Shelf Empowerment

In neighborhood pet shops, every inch of shelf space is a precious commodity. Learn how data drives smart allocations decisions.


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Manhattan real estate may be valuable, but pet retailers prize their shelf space with the same intensity. Square footage is fixed, and smart retailers try to wring the greatest value from every inch of their display areas. No one wrestles with this difficult math, where geometry and accounting face off, more than the neighborhood pet store owner. To be profitable, these retailers—mostly independents—need to weigh profit margins against space requirements in a relentless pursuit of efficiency.

GfK’s point-of-sale pet panel represents about 8,000 boutique and regional shops, giving participating retailers a look beyond their own inventories and sales data to reveal what is going on in stores across the U.S. By tracking both shelf space allotments and sales, GfK can provide shelf allocation guidance for small sellers by identifying where they may be overinvesting in underachievers, or missing golden opportunities.

Sticking to dog and cat food only—the industry’s heavyweights—GfK’s data show that dog items account for about 70 percent of shelf space but 80 percent of the sales in smaller shops. The disparity between revenue and square footage is largest for dry dog foods, which get just 36 percent of shelf space but generate 67 percent of sales. The trouble is, retailer profit on these items is generally meager, so it may take double the revenue to make these products pay dividends.

Wet foods have been gaining momentum as a healthy alternative because they contribute to hydration and allow for clearer portion control—both important considerations for health-conscious pet owners. Wet items also yield bigger profits for stores, giving this category a compelling argument for generous shelf allotments. Since 2011, GfK has observed a 44-percent increase in shelf space devoted to wet feline food items, and 23-percent growth in wet dog food.

When it comes to shelf expansion, though, nothing can top treats. Delivering big profits in small packages, these items have recorded 78-percent shelf space growth for cats and a remarkable 94 percent for dogs in the past four years. And many treats do not require shelf space at all; they hang from clip strips or sit in standalone displays on the store floor.

Owners of small stores are indeed savvy about their stocking decisions. For example, they have found that 30-pound bags not only take up tons of space, but they also allow customers to make fewer trips to the pet shop, which means fewer opportunities for impulse purchases. With that in mind, some neighborhood sellers are now opting for smaller bags as their standard dry-food size.

Display allocations also reflect some of the big trends we see in the industry. Four years ago, grain-free dog and cat foods represented about one-third of shelf space devoted to natural food items in neighborhood shops. Today, the grain-free figure is up to roughly half.

At the same time that they have boosted their shelf allotments for natural items, however, small pet stores have cut back only slightly on non-natural items and other less fashionable categories. Retailers, it seems, are fitting a larger number of items in the same square footage; efficiency, as we know, is their mantra.

In the coming months, look for neighborhood pet retailers to continue upping their commitment to high-profit, small-footprint treats, and to replace more dry SKUs with wet. Keeping track of the latest wrinkles in the natural food juggernaut will remain essential for smart space allocations. And cat products will claim more and more of sellers’ attention and floor space.

The secret to leveraging the latest pet trends is to have a big picture of the industry—what is working and what is floundering in thousands of retailers around the country. Data gives an added advantage to savvy neighborhood pet retailers, who are experts at making the best of every square foot at their disposal.
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Maria Lange is Business Group Director (Pet Specialty) on GfK’s POS Tracking team. She can be reached at maria.lange@gfk.com.

 

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