The Road to Success
The pet specialty retail channel has a rosy future, if it can take advantage of the positive economic trends that are expected over the next few years.
Members of the Pet Industry Distributors Association (PIDA) gathered in Phoenix in January for the organization’s 46th annual meeting, where keynote speaker, economist Brian Beaulieu, painted a pretty rosy picture for the pet industry—and the U.S. economy at large—for the next few years. But beware of 2018—that is when the next significant recession is likely to hit.
Beaulieu, chief economist for the Institute for Trend Research Economics (ITR), based his optimistic forecast—at least for the next three years—on long-term trends that are favorable for consumer spending. First is the underlying strength of the U.S. economy. The U.S. represents 22 percent of the world’s economic activity and is growing. China, a distant second, will never have as big an economy as the U.S., according to ITR’s forecasts.
Second is the favorable population growth trend for the country. The U.S. population will grow by 100 million people by the year 2050, and many of those folks will have pets. Other large economies—like Japan and many Western European countries—are experiencing negative population trends that will put pressure on companies selling consumer goods there. According to Beaulieu, pet industry growth should outpace GDP for the foreseeable future. His advice to pet product companies is, “budget for growth.”
Pet Specialty—Large and Growing
Of course, PIDA members are most interested in the pet specialty segment of overall pet product sales. How are sales through independent pet retailers and the wholesaler-distributors that support them growing relative to other pet supply outlets? What portion of the $55 billion in annual pet services and product sales consumed by the American public does this segment represent?
Last year, PIDA surveyed its 53 distributor members to find out. The results reveal a segment of the market that is large and growing. PIDA-member distributors collectively had more than $3.3 billion in sales at wholesale last year. This translates to more than $4.45 billion in retail sales, assuming an average gross margin of 35 percent.
Distributors have made huge investments in warehouse space, equipment and people to get manufacturers’ products onto retailers’ shelves and ultimately, into the hands of consumers. Our members have 104 distribution centers, comprising 7.5 million square feet of warehouse space. They maintained, on average, $326 million in inventory in 2012—in stock, ready for immediate delivery. They made over three million deliveries to retail customers; that’s more than 8,200 deliveries a day.
PIDA distributors employ 5,400 people to sell, pick, pack, deliver and collect payment for the products that manufacturers make. And nearly 1,000 inside and outside salespeople call on retailers to assist with orders, identify hot new products and promote special offers.
Distributors hold 51 trade shows and open houses each year to get manufacturers and retailers together for product demonstrations and specials, and 1,000 pet store owners and their employees attended these events.
Preparing for Growth
Opportunities abound in the pet specialty market, and the companies that are best positioned to take advantage of these opportunities will prosper. Beaulieu offered his “Top Ten List” for preparing for the next four years of economic growth:
1. Positive leadership modeling—the culture you establish in your business turns to behavior.
2. Invest in customer market research—know what your customers value.
3. Training programs—people, process, internal metrics (think Pet Store Pro).
4. Review and uncover competitive advantages—what makes your business stand above the competition?
5. Spend money on new products, marketing and advertising—give consumers a reason to shop in your store.
6. Improve efficiencies with investment in technology and software—get that new POS system now!
7. Add sales staff and hire top people—the labor market is tightening and competition for top performers will be increasingly fierce.
8. Lock in costs—don’t let a tight labor market and looming inflationary pressure catch you by surprise.
9. Judiciously examine credit—credit is still cheap, but lock in rates where possible.
10. Work on “what’s next”—update your business plan today.
Steve King is president of the Pet Industry Distributors Association.