The PIDA Perspective
Steve King, president of the Pet Industry Distributors Association, discusses the many opportunities and challenges facing pet industry retailers, distributors and manufacturers today.
From your perspective, what is the state of the pet industry? What are the major opportunities and challenges facing the industry today? What is your outlook for the industry over the short and long term?
Steve King: I think the overall state of the pet industry is quite good. We continue to see steady growth in overall sales within the industry, and based on the information that I’ve seen about the expectations for retail sales and consumer spending for the next 12 months, 2017 should be a continuation of that trend.
Are there any particular issues that you think are especially important to the pet industry right now?
King: Looking at it from the retailers’ perspective, one of the things that we saw in 2016 was that e-commerce retail reached a record high. The folks that we follow at ITR Economics reported that e-commerce retail did $379.5 billion in sales during the 12 months that ended in September, which was up 15.6 percent on a year over year basis. That’s a huge jump in that one year, but it’s also a continuation of a pretty steep increase in e-commerce overall.
Another piece that is important for the pet industry is that Amazon once again dominated the 2016 holiday season. It captured close to 38 percent of online sales during the holidays, which is just an astounding number to me. It shows the strength of Amazon as an e-retailer of products in all categories, including pet.
I think what that says for our traditional brick-and-mortar retailers is that no matter your size or what industry you’re in, companies have to have a comprehensive e-commerce strategy. Without that, they’re going to continue to lose market share to the big e-commerce retailers.
Now, while Amazon continues to dominate that market, there are a lot of small retailers that are finding ways to boost their overall sales by improving and increasing their online presence.
How are the pet industry’s specialty distributors doing? What are some of the key opportunities and challenges facing your membership today? Is consolidation something that is still a prevalent issue or have we seen that run its course?
King: On the distribution side, we’ve largely seen consolidation run its course. While the companies that were most active there a few years ago are still looking at strategic opportunities to grow their business, it’s not through big acquisitions anymore. They’re looking at smaller distributors that fit niche markets, either geographically or with the product lines that they have.
What is continuing to impact or maybe impacting distributors more than what’s happening in distribution is what’s happening in retail. As Pet Business reported in its January issue, which looked at the 25 largest pet retailers, there are companies today that weren’t on the list just a year or two ago that continue to grow through acquisitions and through organic growth in their markets. Because those companies still largely rely on distributors to fulfill their needs in different markets, that’s a positive for distributors. By and large, those retailers are going to be stronger businesses that end up buying more from distributors as they grow.
Of course, the downside to that is some retailers, when they get to a certain size, start to consider whether going direct to manufacturers and bypassing distributors makes sense for them as a long-term strategy. That’s a concern any distributor would have with any particular retail customer as they add stores and grow their business. So, the challenge for the distributors is to continue proving their value to these companies even as they grow and can certainly source some products directly from manufacturers should they choose to do so.
MAP and MRP policies have become a hot-button issue in the pet industry as brick-and-mortar retailers try to defend their market share against online outlets. How are these policies and competitive dynamics impacting industry distributors?
King: I think our membership recognizes that the distributors’ success is still very much dependent on the success of brick-and-mortar retailers. That’s their bread and butter customer, and MAP and MRP policies on the part of manufacturers help to level the playing field and protect those retailers against the type of unfair price competitiveness that is largely driven by online sellers.
With that said, it’s not the distributors’ role to enforce those policies on behalf of the manufacturers. However, it certainly is the distributors’ responsibility to respect the policies that manufacturers have put into place as they’re reselling product to the various retail customers that they have.
One of the valuable initiatives to come out of PIDA is the Pet Store Pro free online training program for retailers. How is the program going?
King: Our commitment to the program is as strong as it has ever been. We continue to look for ways to make it a better resource for retailers, and we remain committed to the policy that we won’t charge retailers to use it. We know it’s working because our numbers continue to grow. We’re up another eight percent this year in overall usage, and when we survey users and get feedback from them, it’s uniformly positive.
How is the Pets in the Classroom program going? Have there been any notable developments?
King: Pets in the Classroom is one of the great success stories in the industry today. The continuing growth of the program year over year certainly tells us that teachers value what pets can bring to the classroom and their ability to connect with kids on so many levels. Classroom pets impact so many aspects of the teacher-child relationship that we’re just beginning to understand some of the implications.
We did over 19 thousand grants last school year, and we’re on target to come in at pretty close to the same number this year. That puts us at over 91 thousand grants since the program began and about three and a half million kids that now have daily contact with a pet thanks to Pets in the Classroom.
The thing that we’re looking forward to this year is that we will have the final results of a study that Pet Care Trust and HABRI are funding with the American Humane Association to look at matched pairs of third and fourth grade classrooms in schools where one class has a class pet and one does not.
Through survey forms that are being completed by teachers, students and parents over the course of the school year, we should be able to show a measurable difference in the socialization and academic performance of kids in the classrooms with a pet versus classrooms without a pet. If, as we surmise, there is a direct benefit associated with a classroom pet, that could be a huge advance.
Are there any other programs that PIDA is working on that you would like to discuss?
King: A program that I do want to mention is actually one that we have had for a long time but we are now in the process of reinvigorating—The Power of D: Growth Through Distribution. It’s a program that we developed some years ago to help distributors demonstrate the value that they bring to both manufacturers and retailers.
Initially, it was just a series of promotional pieces that we did to convey what distributors provide and why they are such an important part of the channel. Now we’re updating the program with a brochure full of infographics that illustrate the benefits of working with distributors in a much more contemporary way than the old pieces did.
Another thing that we rolled out at Global Pet Expo was a series of interviews with distributor business leaders talking about what they see as the value that they bring to the manufacturers and the retailers that they work with. We shot video at the distributors’ facilities to show the investments they’ve made in equipment and materials and personnel. I think it’s a great way for us to illustrate, again, the value of distributors to the channel.