PetSmart, Petco Losing Ground to Independents
After more than 20 years of watching PetSmart and Petco enjoy the lion’s share of consumer spending in the pet specialty channel, it appears that independent pet store chains are gaining ground.
According to the latest edition of the Pet Stores in the U.S. industry report (December 2018) from global market research firm IBISWorld, the two big-box chains’ combined sales accounted for less than half of the pet specialty retail market for the first time in a long time.
Of course, with 47.2 percent market share between them, PetSmart (27.3 percent) and Petco (19.9 percent) are still major forces in the channel. But when you consider that, just six years ago, the two chains together reportedly accounted for nearly 64 percent of the market, it becomes clear that the other players in the pet specialty channel must be doing something right.
More evidence that independent pet retailers are catching up to the big boxes can be found in this month’s cover story, which revolves around an update of Pet Business’ annual Top 25 Retailers list.
Looking at this year’s list, we see that the total number of stores operated by the Top 25 Retailers in the pet specialty channel increased by 2,379 over the past six years—about 34 percent of which were opened by either Petco or PetSmart. However, over the previous five-year period, the two big-box chains were responsible for more than 70 percent of the Top 25 list’s store count increase.
Obviously, momentum has shifted toward the independents, but why?
We can point to the impact of online sales, which many industry experts say disproportionately hurt big-box retailers across every channel. That is because these chains typically compete primarily on price and convenience—two areas where internet outlets like Amazon excel. Making matters worse, neither PetSmart nor Petco have done a particularly good job luring online shoppers, although there are some signs that they have been making progress recently.
Still, I think what has played a much bigger role in shifting the balance within the pet specialty channel is the ongoing evolution of its independent retailers. Whether you’re talking about the 91-store Hollywood Feed chain or Concord Pet with 29 stores, these “small” retailers have gotten very good at leveraging their unique strengths to be formidable competitors. And now that we’re seeing the emergence of a new class of independent retailers like Pet Retail Brands and Independent Pet Partners, which can wield the combined might of multiple chains, I doubt that things are going to get any easier for the big boxes.
I hope they enjoyed the lion’s share while they had it.