Answering the Tough Questions

Prominent industry executives share their perspectives on the many opportunities and challenges facing pet specialty retailers today and in the future.


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It is a great time to be in the pet business.

Not only are consumers continuing to display an unwavering commitment to providing the best possible care to their beloved companion animals, manufacturers have stepped up with an ever-expanding assortment of innovative products to meet the demands and preferences of these discerning shoppers—all of which added up to an estimated $58.5 billion in U.S. pet industry spending in 2014.

However, even as the pet care category remains one of the brightest stars in the retail world, there are significant challenges that must be met and opportunities that must be tapped in order to ensure long-term success, particularly for pet specialty stores. With this in mind, Pet Business reached out to a number of prominent industry executives to get their answers to the tough questions facing the pet care market.



Michelle Higdon, CEO, Solid Gold Pet

What do you think will be the most important pet product trends over the next five years?

Products that can improve quality of life for pets and pet parents will be leading the trends. As pioneers of holistic pet food, Solid Gold Pet was founded on quality nutrition for dogs and cats. It’s in our DNA and guides everything we do. We have been advocating and formulating for extraordinary pet life for over 40 years. Looking ahead, we are encouraged by the continued interest in holistic health and pet nutrition and see a few trends that are important to watch.

• Demand for Health and Wellness Products—As pet owners are becoming more knowledgeable about the benefits of holistic health and overall good pet nutrition, the demand for healthy products will continue to lead the growth in the pet space.

• Growth of Functional Ingredients—There is more interest in functional ingredients, which is the foundation of our entire line of pet food. Some of the most powerful nutrients are found in nature. As we learn more about the benefits of our earth’s natural foods, you will see the addition of unique ingredients, like exotic proteins and functional vegetables in future formulas.

• Influence of Human Trends—Industry research suggests that trends in pet food are directly connected to human trends. We believe this trend will continue to shape future innovations in pet food. This year, Solid Gold will expand its line of grain-free formulas for the growing population of pets sensitive to grain. The growth of grain-free products is a key example of how the pet space has been influenced by human trends. You will also see an increasing number of specific products that address a distinct dietary need.

• Customization of Pet Food—Solid Gold offers a complete line of pet food formulas for dogs and cats, of all breeds, life stages and dietary requirements. The customization of pet food, where formulas are tailored to a pet’s unique health needs, will continue to advance as consumers learn more about the holistic health and good nutrition.


Veterinary care costs have skyrocketed over the past several years. How do you expect this to impact the retail pet channel over the next five years?

Good nutrition is the best and most cost effective way to lower veterinary costs. Every pet should have the opportunity to live its best life. The retail pet channel will continue to experience steady growth as pet owners are learning more about holistic health and the power of good nutrition.

Over the years, veterinary medicine has made revolutionary advancements in the treatment and diagnosis of veterinary diseases. As scientists learn more about the role that diet has in preventing diseases, nutritional education will become increasingly important and will heavily influence the development of new products across pet retail channels.

 


Samuel Cohen, Vice President of Marketing & Sales, Healthy Pet

What are some of the biggest opportunities facing the pet specialty retail channel over the next five years? What will be the keys to capitalizing on these opportunities?

Changing demographics will continue to drive many opportunities for the pet industry. We’ll have a larger number of young singles and couples who are interested in adding pets to their households before having children, as well as a larger number of older singles and empty-nester couples who have many active years to share with pets after children.

At the same time, the population is becoming more urban, as both of these groups gravitate towards urban core and walkable suburban neighborhoods. These trends are driving faster growth of cats, smaller dogs, and even rabbits and guinea pigs as pets, which bring the same love and companionship to a household but better fit the small spaces and varied environments of urban lifestyles.

The pet industry has a big opportunity in catering to these families with consumables, soft and hard goods that foster health, comfort and fun within smaller square footage residences and lifestyles that feature more time outside the home but in a more urban setting. On the go products, training aids, indoor waste management and innovative carriers are promising innovation spaces for the industry to capitalize on these trends.


While dog and cat products continue to see sales growth, some of the specialty categories within the pet industry have had a tougher time. What’s in the store for these categories moving forward? How can they be revitalized?

Most of the downturn in these categories can be attributed to a persistently tough economy and temporary factors, such as declining residential construction and a smaller number of households with children in the key six to 16 age range. Long-term, these categories will rebound as the Echo Boom generation forms their own households and begins having children over the next three to five years.

The challenge for specialty categories will be to make sure that the joy of pets is known to these new families inundated with video games, tablets and other digital entertainment. We need to make sure that the next generation of children learns to unplug and play. Healthy Pet is proud to support the Pet Care Trust and their Pets in the Classroom program to safely and constructively teach children both the rewards and the responsibility of pet ownership. Because small mammals, reptiles and fish are many people’s first pet and help build the future cat and dog owners for the pet industry, stakeholders will benefit from investing in the program even if they are not in a specialty category.




Ward Johnson, Owner/President, Sojos


What impact do you expect the Made in the USA trend to have on the pet industry over the next five years and beyond?

Above all, the Made in America movement will continue to improve food quality and safety across the board. I assume it will add some incremental cost to better pet products, but when measured against the health benefits, I’m sure pet parents will agree it’s worth every penny.


Some industry observers contend that grocery and mass retailers are doing a much better job of retaining their pet-owning customers by broadening their product mix and doing a better job of merchandising their pet aisles. How can retailers reverse this trend to capture more market share from these outside retailers?

While natural kibble has proliferated in grocery and mass, the raw dehydrated category remains relatively exclusive to independent pet specialty stores. It’s essential that retail team members are well versed in the benefits of raw nutrition—along with the ins and outs of the brands they carry. It’s no longer enough to simply stock unique brands; it’s about being prepared to educate pet parents. In my mind, nothing can do more to differentiate independent retailers from grocery and mass retailers.


With the Baby Boomer generation expected to have a declining impact on pet industry spending, how should pet retailers be preparing themselves to appeal to the next generation of pet owners?

I’m no social scientist, but I believe pet specialty retailers should be optimistic. Once convinced, we’ve found that Baby Boomers are loyal and vocal in their support of healthier alternatives. But for everyday purchases, mainstream brands can be challenging to overcome. Gen Xers and Millennials, on the other hand, are much more independent. They have an inherent distrust of large, mass-marketers—and an affinity for alternative products produced by small independent manufacturers. There’s no better example than the recent explosion of craft beer. It’s the antithesis of mass-market brands. It offers an opportunity for individual choice and expression. And it promises hands-on attention in every detail. Whether an alternative pet food, or an independent pet specialty retailer, that strikes me as pretty good description of what it will take to grow and prosper in the future.





Bo Nelson, President, Wholesalepet.com

Can traditional retailers do more of their business online? What would it take?

All brick-and-mortar retailers are concerned with e-commerce. Some view e-commerce as a looming threat to their businesses, while others see a valuable growth opportunity. Physical stores can greatly benefit from having an online presence; this is called “Omni-Channel” retailing, and it’s the true future of buying.

Traditional independent retailers have built their businesses by curating a specialty mix of products, offering a high-level of customer service and providing a unique shopping experience. These qualities can translate to the world of e-commerce. Small specialty retailers can create exceptional websites that reflect their store’s personality, populate them with a distinctive merchandise mix and back the sites with great service to complete the shopping experience. With an effective SEO and marketing strategy, traditional retailers can entice consumers far and wide to purchase through their websites.

Physical stores can use other online tools to benefit their businesses. When not logged-in to our website, WholesalePet.com enables retailers to show customers our vendor catalogs without displaying wholesale prices. This provides store personnel an opportunity to show over 100,000 specialty products that can be specially ordered for the customer.

Brick-and-mortar retailing will remain viable for the foreseeable future. In fact, over 90 percent of U.S. consumer spending is done through physical stores. Though continued growth of e-commerce is real competition, can negatively affect sales and put pricing pressure on physical stores. Traditional retailers can benefit by spending less time beleaguering the threat posed by e-commerce and devoting more energy to growing their businesses.


Many of the most innovative pet product trends get their start in the world of human products. What are some of the human-product trends that will be important to the pet industry in the future?

Pet product trends have followed human product trends for decades. This parallel can be seen in product characteristics in virtually every category: ingredients, solutions, materials, design and function. WholesalePet.com works with over 300 of the most innovative suppliers in the pet industry, and trending products can always be found near the top of our best-selling lists.

Technology advancements are rapidly changing people’s lives. While pets are inherently low-tech, many of the hottest human gadgets are making their way into the pet industry. “Wearables” is a current buzzword in the tech world. GPS tracking devices can enable pet owners to know where their dogs are at all times. Collar cams stream live video, so owners can see the world through their pet’s eyes. And products like Voyce, provide real-time analytics of a pets vital signs and activity levels.

Product innovation, in both the human and pet world, is happening at a faster pace than ever before. This fuels entrepreneurism and benefits businesses, large and small. The future looks bright, and it is an exciting time to be in the pet industry.




Michael Landa, CEO, Nulo Pet Food

Can traditional retailers do more of their business online? What would it take?

Unfortunately, for the small traditional retailer, growing an online business comes down to two things beyond just having an online storefront—shipping volume and online marketing. The traditional retailer has to achieve such a critical shipping volume that they can negotiate better shipping contracts and be competitive against the giant online retailers. Until then, they’ll either bleed money or lose on price.

Secondly, the traditional retailer must have the budget and online marketing expertise to build a brand beyond their own market, acquire new customers, all while competing on price on a daily basis. Most small retailers shy away from these challenges.

We believe the better opportunity for many of our small business retailers is home delivery. It provides additional value to their current customers, keeps it personal and in the community, and provides a level of touch that online retailers simply can’t compete against. As the Baby Boomer generation declines, this service may prove even more valuable to an aging population that wishes to maintain some connection with their community while still being able to maintain their pet as well.


Many of the most innovative pet product trends get their start in the world of human products. What are some of the human-product trends that will be important to the pet industry in the future?

Maybe it’s just Nulo’s brand or demographic, but we’ve seen a popular interest in GPS and activity monitoring for your pet. As consumers learn more about measuring the correlation between their own fitness and nutrition, it’s only natural that it translates to their pet as well.

If you think about it, I don’t think any of us really know how many calories our dog burns in a day, but we don’t think twice when we add a second scoop to their bowl and double their calories. Then we wonder why the vet tells us that Buster could lose a few pounds. The new devices like Whistle, FitBark and PetPace bring that knowledge front and center. Granted, it may be a niche demographic of pet owners, but with knowledge comes power, and we won’t be surprised if new innovations are spurred from this evolving category.




Olivier Amice, President, Whitebridge Pet Brands

What will be the biggest challenges facing the pet industry over the next five years? What will be the keys to overcoming those challenges?


The impact on the total pet population of the Baby Boomers retiring is still largely unknown at this point. Additionally, the cats and small dog population is currently growing faster than the larger dog population, which creates a volume challenge for pet food manufacturers, for instance. This trend has been offset by consumers trading up to better foods for their pets, but there is no guarantee that this will last. To continue to thrive, the pet industry will need to continue to (1) innovate, as today premium products will become mainstream products tomorrow, and (2) educate the consumer to give her a reason to continue to trade up.


Some industry observers contend that grocery and mass retailers are doing a much better job of retaining their pet-owning customers by broadening their product mix and doing a better job of merchandising their pet aisles. How can retailers reverse this trend to capture more market share from these outside retailers?

The pet aisle is an important aisle for grocery and mass retailers, and there is no doubt that today these retailers carry products more in line with consumer expectations. That being said, the pet specialty channel will continue to compete effectively with:

1. Competitive prices, especially on widely distributed brands. This shows the consumers that it is not necessarily more expensive to shop a specialty store.

2. A broad assortment aligned to consumer needs that grocery and mass retailers cannot match due to the limited space they allocate to pet products. Pet parents prefer products tailored to their pet specific needs and physiology. Only the pet specialty channel can give these consumers the choice they want.

3. Consumer services in the form of knowledge through the staff or merchandising and more traditional services like training, grooming, etc., that are not available in grocery and mass retailers.




Rick Blomquist, General Manager, Pet-Ag, Inc.

What are some of the biggest opportunities facing the pet specialty retail channel over the next five years? What will be the keys to capitalizing on these opportunities?


Three key audience demographic opportunities come to mind: the growing population of empty nesters (affluent and indulgent pet parents), families with kids (convert the FDM convenience shopping trip and teach pet parenting responsibilities to the next generation), and Hispanic pet owners (severely under-represented in the pet specialty channel).


Some industry observers contend that grocery and mass retailers are doing a much better job of retaining their pet-owning customers by broadening their product mix and doing a better job of merchandising their pet aisles. How can retailers reverse this trend to capture more market share from these outside retailers?

The convenience of buying pet care products in one of 60-plus shopping trips per year to FDM stores, versus 13 shopping trips to pet specialty stores can only be overcome by providing value-added reasons to make the trip worthwhile, such as traffic-building storewide events, locally relevant community events or experiences that enrich the shopping experience (retail-tainment).


Veterinary care costs have skyrocketed over the past several years. How do you expect this to impact the retail pet channel over the next five years?

Animal health care trends tend to mirror human health care trends, particularly in the areas of wellness, prevention, proper nutrition and the use of OTC health solutions. Sales associates in the retail pet channel must be knowledgeable and fluent in the language of OTC health care solutions for treatment and prevention of digestive and skin care products to assist pet parents looking for at-home treatment options or first line of defense solutions to help circumvent a visit to the veterinarian.




Don Pellegrino, Vice President of Sales, and Maggie Marchese, Vice President of Marketing, PetMatrix


According to some estimates, online sales grew to account for more than four percent of pet product sales in 2014, and some speculate that this could grow to as much as 20 percent over the next several years. What will be some of the keys for brick-and-mortar retailers to continue thriving under such competitive pressure?

Brick-and-mortar retailers need to provide a fun store experience—whether it is by allowing pets in stores, having fun interactive pet experiences in store for young children—like birds, small animals, fish, dogs and cats—or having special in-store activities like pet pictures with Santa. Stores need to be part of the community, sponsor local events like doggie walks, or work with local schools. Retailers need to be experts on products, pets and other pet services. - Pellegrino


According to many industry experts and financial results, Petco and PetSmart have had a tough time over the past couple of years. What do you expect from the two pet specialty big-box retailers over the next five years?

With so many internal changes happening in these two retailers, we should expect these accounts to become more innovative in attracting customers into their stores with more innovative product assortments, can’t-miss-out-on promotions and in-store services. - Marchese


Veterinary care costs have skyrocketed over the past several years. How do you expect this to impact the retail pet channel over the next five years?

Consumers will continue to go online for education and will depend more on store personnel for first-hand healthcare advice. They will turn more towards preventative and off-the-shelf alternative products, including special foods, dental and supplement items. - Marchese




Bill Chilian, Vice President of Marketing, Barkworthies

What will be the biggest challenges facing the pet industry over the next five years? What will be the keys to overcoming those challenges?

I think that managing change is our biggest challenge, as the industry is evolving at an accelerated pace. A highly engaged, highly informed consumer is driving this evolution. Product lifecycles are now measured in months, not years; and product development cycles must move faster as a result. These realities tend to favor the smaller, more nimble players over larger organizations with decentralized decision-making authority. The key to overcoming these challenges is to anticipate change, not simply react to it. This is obviously easier said than done, but organizations that know their customers intimately, follow the trends closely, make decisions quickly and act decisively will have the edge.


What do you think will be the most important pet product trends over the next five years?

The current “all natural” and “trusted country of origin” trends will continue to dominate the category in the mid-term. Barkworthies is committed to satisfying these needs with our all-natural, single-ingredient products from here in the USA, as well as other trusted sources.

I also see growth in the demand for products that meet increasingly specific criteria—for example, gluten free, low glycemic impact or certified organic. I also predict growing consumer interest in products that aren’t from typical protein families such as beef, chicken and pork. Pet parents caring for loved ones with food allergies or simply looking to add a little variety to their diet are embracing exotic sources of protein such as venison, rabbit, kangaroo and even crocodile.




Barbara Denzer, Vice President of Marketing, Cardinal Laboratories

With the Baby Boomer generation expected to have a declining impact on pet industry spending, how should pet retailers be preparing themselves to appeal to the next generation of pet owners?

The term Baby Boomer may not carry the weight it once did among marketers, but there is a segment of this demographic that remains extremely lucrative to retailers and is actually forecasted to grow even more powerful over the next 20 years: “PrimeTime Women.” This term, coined by author/marketing researcher Marti Barletta, and thoroughly supported by others including marketing guru Tom Peters, refers to women ages 50 to 70, who are the “healthiest, wealthiest generation in history with the most discretionary spending—and they are enormously influential.”

PrimeTime Women—also known as Big Spenders—are the decision-makers for 80 to 85 percent of all household spending; and once their nests are empty, they have discretionary spending power that can be up to 2.5 times greater than that of the average consumer. They are in their peak years of their income, wealth and spending—and they also love pets. If we’re not making them the target of our marketing, we’re missing out, so it’s important that we understand who they are and what they like.

Research has shown that PrimeTime Women seek out credible opinions before they go shopping, not only from friends and family, but today, blogs and social media are playing an increasingly important role in their buying decisions. They are also very detail oriented, spend a lot of time researching products and typically ask a lot of questions. So it’s important to really listen to them and provide them with helpful answers and customer service. Demographics show that women, in general, account for 76 to 87 percent of pet consumers, depending on the channel.


Has the natural pet product trend reached a level of maturity at which it will be difficult to drive growth for pet stores? How should pet retailers respond?

The natural trend probably has reached maturity, in the sense that natural products are available in most brands and all price segments, so retailers need to know their customer demographics and the current economic situation of their region. They can choose natural brands that offer natural products in the price ranges that their customers prefer.
Also, with natural products being so prevalent today, educating the consumer becomes all the more important. Research shows that even consumers who want to buy natural products are still confused about the terminology and what it really means from a health-benefit standpoint. The store that makes it easier for consumers to understand this category will continue to grow their natural product sales.




Dave Murray, Vice President of Sales, Kent Pet Group

What will be the biggest challenges facing the pet industry over the next five years? What will be the keys to overcoming those challenges?

There are many challenges facing our industry. The lack of high-quality proteins in the manufacture of high-quality pet foods will change the way we formulate and feed our pets. We can also expect bag sizes to continue shrinking and price per pound to continue escalating.


Has the natural pet product trend reached a level of maturity at which it will be difficult to drive growth for pet stores? How should pet retailers respond?

I would consider the natural trend as reaching a level of saturation. The term “natural” has become meaningless in our industry, as every consumable pet product now considers itself “natural.” What is driving growth in pet stores are the differences in the ingredients of the foods they sell compared to those sold in other formats. Successful retailers are those that have superior customer service—especially those where the employees understand pet nutrition and can communicate the difference between the foods they sell against those in mass/grocery. Retailers need to carry a wide range of products that will satisfy consumers buying at all levels on the price scale.


With the Baby Boomer generation expected to have a declining impact on pet industry spending, how should pet retailers be preparing themselves to appeal to the next generation of pet owners?

It is all about information and convenience. Generation X consumers use the Internet to research everything they buy and tend to be comfortable buying online. Having a strong presence on the Internet, offering the information about the products you sell, and ultimately, selling them product without meeting face to face is the future of all retailing, and we see Internet sales grow every year. The number of Internet pet retailers increases every year, and they enjoy double-digit growth every year.




Chris Gardner, Director of Sales, Pet Head

Can traditional retailers do more of their business online? What would it take?

Many shoppers are now accustomed to buying an item first at a neighborhood store, but re-purchasing the item through an online retailer due to ease and convenience. Offering an online shopping experience that mirrors the selection offered at [a pet specialty retailers’] storefront will help continue to drive repeat sales through their channels.


According to many industry experts and financial results, Petco and PetSmart have had a tough time over the past couple of years. What do you expect from the two pet specialty big-box retailers over the next five years?

I believe we are already seeing it. The acquisition of Pet360 by PetSmart and Drs. Foster and Smith by Petco, [represents] the first step in strengthening each respective company’s online presence by working with proven leaders in the online pet community.




Dr. Christine Bessent, DVM, CEO of Herbsmith, Inc.

Many of the most innovative pet product trends get their start in the world of human products. What are some of the human-product trends that will be important to the pet industry in the future?

I think there are a number of things that we see as concerns within the human industry and will start to affect the way pet parents buy products for their animals. Certainly, gluten-free is one of those. Some humans are more sensitive to the effects of gluten, and there are holistic veterinarians who believe the same thing is true for animals. I agree, that probably is the case. So, hopefully we will see a trend toward gluten-free food or minimizing the amount of gluten in products.

Humans are also getting keener to the idea that heavily processed foods are not as healthy for us as fresh, locally grown foods, and I think we’re going to start to see that in the demand for pet products. We may also see a shift toward the idea that you can add some healthy whole foods to your dog or cat’s diet.

Another thing that I see a lot as a holistic veterinarian is that we now have a generation of geriatric animals like we’ve never seen before. The pet industry really needs to address that category of the population more. There are some wonderful products that are currently being developed and launched on the market. For example, we’re producing a product called Senior Dog Wisdom. It is a combination of neutraceuticals that have been proven to increase cognition or the mental capacity and support brain health in older pets.


While many mid-sized pet specialty chains have had a lot of success over the past several years, the same period has been more of a mixed bag for single-store operators. How do you expect the next five years to play out for both sides?

I think it is going to be a heyday for single-store retailers. Over the next five years, I believe that the concept of a wellness consultant—the neighborhood pet store where the owner is educated on what is healthy for dogs—is what Millennials will be seeking. They’re going to look for retailers that are knowledgeable on what their dog should get before it has to go into a veterinarian. Smaller, single-store operators can provide that type of personal attention and solutions that keep pets healthier, longer.

And those mid-sized chains that are doing so well, they can do the same thing on a bigger scale by being well organized. What I’ve found is that the multi-store chains that do really are the ones that educate their staff well.

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