two entrances, one of which will have a 30-foot-tall glass facade, a huge mural of Pasadena [showing the Rose Bowl Parade], a dedicated cat adoption center and a dog bakery component. Of course, our signature self-service, semi-automated pet wash will also be a part of the floor plan.”
As is the case with Pet Food Express, many of the success stories contained within Pet Business’ Top 25 Retailers List can be attributed to the retailers’ firm commitment to offering wholesome, high-quality pet nutrition and an exceptional level of customer service. By focusing on these areas, in particular—and, in some cases, combining that focus with service offerings like grooming and even veterinary care—pet store chains have been able to build the loyal customer base and the resulting brand awareness that is the foundation for retail expansion.
To delve even deeper into the formula that some of the top pet specialty chains have used to climb to the pinnacle of the retail heap, Pet Business spoke with executives from five of the companies on the Top 25 List. What we uncovered were stories that, while clearly sharing some common threads, were also quite unique in many ways.
Global Pet Foods
Coming in at number five on the Top 25 List, Global Pet Foods is a Canadian full-line pet retail franchise that added 17 stores between early 2012 and the end of 2013. What is more impressive about this chain, however, is the fact that it has nearly doubled in size since 2009.
“Global started as an Ontario-based chain,” says Sarah Beaton, director of operations. “But our expansion has predominantly been into the [Maritime provinces] and western Canada.”
According to Beaton, Global Pet Foods has also experienced significant growth in Quebec. However, unlike some of the other Canadian chains on the Top 25 List, Global Pet Foods has no inclination to make inroads into the U.S. market. Instead, Beaton says that the chain is more focused on not only expanding its reach in Canada, but also improving its existing stores. “We are committed to really fine-tuning our business here,” she explains. “[For example], we’ve just moved to a new store look, including new fixtures.”
During this period of explosive growth, Beaton says the biggest challenge Global Pet Foods has faced is differentiating its stores—which run the gamut in terms of square footage and breadth of product selection—from the other prominent chains in the pet care market. “It is a question of what strengths can we fine-tune, and how can we ensure that the franchisees focus on these things to continue their growth?” she says, using, as an example, the company’s concentration on brands—holistic brands, in particular—that aren’t necessarily available everywhere. “The business certainly has evolved over the past 10 years. So, it’s always a challenge to get franchisees who have been in the system for 10 or more years to take their game to the next level.”
Ultimately, it has been a focus on nutrition— offering not only the right products, but also sound advice to pet owners—that has set Global Pet Food apart from its competitors, says Beaton. “Our overall knowledge and ability to educate consumers on pet nutrition is, quite frankly, superior to any other chain in Canada,” she says. “That is what we’re well known for.”
At number seven, with a total of 138 stores, Petland has been firmly positioned within the top-10 pet specialty chains in every iteration of Pet Business’ Top 25 List. A global franchise, Petland also operates stores in China, Japan, Mexico and South Africa. It features a store model that ranges in size from 4,500 to 6,000 square feet and typically offers 4,000 to 7,000 SKUs.
One of the things that separates Petland from most of the other retail chains on the list is the fact that its offerings include not only pet products, but the pets themselves. “As the industry has evolved and consumer expectations have evolved, so has Petland,” says president Joe Watson. “One thing that hasn’t changed is that people love pets, and Petland features the pets. Our pets and our highly trained pet counselors continue to provide a unique and fun experience for people of all ages.”
In the past, the chain has seen its growth somewhat hampered by the limited availability of capital for franchisees, but Watson says that things are turning around on that front. “The climate of tight SBA [Small Business Administration] and commercial lending is beginning to loosen up,” he says, explaining that it is a trend that Petland expects will continue. As a result, “Domestic franchised store growth has improved, and our international franchise growth remains strong.”
Another positive development for the franchise has been its ability to extend credit to its customer base, says Watson. “The introduction of our private-label Petland credit card has allowed our customers the benefits of a revolving-credit program to meet their purchasing needs.”
While continuing the expansion of the Petland franchise both domestically and internationally, Watson says that the company will remain focused on improving the performance of its existing franchisees. “The profitability of our franchisees remains our highest priority, and we look forward to enhancing those profits with stronger economic growth,” he adds.
In addition, the chain is committed to helping secure the future of the entire pet industry, says Watson. “Petland has initiated and assisted in many of the improvements within the pet industry and we continue that tradition today,” he says.
“Additionally, Petland has gotten even more involved in industry-wide issues as it relates to the consumer’s right to keep and own pets and in promoting responsible breeding practices.”
Woof Gang Bakery
Founded in 2007, after two years of careful planning by founder and CEO Paul Allen, the Woof Gang Bakery franchise has gotten off to a great start, despite that fact that it launched right before recessionary forces walloped the global economy. At number 15 on the list, with 44 stores, the chain added 16 locations over the past two years.
Woof Gang Bakery stores, which typically have a footprint of about 1,500 square feet and carry around 1,000 dog and cat SKUs, prominently feature grooming services along with their retail fare. According to Allen, it is a model that the company added two years ago, and it has since proven to be a critical component of the chain’s success.
“Grooming is an enormous part of our company,” he explains. “What grooming did for us is it brought more customers into the stores. We have stores that are doing 200 to 300 dogs per week.”
In addition to driving traffic into the stores, Allen says that grooming services have also helped increase the profit margins of Woof Gang Bakery franchisees. “In the model of a small pet store by itself, unfortunately, oftentimes the profit is always on the shelves,” he says. Grooming services, by comparison, require little in the way of an initial investment, and they typically deliver much higher margins.
“What is really interesting is that pre-grooming, our average customer was worth about $37 each time they visited,” says Allen. “Post-grooming, our average customer is worth closer to $90. So, you don’t need as many customers to have a very successful store.”
According to Allen, grooming has proven so robust that, in some locations, it actually exceeds retail sales. Building on the success that it has found in service offerings, the Woof Gang Bakery is now focused on adding animal wellness clinics to its stores. In 2014, the company expects to adapt 10 of its locations to hold such clinics.
Of course, Allen also expects to continue growing the Woof Gang Bakery brand by adding more locations, mostly in markets where the company already has a foothold. “We can probably continue to grow by about two stores per month,” he says, noting that his goal is to grow to 65 stores in 2014 and to100-120 stores over the next five years.
Given its trademark as the “Natural Pet Food Headquarters,” the focus of Glendora, Calif.-headquartered Pet Depot chain is obvious. What is also obvious is the fact that this has been a winning formula for the retailer, which now has 37 stores scattered around the U.S. and Canada. Number 17 on the list, Pet Depot has added five locations since 2012. The chain features an average store footprint of about 4,000 square feet, in which pet owners can typically find approximately 5,000 SKUs that span all pet categories, including not only dogs and cats, but small animals, birds, fish and herptiles.
“We’re absolutely a full-line retailer, because many pet owners have multiple types of pets,” says Pet Depot president Roman Versch. “We really don’t want to give customers a reason to go visit another store, so we offer key items in every category.”
Pet Depot is another Top 25 chain that sees the value of including pet services in its business model. Grooming has been offered in every Pet Depot location since the company was founded, accounting for an average of approximately 10 percent of store sales. Referring to these services as an “evergreen” offering, Versch says that pet grooming has been a real strength for Pet Depot stores by driving repeat visits and inspiring customer loyalty.
Similar to Woof Gang Bakery’s incorporation of animal wellness clinics into some of its stores, the Pet Depot chain includes a couple of retail/veterinary hospital hybrids, with more in development. It is a model that, while still limited in scope, has been successful. In fact, Versch hints that further refinement and rollout of such hybrids may play a significant role in Pet Depot’s continued growth.
Also on tap for the chain is an expansion into Mexico, and possibly down into South America. “The pet business is emerging in Mexico, and there is plenty of room for competition throughout Latin America,” says Versch.
When it comes to ensuring the growth he envisions for Pet Depot, Versch knows that it will largely come down to the chain’s ability to stay focused on providing a consistently high level of customer service. “We have to continue to recognize that while, yes, it’s about the pets, it’s also about the people who own the pets,” he says.
Doubling in size to 22 stores in just two years, the Kriser’s chain is a new addition to the list, coming in at number 24. Founded in 2006, this fast-growing retail brand features stores with a typical footprint of about 2,400 square feet and a 3,500-SKU product selection that is completely dedicated to all-natural food and supplies for dogs and cats. Grooming services also play a significant role in Kriser’s stores. It is an approach that has enabled the chain to make significant inroads into three markets—Chicago, Southern California and Denver—and founder and CEO Brad Kriser has his sights set on a fourth market, Houston, in 2014.
“What makes us very unique is that we are highly focused on all-natural. Every product that goes into our stores is hand-picked by myself, so nothing goes on the shelves without my approval,” says Kriser.
However, the chain’s dedication to all-natural pet care extends beyond what customers can find on the shelf. “We’re all about the experience and the education,” notes Kriser, describing his chain as being “at the nexus of the healthy pet movement.”
“So, in each and every market we go into, we want to make sure we continue to give customers the same exact same experience.”
This commitment to consistency has paid off. “One of the things we’ve been able to develop is a trusted brand,” says Kriser president Ken Grouf. “People really respect and believe in what we are trying to do, and that is why they are getting behind the Kriser’s movement.”
In addition to the healthy pet fare and services it offers, the Kriser’s chain has also benefited from a concerted effort to create a warm and inviting “next-level” shopping experience. “The design and layout of the stores are intended to provide a very clean, welcoming and easy-to-shop environment,” adds Grouf.
Ultimately, however, Grouf and Kriser both acknowledge that the success would not be possible without a great staff. “Ken and I are actually cousins, and we truly view our staff as an extension of our family,” says Kriser. “By treating them as part of the family, we empower them to take ownership of their stores. That, combined with their passion for pets, really helps in creating a small-store feel.”
2014 PET BUSINESS TOP 25 RETAILERS LIST
CHAIN LOCATION # of STORES*
1. PETSMART, Phoenix, AZ National 1289 www.petsmart.com
2. PETCO, San Diego, CA National 1215 www.petco.com
3. PET VALU, Markham, Ont., Canada Canada 489 www.petvalu.com Mid-Atlantic, Northeast U.S.
4. PET SUPPLIES “PLUS”, Farmington Hills, MI East Coast 284 www.petsuppliesplus.com Mid West
5. GLOBAL PET FOODS, Brampton, Ont., Canada Canada 160 www.globalpetfoods.com
6. PET SUPERMARKET, Sunrise, FL Southeast U.S. 139 www.petsupermarket.com
7. PETLAND, Chillicothe, OH
8. PETLAND DISCOUNTS, Brentwood, NY Metro NY 96 www.petlanddiscounts.com
9. UNLEASHED BY PETCO, San Diego, CA CA, CO, Northeast 92 www.unleashed.petco.com Mid-Atlantic
10. PETSENSE, Scottsdale, AZ National 85 www.petsensellc.com
11. MONDOU, Quebec, Canada
Quebec, Canada 57 www.mondou.com
12. PET PLANET, Calgary, Canada Canada, AZ 51 www.petplanethealth.com
13. PET FOOD EXPRESS, San Leandro, CA CA
14. BOSLEYS PET FOOD PLUS, Richmond, BC Canada
15. WOOF GANG BAKERY, Orlando, FL
NV, TX, TN, NC, GA, FL, NJ
16. PET CLUB, Mesa, AZ AZ, CO 39 thepetclub.net
17. PET DEPOT U.S., Canada
18. JACK’S PETS OH, IN, Northern KY 32 www.jackspets.com
19. MUD BAY GRANARY, Olympia, WA WA
20. CHUCK & DON’S PET FOOD, Mahtomedi, MN MN, CO 25 www.chuckanddons.com
21. PET PROS, Woodinville, WA WA, OR 23 www.petpros.org
22. CONCORD PET, Wilmington, DE DE, PA 22 www.concordpet.com
23. KAHOOTS PET STORE, San Diego, CA So. CA 22 www.kahootspet.com
24. KRISERS Chicago, So. CA, Denver
25. PET PEOPLE, Encinitas, CA OH, IN, MI
Total # of stores
4,504 *As of Jan. 1, 2014