The Next E-volution of Phillips
Todd Shelton, CEO of Phillips Pet Food & Supplies, discusses how the company’s recent acquisition of PetFlow will result in a powerful e-commerce solution for local pet stores.
Pet Business: How did the current competitive environment at retail inspire Phillips to acquire an online retail operation?
Todd Shelton: Our retailers have been asking for our support in building e-commerce solutions for several years. We see successful retailers adapting to the consumer trends of broader selection and increased convenience (home delivery), and the trends appear to be accelerating. We did some solid research that confirmed the trends and had a choice to make: build the tools to give our customers what they want or buy assets and convert them. Standing still wasn’t a good alternative.
PB: What attracted Phillips to PetFlow in particular?
Shelton: Before we met the team at PetFlow, we assumed we would need to build a solution. We knew it would take significant time, money and development risk. We were pleasantly surprised when we met them and got to learn about their business.
First and foremost, they possessed the digital capabilities that we needed and had a track record of building them in-house, on time and on budget. Second, their team was concentrated on building new features and solving retailer challenges, not growing their top-line. Since we have no interest in growing a retail business, that piece was really important. From there, the cultural fit was right. We are building a culture at Phillips that’s centered on accountability, execution, humility and integrity, and we saw those qualities throughout the PetFlow team.
PB: Why did a deal with Phillips make sense from PetFlow’s point of view?
Shelton: Along with our shared view of enabling our retailers, they cared about having 1) the freedom to retain their culture and 2) the mandate and budget to solve some of the big challenges that the industry is facing. From the first discussions that we had, it was clear that what made PetFlow successful was its lean and nimble culture, so our willingness to respect and nurture that was critical.
The truth is that lots of acquisitions don’t go that well, and in many of those cases it’s because a big company tries to make a small company stay nimble while adapting to big-company culture. We’re going to keep the team nimble and small because that’s the only way we can be sure to give our retail stores what we’ve promised them on time and on budget.
PB: How will the acquisition of PetFlow benefit Phillips’ retailer customers?
Shelton: Phillips will convert the PetFlow platform to deliver new capabilities for local retailers. With ‘Endless Aisles,’ retailers can sell thousands of additional products from behind the counter on a dedicated, secure website accessible only by retailers. Without carrying any extra inventory, retailers will be able to offer extended products and home delivery service, allowing them to say “yes” to more customer requests. Items will be shipped to the consumer’s home with the retailer’s name on the box, with the retailer controlling all data and making the profit. Using similar systems, we will work with stores who run their own e-commerce sites to offer access to shipping, delivery and e-commerce tools so that stores can manage product information and ship merchandise at big-company efficiency while focusing on their own day-to-day operations.
PB: How will PetFlow’s retail operations be affected by the acquisition?
Shelton: PetFlow will be converted into a platform for the independent retailers. While PetFlow will continue to service their existing customer base, we will encourage those consumers to “shop local” and select a local store as their favorite so we can share that information with local retailers. It’s important to note that we will not grow the current consumer base. PetFlow has shifted its resources, and all new marketing efforts are aimed at driving traffic into local stores.
PB: Are there any misconceptions or concerns retailers have that you would like to address?
Shelton: Yes, we want to clarify that we will not compete with our retail customers for new consumers or grow an online retail business. We will use the scale of the PetFlow business to power a new set of capabilities for local retailers. Those will be independent of PetFlow, so we can secure their data and transactions. Over time, we expect many of the PetFlow consumers will connect with local retailers. Helping our local retail customers grow their market share in a digital world has been the priority from the start.
PB: What will Michael Lackman’s role be in this new partnership?
Shelton: Mike will continue in his role as the CEO of PetFlow and has assumed the duties of chief digital officer of Phillips. His immediate focus is on delivering the new ‘Endless Aisles’ platform by early August. Mike and the team will also manage the new Phillips Ordering App and several other tools we are developing to support our retailers.
PB: Are there any additional aspects to the acquisition that would be important for retailers to know about?
Shelton: We want to stress that this acquisition will be converted to support our retailers, not compete with them. We’re making the changes that we’ve promised quickly, and we will communicate transparently with our retailers and manufacturers. We recognize it’s a big project, and some may question our motives, but we’re committed to having feedback from customers and vendors inform how we build the technology. While that means that we’re talking about some of these features in advance of being able to deliver them, we’re excited that customers have been included in the process. We want the feedback so that we can make the tools as effective as possible to meet changing consumer needs