Pet Industry Perspectives

Top executives from some of the industry’s premier pet product companies sound off on the key issues facing retailers today.




 

After 20-plus years of overwhelming success, the pet specialty retail channel finds itself at an important crossroad. 

Even as pet-related consumer spending continues its steady climb well above the $60-billion mark, pet stores face formidable challenges in maintaining their position as the shopping destination of choice for the tens of millions of pet owners who serve as the economic engine driving this industry ever upward. From adapting to shifting consumer demographics and evolving appetites to competing with online sellers and a fast-growing class of powerful pet specialty chains, these are the issues that will ultimately decide the future of the pet retail landscape.

Will it remain the vibrant and diverse marketplace that has made the pet specialty channel the envy of other retail industries, or will competitive pressures eventually lead to an environment where price and convenience—instead of innovation and personal connections—distinguish the winners from the losers? It all depends on how pet specialty retailers respond to the challenges set before them.

With this in mind,
Pet Business reached out to a select group of top executives from some of the industry’s top pet product companies to get their perspectives on the key issues facing pet stores today, as well as how retailers can rise to the challenges that are sure to shape pet retailing for years to come.

 

Kevin Fick, CEO, Worldwise

 

How do you expect the dynamics between online and brick-and-mortar stores to play out over the next few years? Is there anything traditional retailers could be doing to compete more effectively with internet outlets? 
Online will definitely continue on its growth path as consumers of all ages (especially the Millennials) increase their comfort level of shopping on their phone and laptops. In order to compete more effectively with them, I think the brick-an-mortar retailers will definitely need to leverage a great store experience and over-the-top expert service, and provide competitive retail prices. Anything short of this will likely prove to be a difficult path to compete with online.


What consumer demographics should retailers be focused on over the next few years? How can they effectively reach these shoppers and turn them into loyal customers? 
Between Millennials and Hispanics, the way they shop compared to the Baby Boomers and GenXers is vastly different. For one, what’s defined as discretionary purchases versus non-discretionary with Millennials and Hispanics is nearly the reverse of the older generations. As such, I think there’s a lot of opportunity to cater your non-discretionary offerings to take advantage of this and drive the basket ring up. Additionally, it goes without saying that getting product information, ratings and reviews, video demonstrations and “what’s new” to them in real time via the internet is absolutely essential.

 

 

Joey Herrick, President, Lucy Pet Products

 

Considering ongoing consolidation and continued growth of some of the regional chains, how do you expect the pet specialty retail landscape to change over the next few years?
The internet will continue to grow and take share from all offline channels. The retailers who can adapt quickly and figure out what they are good at will continue to do well. Most important is to understand where you can win and where you can’t. Strong retailers will begin to gradually reduce their emphasis on brands that are not exclusive and re-build their assortment with exclusive brands that are seeking exposure in the specialty channel. 


What are some of the lessons that brick-and-mortar stores can learn from their competitors on the internet? 
Retailers should remember that there is no replacement for individual service and the experience of shopping one-on-one. Making the shopping experience memorable and enjoyable is critical. Hiring great employees who are friendly, well-trained, knowledgeable about the products you carry and know how to engage with customers is the key. There will always be some consumers who only care about price, and there isn’t much we can do about those shoppers. What we can do is to focus on the consumers who appreciate a good shopping experience with fair pricing and actually meeting real people who can answer questions. This includes carrying the innovative new products that are exclusive to pet specialty stores. 

 

 

Bryan Nieman, Brand Director, Fromm Family Foods

 

What are some of the strengths that pet specialty retailers have that will be particularly important in driving growth for the industry over the next few years?
One of the biggest strengths pet specialty retailers have in the market is the ability to develop authentic relationships with their customers. Customers often choose a neighborhood or specialty retailer in part because of the intimate buying experience they have. These stores are small and mighty, with very dedicated and knowledgeable staff. Because they are typically independent or family-run businesses, there is a level of personal attention they give their customers. In turn, the customers often trust the counsel of the staff and owners even more. The result is, if a neighborhood pet retailer gets behind a brand or a trend, they can often quickly convert new customers while answering questions and strengthening the sale. 

What do you think will be the key pet nutrition trends that will drive continued sales growth in the pet specialty channel?
One of the key trends that will continue to drive growth for the pet specialty segment is variety. Pet owners are looking for options for their pets—some for health reasons like sensitivities or allergies and some for the simple pleasure of delivering something new and exciting at mealtime for their pets that are truly family members. Pet specialty retailers that offer trusted brands with unique and innovative products will continue to have more conversation starters and more mealtime solutions for their customer base. 

 

 

Steven Shweky, CEO, Fetch…for Pets!

 

Has the humanization trend made branding more important in the pet industry? How does this impact retailers? 
Yes, the humanization trend has been a key driver of the licensed brands business in the pet industry. People want to share their favorite brands with their pets, and this has a huge impact on buying behavior. We’ve seen great success, especially in the grooming category, with brands such as Burt’s Bees for Pets and CHI for Dogs. Just as with the human market, variety is important, so offering an array of brands covering all price points will ensure retailers are meeting the needs of all customers.

Are there any particular product categories that you feel are primed for growth over the next few years? 
The health and wellness category is one that we are very focused on. Vet visits are the biggest expense for pet owners, and they’re looking for ways to keep their pet healthy at a lower cost. Taking preventative measures such as dental cleaning, providing vitamins and ensuring pets have daily exercise are all ways pet parents can keep their pets healthy. We recently launched a line of medicated grooming solutions at Meijer called VetMD. These shampoos and sprays are specially formulated for skin conditions including dry or sensitive skin, bacterial infections and hot spots. This year we’re launching VetMD vitamins and supplements as well as pill pockets to fulfill our objective to make it easier for consumers to care for their pets at a lower cost.

 

 

Camelle Kent, CEO, WellPet

 

What do you think will be the key pet nutrition trends that will drive continued sales growth in the pet specialty channel?
One of the biggest trends that we foresee being a key component to the continued growth of pet nutrition sales is the closing gap between human food and pet food. Pet parents are making their pet’s nutrition a high priority as they realize what a high-quality, premium, natural diet can do for their overall health and happiness.

As people become more aware of sensitivities within themselves such as gluten intolerances, they are also considering what these grains could do to our pets. Grain-free pet food continues to be a key growth driver in the natural category. Thirty-seven percent of all sales in the U.S. are attributed to grain free. Of all new product introductions last year, nearly 45 percent of these items fell into the grain-free category, which shows potential for future growth. 

The alternative pet food category growth is also strong at +47 percent. Alternative feeding is expected to be a $1 billion category by 2020. There’s no doubt that it’s a category to look out for as it continues to grow steadily within our industry. 


What are some of the biggest challenges facing pet stores today? How can these retailers rise to meet those challenges?
There’s no denying that the pet food aisles are difficult to navigate, more so today than ever before. Food is no longer categorized as just “wet” or “dry.” We now have new categories of food, including raw and freeze-dried. While this is exciting for manufacturers, it presents both an opportunity and a challenge for us and our retail partners. 

The goal is to guide pet parents to find and select the product that’s best for their pet, and at WellPet, we make every effort to educate our retail partners on this. Just as we give consumers guidance on recipe selection over the phone, on social media or via live chat on our website, our on-staff veterinarians help train in-store staff on what goes into each recipe and how that translates to your pet’s health, whether it be the role of a specific ingredient or the potential benefits of a grain-free diet. 

The retail environment has drastically changed in the past decade with e-commerce becoming an option for pet parents. Again, the way to ensure pet stores are able to balance e-commerce with brick-and-mortar is to work with manufacturers to ensure guidelines like MRP policies are in place to help protect our independent retail partners and help ensure consistency across channels. 

 

 

Michael Landa, President & CEO, Nulo Pet Food

 

Has the humanization trend made branding more important in the pet retail industry? How should retailers respond?
The humanization of pets implies much more intimate relationships. The same goes for pet retailers looking to capitalize on this trend—being a more intimate brand with their customer base. Whether it’s celebrating pet birthdays or asking about a pet by name when a purchase is made, finding ways to connect is an important step in improving retention and a customer’s intent to recommend.

The human foodie phenomenon has also meant that more consumers are turning to engaging with their pets at mealtime. This is driving demand for more innovative products that can help owners to prepare unique nutritional meals for their furry friends. Flavors and textures are becoming bolder, more complex, authentic, specific. Pet retailers who make it their brand’s mission to embrace innovation and provide mealtime engagement options will win the hearts of the anthropomorphic consumer.


What consumer demographics should retailers be targeting over the next few years? How can they effectively turn these shoppers into loyal customers?
Millennials are the driving force in the pet food industry, rapidly becoming the single largest segment of pet food buyers. Many Millennial human food trends have even worked their way into the pet food industry. For example, natural foods and the demand for transparency in product sourcing both mirror human food trends. 

Millennial pet owners are much more likely to buy premium, raw and freeze-dried pet food or pet foods with formulations geared toward enhancing the health of their pets. They are more likely than other pet owners to both expect to spend and to actually spend more on higher-priced pet products and services. This all bodes well for pet retailers looking to differentiate their food assortment with higher-engagement offerings.

It’s clear that the Millennials have become a key component of the pet food landscape. Traditional retail marketing is less likely to be effective as they seek more genuine, authentic brands, not big brand names. Their enthusiasm for authenticity and transparency surrounding food has also influenced how their pets eat.

Millennial pet owners are much more likely than other demographics to be tethered to their smartphones to compare offers, prices and products and to use mobile apps to get additional information at the point of sale. To ensure that these buyers turn into loyal customers, retailers should increase the support they give manufacturers who ensure price parity in the form of MAP pricing and channel integrity. This creates a level playing field, and when combined with a unique in-store experience, ensures the recurring Millennial purchase.

 

 

Tim Fabits, Vice President of Sales, Redbarn Pet Products

 

As the trend toward looking at pets as part of the family continues to grow, how do you expect this will shape the way brands will go to market? What role must retailers play in this strategy?  
Several years ago, manufacturers were able to identify a strong correlation between how pet parents began feeding/treating their pets. This term was generally accepted as “the humanization effect.” Since that time, manufacturers have invested heavily in marketing pet foods and treats in a manner that is parallel to the day-to-day eating habits of a human household. This includes focusing on grain-free, limited ingredients and super food additions to help promote wellness and health to their beloved companions. 

Retailers must continue to pay great attention to these trends and adapt accordingly. Today’s pet parent is much more educated on what goes into pet food and treats and is seeking premium products that address a specific need or requirement. Using robust displays and signage are great tools to continue educating customers on current and future trends in the pet food category.


What are some of the biggest challenges facing pet stores today? How can these retailers rise to meet those challenges?
Traditional brick-and-mortar stores are facing one of the most uniquely challenging channels of competition: the online pet space. This relatively new segment of business caters specifically to the Millennial generation by combining product content, competitive pricing and the convenience of delivery right to their doors. 

While the challenges facing brick-and-mortar are at unprecedented levels, many of these retailers have devoted resources to identify this new level of consumerism. While pricing and delivery are uniquely tied together, brick-and-mortar pet retailers also understand that information, service and a human connection all still play a major role in not only surviving, but thriving in today’s industry. Continuing to provide education and service along with an inviting shopping experience that encourages interaction with their pet parents will still be a sought-after touch point in the pet channel. 

 

 

Jean Broders, Senior Brand Manager, Kent Pet Group/World’s Best Cat Litter

 

What are some of the biggest challenges facing pet stores today? How can retailers rise to meet those challenges?
Retailers should stay focused on what they do best –personalized customer service and offering their customer a positive experience when they come into their stores. Continue to work with brands that are focused on a common goal–pleasing the consumer and offering products that fit their specific needs. Consumers rely on the retailers for expert advice and recommendations. The more educated the retailers are, the more value they bring to their customers, which keeps them coming back to their stores.   


As the trend toward looking at pets as part of the family continues to grow, how do you expect this to shape the way brands go to market? 
Across various categories, consumers are looking for products that solve specific problems they have. This is true whether it’s cosmetics, dental or cleaning products, just to name a few. Likewise, consumers shop the same way for products for their pets. They seek out products that will help solve a specific need/problem of their pet. This could be in food (grain-free diets), in treats (dental chews), etc. This is true in the cat litter category as well, so we are offering an Advanced product line that focuses on solving specific litter box problems. Our Zero Mess formulas are the first products being offered, focusing on the number one problem consumers face with litter boxes–litter box clean-up.  

 

 

Alisha Navarro, President, 2 Hounds Design

 

Has consolidation and rapid growth among pet store chains been a positive or negative trend for the pet industry overall? Why?
We’ve seen the small independent retailers expanding and opening up multiple store locations and we’ve watched as some of the smaller/mid-sized chains (around 50 stores) have continued to expand. This means there is a lot more selection for the end customer within a store that still gives the specialized customer support of a small family owned store. I think for the customer, this is a win.


Are there any particular product categories or trends that you feel are primed for growth over the next few years? 
Made in the USA continues to be one of the most important questions we are hearing from new customers and at trade shows.  Many are even taking it further and asking where the components are sourced.  We used to get the question two to three times per show max, now it is way over half of the people that we talk to asking us where our products are made. I see this becoming even more important in the coming years. 

 

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