The rising cost of pet food is causing problems for businesses struggling to compete in this industry, so storeowners must find creative ways to attract customers to the nutrition aisle.
Early last year, when fuel costs spiked, pet food prices rose dramatically. That upward movement has continued ever since, across many lines of food, even though energy costs have been stable for several months.
The rising price of dog food represents a significant force influencing trends in this industry segment. Many retailers have already seen the consumer response, especially in specialty foods, but other storeowners are holding their collective breath to see how the long-term trend might turn out.
Price pressures have forced food manufacturers to make tough decisions about their source ingredients and production standards. Some food makers introduced smaller packaging sizes for the same price as larger packages, forcing retailers to come up with new ideas to keep their beleaguered customers from cutting and running.
Retailers, however, should not see themselves as helpless bystanders amidst the furious winds of economic climate change. We have options. We have knowledge. And most importantly, we have customers who need us to help them sort through tough decisions about nutrition for their best friends.
The Bottom Line
Whether a business depends primarily on food sales or food accounts for only a fraction of store sales, this category generates two main outcomes: low margins and repeat business.
If a store carries medium- to low-cost food, it’s vulnerable to cost pressures from competitors, including the big-box discount cost leaders and grocery stores. If the store stocks hard-to-find premium foods, then storeowners must fight to prevent customers from abandoning those brands for cheaper alternatives.
The following are tips that might help a retailer boost this vital segment of their business:
• Commit to an ongoing program of education. Ask for free samples and brochures from distributors and suppliers. This can re-enforce a store’s commitment to good nutrition with existing customers while cultivating new ones.
• Offer customer loyalty benefits–buy 12 bags, get the 13th free. A store program can go a long way to maintaining customer market share.
• When discussing the “cost” of food with customers, try to help them understand “value.” If they say they can get foods cheaper somewhere else, compete on convenience and customer service.
• If the bottom line depends on non-food merchandise sales, position food products so that customers pass through high-margin departments (such as collars, leashes and toys) on their way to pick up food. They’ve got to pass those high-margin items a second time on their way out, too.
• And finally, cross-merchandise food-related products. Bowls and diner sets, mats, scoops, dietary supplements, storage bins, treat pouches and travel containers can be displayed with food products to generate impulse buys.
Offering New Brands
There are a number of other tactics a storeowner can develop to protect and fuel food sales, including introducing new brands to customers. One might, for example, want to expand the offering to include specialty, premium and super-premium lines. Or, if a storeowner has decided that customers need to choose from lower price points, they may want to bring in less expensive brands. In either case, there are serious challenges.
First, retailers must be prepared to invest in a long education process when introducing new foods. Since many distributors demand immediate payment for food deliveries, there may be significant out-of-pocket costs while building demand for new product.
Ask a distributor or manufacturer’s rep for help–sales collateral and samples, for sure, but also discuss having someone from the company come onsite for events that provide Q&As with customers and training for staff. It’s not easy getting customers to switch food if their dog is happy with what they’re getting. And it’s also challenging to get customers to try something they’ve never heard of, even if they are looking.
If a store carries specialty diets and premium brands, it should carefully weigh the risks of introducing “cheap” products. Many super-premium manufacturers do offer less costly lines, but they are careful not to position low-cost products with their pricier brands, because the low-cost lines can erode the public’s perception of brand value. This can also happen to a store, especially a boutique or specialty shop that provides unique products. A boutique owner might be tempted to boost market share by offering a wider range of products at lower price points, but there is a real risk that customers will begin to see the store, and its merchandise, as less special than before.
This article isn’t meant to frighten retailers with dire warnings about rising costs of dog food. Rather, it is a call to action–a reminder that we do have cards to play and options to deploy in response to those larger forces at work. Storeowners must think through their entire tool kit of tactics to keep customers coming back.
Dan Headrick is a freelance writer. He and his wife Pam Guthrie own Wag Pet Boutique in Raleigh, N.C.