The Road to Success
The close relationship between independent pet specialty retailers and their distributor partners has long been–and continues to be–the cornerstone of a healthy pet industry.
Independent pet specialty retailers may be singular in nature, but they are not alone.
A strong tie exists between the retailers and their distributors, almost like a financial umbilical cord. The stronger the relationship is between the two, the stronger the cord becomes.
According to Steven King, president of the Pet Industry Distributors Association, “The distributor is the retailer’s biggest ally in the market because with the success of the independents so goes the success of wholesale distributors.”
Bob Merar, president of General Pet Supply, a distributor based in Milwaukee, Wis., agrees that the success of distributors and independent retailers is intertwined. “The two go hand in hand in the survival of both,” says Merar. “We’re tied with each other in bringing them good products at a good price and maybe even helping them find some unique products. We’re very tied to the independent retailer and support them strongly.”
Not surprisingly, many independent pet specialty retailers have a similar perspective on their relationship with distributors. “I love the distributors,” says Sheila Crane, owner of Pet Works, a San Antonio, Texas-based independent pet retailer that’s been open for more than 20 years. “The role they play in my business is very important.”
Retailers give the love because they know that the benefits they receive from distributors cross many boundaries. They offer better pricing and product selection. They have proper products, help with product selection and store set-ups, provide electronic technology that makes reordering easier and aid in deciding which promotions make the most sense for their stores. Distributors can even help retailers obtain co-op advertising dollars from manufacturers. The list of helpful services goes on and on and on.
Service sells. And when done right, its value is unequalled. “It’s very important,” says Crane of the personal service she receives from her distributors’ salespeople. “I ask them questions all the time. The salesmen can usually personally give me better discounts on things. They’re very, very helpful. They’re integral in my business.”
According to King, there are a couple of key factors that retailers should look for in working with their distributors that will make them more successful. Product selection is probably first and foremost. Full-line distributors are carrying somewhere in the neighborhood of 15,000 SKUs. That’s going to mean retailers have a large number and broad selection of products they can choose from.
“The distributor is generally a local supplier,” says King. “They’re going to have frequent deliveries to the retail store. The retailer is less likely to be out of stock on any given product because of that local distributor’s ability to fulfill their orders quickly and accurately. Distributors change their inventory quite frequently–up to 20 percent each year–so retailers can rely on them to be a source of new products. That’s not to say that retailers shouldn’t do their own investigation of new products, whether it be trade shows or reading trade magazines, but distributor salespeople can be a good source of new product ideas and information, as well.”
To make the most of their relationships with distributors, retailers should take advantage of the competition between these suppliers.
“Distributors compete for customers,” says King. “Price is one area of competition, but not the sole area. It comes down to what the retailer is looking for and how the distributor can adapt its service offering to meet the retailer’s needs. Some retailers want to have a salesperson call on them on a regular basis and give advice. Other retail stores may not want that high level of service. They may be looking for the lowest possible price they can get. Retailers may also want to find out if their distributors are willing to do things to help reduce some of the cost of servicing them, such as accepting orders electronically and allowing retailers to place larger, less frequent orders than other retailers might.”
Crane’s two main distributors are Central Pet Supply in Dallas, and Lone Star Pet Supply in San Antonio, and she says that her selection of these two suppliers is largely based on price.
“They have better, broader, deeper specials,” says Crane. “Their salesmen know their inventory and products much better than I do. They’re here to help me all the time. Some of the other companies send salesmen around, but not every week. The bulk of my dollars go to those two biggest distributors. They’re my bread and butter.”
Bread and butter, yes. But does working with only a few select distributors provide independent pet retailers with the whole loaf they need? And will it make them the toast of the town with their customers?
Distributing Your Business
Independents and distributors agree that doing the majority of business with a minimum number of distributors is important. The more business you do with a particular distributor, the more benefits they’ll give back.
“There’s not a rule of thumb [regarding how many distributors retailers should use],” says King. “But it’s important for retailers to understand that the more business they provide to any one distributor, the more important they’re going to be as a customer to that distributor.
“I wouldn’t recommend any retailer put all of its eggs in one basket. There’s going to be certain products they want to carry in their store that they’re not going to be able to get from a single distributor. They need to work with several distributors in their area to have as broad an array of products as possible available to them. [But going beyond] two or three distributors, your business starts to get so diluted that you’re really not going to be an important customer to any single distributor. That’s going to impact your ability to work in concert with that distributor and get the highest level of attention.”
“The more business you do with a distributor, the better your relationship is going to be with that distributor,” agrees Howard Berkowitz, owner of Pets Pets Pets in Somerset, N.J. “When you start pulling individual items and giving them to small individual companies, you’re losing the buying power from your individual distributors. When you start to spread yourself too thin with different smaller distributors, you’re losing buying power and the relationship with the distributors you’re currently buying from.”
However, distributors like Merar know that they can’t be everything to everyone, and that some independents may benefit from having large amounts of distributors to choose from.
Berkowitz, for example, whose store has been open 25 years, says he uses 15-18 distributors, including nine on a fairly regular basis. But industry regulations force him to get certain products from multiple sources.
“Part of the problem in this industry is if you take the dog foods, they have territorial restrictions,” says Berkowitz. “In order to carry the 15 to 16 brands of dog food that I want in my store, I have to buy from six, seven or eight different distributors. Although some of the distributors carry the same products, they’re not allowed to sell them to me. It makes it difficult. You’re meeting the minimum orders for all these distributors.”
Crane also works with multiple distributors at Pet Works. Her store is big into birds, and she gets most of her bird toys and a lot of bird supplies from specialty bird-only distributors. Crane orders specialty items like dog hair bows that her regular distributors don’t carry. She also fulfills the multiple special orders she receives from her customers.
Merar, who describes General Pet Supply as a meat-and-potatoes-type company, doesn’t stock boutique items because they don’t generate enough volume to warrant it. “It’s a very difficult niche for us to play in because the traditional distributor is looking for the volume SKUs and keeping the trucks full,” says Merar. “We’re looking for the ‘A’: items. Some ‘boutiquee’ stuff is cute and looks good in the store, but doesn’t quite sell like other stuff does.”
Independent retailers need the multiple distributors and their unique products because it helps them stand out in their battles against big-box competitors like PETCO and PetSmart.
“I buy all over the country for my bedding and those kind of things so I can have different kinds of items than what I can buy from these [regular] distributors. The little guys have to be able to do that,” says Crane. “You have many more things to juggle. It’s a lot more trouble, but when people come into this store they go ‘Wow, I’ve never seen these kind of things before’. That’s what’s going to keep me alive, hopefully.”
A High-Tech Supply Chain
In addition to offering broad product selection and superior service, distributors are trying to smooth retailers’ path to success by helping them become more technologically savvy. According to Sandra Span, an IT specialist, many small independent retailers still shy away from cutting-edge technology, even though it can improve their bottom line.
Merar agrees and says that pet specialty retailers need to become more computer savvy. “If you go into a lot of the pet stores, they don’t have a very good inventory control system,” he says. “They have a modest POS system, so they don’t really know what they have on hand or what’s moving. We can’t get scan data from them, so we don’t know what they’re selling. They have to take some steps like that to be able to help them control their inventory and their costs to enable us to know what we need to have on hand and what we need in inventory so that we can make sure we have the proper inventory when they need it.”
While they may still be a bit behind the curve when it comes to high-tech inventory management, King says that pet retailers are making progress in embracing this type of technology.
“More and more retailers are [knowledgeable about tech],” he says. “They realize they need the information that’s provided by a point-of-sale system in order to properly maintain their inventory and understand what their sales are in each product category and the like. Investment in those types of systems is becoming more routine on the retail level.”
Distributors like General Pet Supply have various programs and products to help independents move into the 21st century. One is a program where General supplies the retailers with scanners so they can scan the UPC code and then they dial a number that goes directly into the distributor’s system. If a retailer has a POS system, General will work with its IT people to get the store’s purchase orders sent directly from its systems into the distributor’s system, thereby saving both parties time.
“We’re trying to do as much as we can electronically because that saves everybody time and money,” says Merar. General offers retailers an exchange where the distributor pays for the system up front and offers retailers a program to have it for free, based upon a commitment to a certain amount of dollar volume per quarter. Otherwise, a nominal fee covers their costs of the scanners.
Associated with retailers’ move toward technology is their increasing use of the Internet. Using a distributor’s website saves time. Click and send can be a lovely way to do business, and Merar predicts Internet usage by independents will grow somewhere around four to seven percent over the next couple of years.
The use of online wholesalers is also gaining popularity. King, who calls the trend “a fill-in type situation,” attributes the growth of this supplier segment to their popularity with smaller manufacturers that are unable to get into traditional distributors. They may have a few products customers want that enable the retailer to differentiate itself in a crowded market.
“These online companies are a means of providing access to those manufacturers,” says King. “They often don’t take title to the product. They simply place the order and transaction. The actual shipping is handled by the manufacturer. We’ll continue to see that as long as the pet industry maintains a fairly entrepreneurial business where folks with a new product that serves a particular need or niche in the industry continue to pop up. There seems to be no shortage of companies that come along like that.”
Berkowitz, of Pets Pets Pets, agrees that Internet-based distributors are a growing trend, but is wary of those that also target retail consumers.
“I know if someone calls me up and says I’m an Internet-based business, the first thing I would look to see if they’re also selling direct to the consumer,” he says. “If they are, I’m not going to support them in any way.”
While Internet-based distributors are a new phenomenon, there are cases of relationships between distributors and independents stretching back many years, especially since some are family-owned firms that have been in business for several generations.
Crane, for one, recently received “that special touch” from one of her long-term distributors. This past December, when Pet Works moved to a new location in San Antonio, Long Star Pet Supply not only had several salesmen assisting with the move, but also sent its trucks to help on what was a cold, rainy winter day.
“We were soaked and cold by the end of the day and these guys worked all day long,” says Crane. “They go above and beyond.”