Maximizing the Supply Chain
Steve King, president of the Pet Industry Distributors Association, discusses how vendors and buyers alike can better cultivate relationships with their wholesale distributor partners.
From your perspective, what is the state of the pet industry? What are some of the major opportunities and challenges facing the industry today? What is your outlook for the industry’s future over the short and long term?
Steve King: I think the industry is quite strong. As we heard from economist Brian Beaulieu, one of the keynote speakers at the Pet Industry Leadership Conference in January, the pet industry is growing faster than retail sales overall. He also said that he expects strong growth in the economy, starting in the second half of 2016 and going right through 2017. That bodes well for the pet industry, as well as retail sales in general.
There were a couple of other things he said that I thought were particularly instructive. One was that the consumer is why more and more businesses will be feeling the benefits of a stronger economy as we go deeper into 2016. So, the closer a company is tied to the consumer, the better it will perform. That certainly indicates to me that consumers are ready to spend, and they will continue to boost retail sales in the pet industry, just as they have in recent years. As a result, I’m pretty bullish on the state of the industry overall.
Are there any particular opportunities that you think the industry hasn’t fully realized yet, which will help drive growth in the industry over the next 12 months and beyond?
King: One of the things that we’re starting to see from the research that’s being done with Millennials is that they look to become pet owners at the same or higher rate than the Baby Boomers. That was a bit of a question mark a few years ago; we weren’t sure whether Millennials as they come into their peak spending years would be as tied to their pets as the Boomers have been. Now the data is starting to show that seems to be the case.
They have different buying patterns and different reasons for shopping than their parents did, but overall not only do they tend to be frequent pet product shoppers, they are also buyers who typically look for high quality and products that appeal not only to their pet, but also to their sensibilities as consumers. For example, there are the healthy food and convenience trends that we see in human foods, which are also tracking with pet foods. To me, that says we still have a great opportunity with these consumers, who are just now getting into their household-building years and can conceivably be pet product shoppers for the next 30, 40, 50 years. That’s a very good sign.
On the other side of the coin, are there any significant challenges that you think the industry is going to have to face over the next year and beyond?
King: We continue to have a lot of channel blurring, and a lot of other retailers getting into pet product sales, because they see it as a lucrative way to boost the sales of whatever other product categories they might be in. That’s going to continue to be a challenge for the pet specialty segment of the industry; there is just a lot more competition out there.
Certainly, Internet sales are a big factor, and they are growing. As Internet retailers continue to make inroads with staples like food by offering shoppers a high level of convenience, it’s going to be more difficult for brick-and-mortar retailers to get those consumers into the store on a regular basis to pick up the staples—and then, of course, get the add-on sales that really boost the bottom line.
Doing all the things that continue to draw the customer into the store is going to be of paramount importance to retailers as time goes on, and PIDA [the Pet Industry Distributors Association] wants to help by providing tools to retailers in this area. We’ve partnered for the first time, through our Pet Store Pro free online retail-training program with a third-party provider called Monthly Targets. The company offers a really great way for retailers to reach out to a targeted audience of consumers within their sales area.
In a nutshell, what they do is work with a pet retailer to identify target prospects within a certain radius of their store, such as new arrivals to the area who have pets. This analysis is being offered as a free service. Once that data is collected and the retailer can see what a target audience would be for a promotion, then Monthly Targets will help develop a unique direct-mail piece, which is a laminated card that has a detachable coupon or a loyalty card attached to it. When the consumer brings that into the store, they get a discount off of whatever products are being featured. It’s just another way of getting the consumer into the store to see what the retailer has to offer, and hopefully turn them into a repeat customer.
The market analysis is free, and the mailer is priced based on factors such as the number of contacts, etc. One of the things that PIDA is going to be encouraging its distributor members to do is to work with retailers to identify co-op marketing dollars that are available from manufacturers to help support the cost of some of these mailings, so we think it can really be a win-win for everybody.
To promote the new partnership, we are featuring Monthly Targets in our booth this year.
How are the pet industry’s specialty distributors doing? How has the consolidation that went on between pet industry distributors impacted the channel overall?
King: It appears that the wave of consolidation has crested at this point, and I think the big roll-ups now are really working hard to integrate their systems to take advantage of some of the economies of scale that they got from that sort of growth.
I think that a healthy sign within the industry’s distribution network is that the remaining regional distributors are still doing well. There has been some shifting of brands among distributors, which is to be expected in a dynamic situation like this, but overall we’re seeing most markets in the country still with three to four national and/or regional distributors. So retailers clearly have plenty of choice in working with multiple distributors—and that is something we’ve always encouraged. Of course, you don’t want to try to work with 10 different suppliers, because then you won’t be important to any one of them. But if you can find two to three distributors in your area that fulfill most of the needs that you have at your store, then that is the ideal situation for most retailers. Not only will you have a good selection of products to draw from, you will have the support of good, strong distributors in your area, in the form of marketing advice and all of the other ancillary services that they provide.
Another good sign of health for distributors comes from Pet Business’ recent Top 25 Pet Retailers report. As the report illustrates, a number of the regional pet store chains across the country are doing quite well, and these are the key customers of many distributors. The fact that we’re seeing growth and good strength among those retailers in the face of all the competition that is out there bodes well for distributors, which continue to be an essential link between those retailers and manufacturers.
How important of an event is Global Pet Expo for the industry’s distributors? Why?
King: One of the essential elements of being a successful distributor is participating in Global Pet Expo, and getting as much out of the show as possible. There is no substitute for having essentially the entire industry meeting at one place at one time every year. Distributors know they are going to be able to have high-level meetings with suppliers, and their teams are going to have the opportunity to see all of the new products in one place. It is simply impossible to see the entire depth and breadth of what the industry has to offer in any other forum. So, there’s not a serious distributor of pet products in North America that won’t be at Global Pet Expo for all three days, working hard the whole time.
Do you have any advice for retailers on how they can make the most of their distributor relationships? What about for manufacturers who are looking to expand their distribution?
King: On the retailer side, the key is in understanding the strengths of the distributors in their market and taking advantage of some of the services that they provide. It really starts with asking yourself, “How can I work most effectively and efficiently with my distributor?”
Do you have systems in place—through your POS system or in other ways—to automate your ordering? Having that type of automation means you’re not going to find yourself in out-of-stock situations and you will have fewer errors with the orders that are coming from your distributor. And the price of those systems has come down so much that it really makes little sense for a retailer today to not be ordering electronically with their distributor. It’s all part of taking advantage of the technology that exists today to help drive cost out of the channel so retailers can be more competitive with some of the larger entities out there that are selling pet products.
Also look at the other strengths that a distributor in your market brings to the table. For example, do they have programs through which they can help you identify co-op marketing dollars that exist from the manufacturers, and feed that in to your marketing plans, your advertising, your direct mail marketing to customers in your area. There are a lot of distributors that are becoming quite sophisticated and providing assistance to retailers not only in getting those co-op dollars to flow, but also in putting together marketing pieces and helping retailers to develop fliers, and even email marketing and social media marketing—all the different tools that exist out there today to reach the customer. So don’t focus entirely on the price of the goods that they’re offering, but also these value-added services that they can provide to make you more successful.
On the other side, part of the manufacturer-distributor relationship is simply the logistics of what a distributor can offer. That includes making sure that a manufacturer’s products get onto the retailer’s shelf in a timely manner and that it is handled properly. It also includes helping the manufacturer handle any returns or recalls that might occur. The need to recall products is certainly something that we see fairly frequently on the consumable side, and distributors can be a big help in that regard. In addition, the marketing expertise that a distributor brings to the manufacturer in their particular market is essential in many cases. They can really help a manufacturer’s product stand out from the crowd, and we all know it’s a very crowded field out there today.
What are some of the things that a new manufacturer can do to grab the attention of a distributor walking the show floor?
King: Most importantly, the product or line has to have some unique features that can really help it stand out. Whether it’s attractive packaging or through some element of the product design itself, it has to stand out. You can’t just be another natural product, there has to be some other element that helps distinguish that product or line on the shelf—that is a big part of just getting a product looked at by a distributor in the first place.
Once a manufacturer has gotten a distributor’s attention, I think the worst mistake that a lot of small companies make is in not understanding the distributor’s role in the channel and not having programs in place that recognize the distributor has to have adequate margins built in to provide the level of service necessary to grow a brand. If a distributor comes into your booth and all you have is retail pricing available, without any margin built in for a distributor, odds are they’re not going to take you seriously and you’re going to lose an opportunity.
It is critical for manufacturers to recognize the nuances of the pet specialty channel. A company may be successful in another channel that has a different model for getting to the consumer, whether it’s because that channel is dominated by big-box retailers or some other way to market, but the reality of the pet industry today is we still have a lot of independent stores that rely on wholesaler distributors to make sure they get the products that they need. If a manufacturer doesn’t understand the role of the distributor in the channel, then they’re not going to get very far.
Aside from the partnership with Monthly Targets, have there been any other notable changes/updates to the Pet Industry Distributors Association’s (PIDA) Pet Store Pro free online training program for retailers?
King: We continue to expand and improve the program. The great news coming out of last year is that our growth rate was a little more than 12 percent for the second year in a row. There are currently 5,200 stores that are using the program. We’re just shy of 25,000 owners, managers and sales associates who have gone through the training, and retailers continue to use Pet Store Pro on a regular basis to help supplement their overall training program. The numbers are really impressive.
Have there been any content updates worth mentioning?
King: Yes, definitely. The feedback that we’ve gotten from users indicates that they want more short chapters that will allow someone to learn about a particular topic in a relatively short period of time—a supplement to the longer, more-comprehensive chapters that have been a part of Pet Store Pro from the beginning. So, for the past two to three years, we’ve been developing these micro courses that focus on very specific topics. For example, the cashier basics micro course focuses on what cashiers should be doing to engage with the customer. This goes back to the original purpose of Pet Store Pro, which was to help to train the inexperienced employee, the new employee who perhaps never worked in retail before, and get them to understand some of the really basic elements of being a successful retail store associate. We have also developed, for the first time, in conjunction with a new social media chapter, an online forum for retailer-to-retailer interaction. We feel it can be a great way for storeowners and managers to communicate some of the challenges that they are facing in their stores with other Pet Store Pro users, and hopefully get some feedback from other folks who are dealing with the same issues every day. We see it as an exciting new development in the way that Pet Store Pro can be used by its community of retailer subscribers.
How is the Pets in the Classroom program going? Have there been any notable developments with the program?
King: We’re up to 74,000 total grants since the program began, so it just continues to grow at a rapid rate; we haven’t plateaued much at all. We’ve done in excess of 15,000 grants so far this school year, so we are probably going to be closing in on around 17,000 total grants for the year. That shows us that there is still a great deal of demand remaining out there in schools for assistance in getting pets into their classrooms.
Another development was last year we released the phase-one results of a study on Pets in the Classroom that we did with the American Humane Association, which looked into just what pets mean to teachers and to the learning environment. In that study, we found that the teachers identify a number of very positive impacts coming out of having a pet in the classroom—for example, they’re incorporating pets into their lesson plans to make a variety of concepts more interesting and accessible to the kids.
We’ve also found that it aids in enhancing the empathetic atmosphere in a classroom, because the kids learn that they have to care for this animal. That empathy carries over to their fellow classmates, and teachers have identified that as a very positive development that is fostered by a classroom pet.
That goes hand in hand with simple class and student deportment. What we found is that the kids don’t want to upset the animal, and they want to get rewarded for good behavior, with the reward being the opportunity to care for the animal or spend some extra time with the animal in the classroom.
We’re really excited about the next phase of the study, which we hope to have funded in time for the next school year. This will entail a year-long study of 20 classrooms where teachers, parents and students are surveyed prior to the pet being in the classroom, several weeks after the pet has been introduced to the classroom, and at the end of the school year to see what changes have taken place. We’re going to focus on a number of different measurement areas, including academic performance. We think, again based on the anecdotal information we have and some of the reporting back from phase one, that there is actually a measurable difference in how kids perform on standardized tests and other academic benchmarks in a classroom because of the introduction of a pet. There will be control groups set up, so there will be a class where a pet is introduced during the class year, and then a control class that doesn’t have a pet, and they will be studied as matched pairs.
If we can prove to the academic community that pets are an important part of the learning environment and can help to improve the academic performance of students, I can see a day where it’s unusual to find a classroom that doesn’t have a pet in it.
Every year, PIDA organizes the educational seminars at Global Pet Expo. What can attendees expect to find at Global Pet Expo Academy this year?
King: Every year, we try to have a solid mix of speakers who we know consistently get high marks from the attendees. We like to bring them back because they’re always honing their message and coming up with new topics to present.
But equally important is bringing in new faces and new ideas from speakers who haven’t been at the show before. So, five of the 11 speakers that we have this year are brand new to Global Pet Expo. We’re excited about these new speakers, and we’ve got some topics that are a little bit of a departure from the sessions that we’ve done before. Of course, we continue to provide what we know are some of the most popular sessions, on subjects like improving the customer service experience and the financial aspects of running a retail store. However, we’re also doing some fun things that are a little bit outside the box—for example, Linda Cahan, a new speaker for us, is doing a session on Feng Shui for the pet store. This session will focus on how retailers approach the space that they are using to sell products and how to make it appealing to customers by utilizing the ancient art of Feng Shui.
Another first-time speaker at Global Pet Expo is Joel Silverman, who brings his experience as an animal trainer in Hollywood and relates it to how retailers can better communicate to their team in the store. I think his sessions are going to be very popular.
In total, we have more than 30 hours of seminars lined up. We’ve got eight mini sessions again, which are brief 15-minute sessions for time-pressed attendees, and we held a comprehensive four-hour workshop on Tuesday, so there’s a lot of good training going on here at the show. And again this year, we’ve made it free for any attendee who wants to join in.
Do you have any advice for buyers on how they can take full advantage of their time at Global Pet Expo?
King: You have to have a plan. If you come to this show without trying to at least outline your day, let alone map it out to the hour, you are just going to be flailing. You’re going to waste so much time and not get nearly as much out of it as you could. So, before you get started walking the show floor, spend some time figuring out which exhibitors you want to see, which seminars are of the most interest to you, and how you are going to maximize your time.
In addition to identifying which vendors you want to visit, identify where they are on the show floor. Too often, attendees don’t realize that while they might have a plan for who they want to see, if one exhibitor is in the 200 aisle, and another is in the 3000 aisle, they may have a half-mile or more of walking to do between those two booths.
Of course, the New Products Showcase is an essential stop too. There’s no question that it’s one of the first places that you need to visit, so you can identify the new products that you really want to learn more about by visiting with the company launching them here at the show.
This year, PIDA partnered with the American Pet Products Association to host the first-annual Pet Industry Leadership Conference. Did your established relationship as the joint organizers of Global Pet Expo make it easier to partner for the new conference? Did APPA’s involvement improve the event?
King: There’s no question that it made it easier. We’ve been working with APPA for 11 years now in organizing Global Pet Expo, so we know them very well, and we work together so well that part was really pretty easy. And we incorporated PIJAC [the Pet Industry Joint Advisory Council] too. The fact that we’re now working closely with PIJAC through the Pet Leadership Council made their participation pretty seamless as well. We incorporated some of the elements of [PIJAC’s former] Top to Top Conference into the Pet Industry Leadership Conference, and I couldn’t be happier with how that worked out.
In terms of the improvements we saw, overall attendance was up about 20 percent over last year’s PIDA Management Conference, so we saw real healthy growth there. We were quite pleased with the first conference out of the box and feel pretty strongly that we’re going to continue to see healthy growth along those lines in future years, especially as word gets out amongst the medium-sized companies that are so prevalent in the pet industry. Perhaps they only have experience in attending trade shows and distributor open houses, so this is kind of a new concept for them; but I think it’s one they will find to be very valuable, particularly as they talk to peers who have attended in previous years.
From your perspective, what were some of the highlights from the Pet Industry Leadership Conference? Can you tell us anything about next year’s conference?
King: Well, having a larger conference with three organizations participating allowed us to increase our budget for speakers. So, we were able to up our game quite a bit with the quality of the speakers that we brought to the conference this year. Everybody seemed to have their favorites, but anybody who listened to Capt. Mark Kelly speak and wasn’t moved and inspired by his life experiences and his ability to relate that to an audience must have been asleep. To me, it was just a great way to kick off the conference, and I had lots of people come back to me afterward and say he was one of the best speakers they’ve ever heard.
Overall, we felt like the sessions went really well—and not just the keynote presentations, but the breakouts sessions as well. We had some great breakout speakers who delivered solid information. David Sprinkle, from Packaged Facts, had a packed room. Maria Lange, from Gfk, just had a wealth of knowledge about trends in the industry. I think those types of sessions will continue to be an important part of what we offer in the conference.