Managing Shelf Space
Independent pet specialty retailers must be relentless in their data-driven pursuit of smarter shelf allocations.
For pet retailers, shelf space may be the ultimate commodity; square footage is fixed, and smart retailers try to wring the greatest value from every inch of their display areas. Nobody wrestles more with this difficult math, where geometry and accounting face off, than the neighborhood pet store owner. To be profitable, these sellers—mostly independents—need to weigh profit margins against space requirements in a relentless pursuit of efficiency.
GfK’s POS (point-of-sale) pet panel represents about 8,000 boutique and regional shops, giving participating retailers a look beyond their own inventories and sales data to reveal what is going on in stores across the U.S. By tracking both shelf space allotments and sales, the GfK pet panel can provide shelf allocation guidance for small sellers—where they may be over-investing in underachievers, or missing golden opportunities.
Sticking to dog and cat food only, the industry’s heavyweights, our data shows that dog items account for about 70 percent of shelf space, but 80 percent of the sales in smaller shops. The disparity between revenue and square footage is largest for dry items for dogs, which get just 36 percent of shelf space but generate 67 percent of sales; trouble is, retailer profit on these items is generally meager, so it may take double the revenue to make them pay dividends.
Wet foods have been gaining momentum as a healthy alternative, because they contribute to hydration and allow for clearer portion control, both important considerations for health-conscious pet owners. Wet items also yield bigger profits for stores, giving this category a compelling argument for generous shelf allotments. Since 2011, we have seen a 44-percent increase in shelf space devoted to feline wet food items, and 23 percent growth in dog wet food.
When it comes to shelf expansion though, nothing can top treats. Delivering big profits in small packages, these items have recorded 78-percent shelf space growth for cats and a remarkable 94 percent for dogs in the past four years. And many treats do not require shelf space at all; they hang from clip strips or sit in standalone displays on the sales floor.
Owners of small stores are indeed savvy about their stocking decisions; they have found that 30-lb. bags, for example, not only take up tons of space, but also allow customers to make fewer trips to the pet shop, which means fewer opportunities for impulse purchases. So some neighborhood sellers are now opting for smaller bags as their standard dry-food size.
Display allocations also reflect some of the big trends we see in the industry. Four years ago, grain-free dog and cat foods represented about one-third of shelf space devoted to natural food items in neighborhood shops; today, the grain-free figure is up to roughly half.
At the same time that they have boosted their shelf allotments for natural items, however, small pet stores have cut back only slightly on non-natural items and other less fashionable categories. Retailers, it seems, are fitting a larger number of items in the same square footage; efficiency, as we know, is their mantra.
In the coming months, look for neighborhood pet retailers to continue upping their commitment to high-profit, small-footprint treats, and to replace more dry SKUs with wet. Keeping track of the latest wrinkles in the natural food juggernaut will remain essential for smart space allocations. And cat products will claim more and more of sellers’ attention and floor space.
The secret to leveraging the latest pet trends is to have a big picture of the industry—what is working and what is floundering in thousands of pet stores around the country. Data gives an added advantage to savvy neighborhood pet retailers, who are experts at making the best of every square foot at their disposal.
Want to get savvier about data? Join GfK’s pet specialty POS panel – contact Dave Stevens at email@example.com.
Maria Lange is Business Group Director (Pet Specialty) on GfK’s POS Tracking team. She can be reached at firstname.lastname@example.org.