It’s a good time to be in the pet-care market. It is estimated that industry spending topped $50 billion last year, with even further growth expected in 2012. Largely driven by increases in dog and cat ownership, as well as pet owners’ commitment to treating their companion animals as members of the family, this type of market growth represents a great opportunity for pet product retailers.
However, the industry is not without its challenges—particularly when it comes to the pet specialty channel. Rising food prices, increased competition from other retail channels and declines in some pet ownership categories are all putting pet stores to the test, particularly small independents. With this in mind, Pet Business approached some of the pet industry’s top executives to discuss what they perceive as the biggest issues facing the pet specialty channel, and how retailers and vendors can work together to meet current and future challenges.
Rolf Hagen Jr., President and CEO, Rolf C. Hagen Inc.
The pet specialty market has changed dramatically and will continue to evolve. If I may be blunt, the easy money has been made. This applies to both retailers and manufacturers. Premium pet foods are available in all channels while the puppy-in-the-window effect no longer applies. In fact, it has become a negative.
[Pet] specialty needs to focus on the areas in which its direct competitors are weak. Two examples: livestock presentation and individual service. As hard goods and pet foods have expanded outside of the traditional pet channel, new consumers have entered pet keeping. The industry has exploded in growth. These consumers eventually will need a specialist and will enter their local pet shops. If that shop is visually merchandised, has motivated and trained employees, is clean and bright and, most of all, has an engaged store manager/owner, those consumers can be won over. They can be up-sold into new pet diets and into cross-pet ownership.
Unfortunately, it is more often the case that these retail conditions do not exist. Modern consumers expect more.
Further, specialty retailers should not only cater to the specialist (hobbyist). This consumer base is shrinking and is increasingly [shopping] online. The potential consumer is lifestyle driven. To that end, modern aquatics and reptiles represent pet [segments] that thrive within pet specialty—a potent combination of livestock and hard good sales. For example, planted nano tanks are exploding in Germany and are increasingly sold already set up. This is impossible in big-box retail. Glass boxes do not sell well; wet displays that can be taken home do.
Again, that new dog or cat owner will one day look for help and will enter your store. What are you going to sell them? Something they can purchase anywhere? Specialists need to specialize in customer service, new age pets, new era pet diets (e.g. raw food), and a clean and well merchandised store in a decent retail location.
It is still possible and happens every day. We still believe.
Bob Nicastro, National Accounts Manager, Lambert Kay Pet Products
What was once a small business has grown to $50 billion, but the independent pet specialty retailer continues to experience challenges. Non-traditional operators continue to slice up the business while the one true channel—the independent pet specialty channel—continues to provide the products, services, advice and experience upon which pet owners can rely.
Right now, the pet specialty channel is dealing with challenges from many directions. This includes mass merchants, big-box retailers and now online retailers that dominate many categories from automotive to pet. There is still one key challenge that they all have in common—that’s competition.
While the pet industry has evolved, it’s the independent pet specialty retailer that has almost been squeezed out of the equation. Mass merchants, big box pet chains and online retailers continue to evolve in the pet category. The question always is what can an independent pet specialty retailer do to survive in this changing environment and is it possible?
The answer is yes; but they need to stay one step ahead by being proactive. They should survey their situation. Work with their customers to understand their needs. The retailer should make sure that their shelves are filled with the right product mix and understand what differentiates their product mix from other channels.
Retailers should take a look at the traditional and non-traditional competitors. They should be walking and shopping the competitors aisles. Learn to navigate and survey the competitive online retail sites. Take lessons from the competition. They don’t always know what they are doing. Their mistakes could mean opportunity for the retailer.
With this data gathered, develop a marketing plan that includes programs that could be implemented to compete. The plan should include a competitive strategy for each channel. Be sure to include help from the distributors and manufacturers in high-volume categories that can drive the business in the store. The pet specialty retailer should be ready to take action to drive results that will keep them competitive.
Bo Nelson, Leader of the Pack, WholesalePet.com
Our love affair with pets is as strong as ever. Sales of pet products in the U.S. have grown steadily throughout the recent recession. So this must mean pet product retailers are living high on the hog—not so fast, my friend.
Along with sales, competition for a pet owner’s pocketbook is at an all-time high. Retailers large and small, online and off, are jumping into the business of marketing and selling pet products. National retailers such as Target, CVS, Lowes and Kroger are dedicating more and more aisle space and marketing dollars to pet products. [Last year] saw the introduction of Wag.com, a play by Amazon to dominate the online world of pet product sales. With the world’s most formidable retail operations converging on the pet segment, does this mean hope is lost for mom-and-pop retailers? Not by a long shot.
There is ample opportunity for small specialty retailers to stake their claim to a chunk of this pie. To succeed and thrive in this very competitive marketplace, niche retailers need to focus on attributes that set them apart from the competition: service, selection, knowledge and experience—not “experience” as in “I’ve been doing this for eight years;” but rather “experience” as in giving your customers a truly remarkable shopping experience.
Americans love their pets and they love to shop. This simple combination should be a motivational tool for specialty pet retailers. Unlike most consumer products, nearly every pet product sold is bought as a gift. People love to buy gifts, whether it is something a pet needs, wants or that would make their life better as a pet owner. Customers want to purchase the right products for their dog or cat, and they want to enjoy themselves while shopping. Give them what they want, and you will be the winner.
Barbara Denzer, Vice President of Marketing, Cardinal Pet Care
Two major challenges that pet stores face are Internet competition and market segmentation. Internet competition for store business is probably the biggest challenge, because it’s easier and faster to shop online in many cases, even though purchases often have shipping charges attached to them. To counter this trend, pet stores must emphasize the value of shopping at their stores versus shopping online to increase traffic.
Market segmentation is an issue that not only affects pet stores, but the industry as a whole. Pet stores need to utilize both traditional and social media to attract customers, but social media is so fragmented that retailers have to be smart and find the right niches on YouTube, Facebook and the blogosphere that will help them reach a sizeable number of pet lovers and potential customers.
To overcome these challenges, I suggest that pet retailers do the following:
• Have an Internet store – Even though pet retailers ultimately would like their customers to shop at their brick-and-mortar locations, giving them the option to shop online through an Internet store is key.
• Customer service – A store that provides its customers with exceptional service will see more repeat business, and gain new business through word of mouth.
• Communicate through social media – Sites like Facebook and Twitter provide retailers with the opportunity to interact with customers on a more personal level and keep them up-to-date with events, sales and promotions happening in the store.
• Add variety – Have a good assortment of merchandise at all times, and constantly add new items while keeping favorites well-stocked. Remove items that don’t do well. Rotate the merchandise every couple of weeks so it always looks like you have new stock when regular customers visit.
• Use displays to your advantage – Floor displays, counter displays and clip strips create visual variety, and excite and entice customers. They’re easy to change out once a month so the newest stock is always readily visible to customers.
• Use newsletters and email – Monthly newsletters alert customers to your latest offerings. Providing some sort of incentive in the newsletter, like a coupon or reward, will drive more traffic to the store.
• Create in-store social events – Social gatherings like “Yappy Hours,” where people bring their pets to the store for an event, are fun for all involved. Stores can partner with manufacturers to provide free treats for pets and samples with coupons for pet owners, making the event profitable for everyone—value for customers and profit for stores and manufacturers.
Shawn Dooley, Chief Development Officer, Absorption Corp
Within the small animal segment, new pet acquisition is the business driver for retailers and manufacturers alike. No one needs a hamster ball, water bottle, food or bedding if they don’t have a small pet at home. Animal sales declined—in some cases dramatically—in 2009 and have been slow to recover. With the lifespan of some pets, we’ve lost a “pet generation” that will ripple through the category over another two years. But it isn’t just the small animal segment that is influenced. Small, furry, pocket pets are often the entryway to lifelong pet ownership so a lost gerbil or guinea pig sale today may mean less dog food, crates and cat litter sold for decades.
One of the challenges for retailers is increasing regulation around the sale and keeping of pets of all types, including small mammals. As more children and families miss out on having a pet in their life, the less likely they will be to be pet parents when they start their own families. A second challenge is simply cost. Caring for animals in the store is a cost center. Not offering pets saves money. But where are pets going to come from if not from the local independent pet store? A more progressive and long-term view says that providing pets in the store plants the seed that will bear fruit over a lifetime through the sale of supplies, accessories and store visits.
Pet stores that encourage “zoo visits” build traffic. “Cuddle and love” areas build bonds that result in sales. Package deals, payment plans and rental options help overcome the sticker shock of walking out the door with everything that’s required to be successful with a new pet. Progressive manufacturers are willing to help retailers control and manage the cost of caring for animals though pricing, training and sharing best practices across the industry. Finally, it is the responsibility of all of us in the industry to support responsible pet ownership though our collective voice and support of PIJAC [the Pet Industry Joint Advisory Council].
Ward Johnson, Owner/CEO, Sojourner Farms
The recent acquisition of popular natural kibble companies has turned the pet specialty playing field upside down. I get the sense that the pet specialty channel is feeling a bit burned by these acquisitions and the resulting proliferation of products through mass-market channels. It is understandable that this would be frustrating for many small independent pet stores, not only because the expansion of natural kibble in mass market makes it more challenging for them to differentiate themselves, but because they were, in large part, responsible for helping to develop those brands over the years.
My hope is that pet specialty retailers take this as an opportunity to continue differentiating themselves by focusing on unique, innovative products. In today’s health-conscious culture, I believe that stores can maintain and grow their consumer market if they continue to build partnerships with companies that have unique and ultra-healthy products that can’t be found in big-box retailers, such as raw frozen, shelf-stable raw, and dehydrated dog and cat foods. These types of foods are a perfect fit for independent retailers because they require education—and the ability to educate customers is the number-one advantage that independent stores have over big box retailers.
Considering pets as family members is a trend that is here to stay, and consumers want to reach out and learn more about what they’re putting in their pet’s dish. Storeowners and their employees have an opportunity to take advantage of this by learning about the latest trends and partnering with manufacturers that can supply them with marketing materials, samples and store training. Being able to have a partnership like this, and then passing this knowledge onto customers who are seeking the absolute best for their pets is priceless.
Derrik Kassebaum, President of Sales, Tropiclean
I believe one of the key issues in the specialty channel is trying to stay in front of where grocery and mass retailers are going. It is easy for major retailers to keep costs low because they buy in such volume. Independents don’t have that ability to buy in such volume, so it is harder for them to compete when it comes to price.
However, independents bring a greater value to the customer in that they are considered the experts in the industry. Customers buy from independents because they know they can get their needs met by experts who take the time to educate themselves. Mass retailers can offer similar products at a discounted price, but they cannot offer the personal education that independents do. It is up to an independent pet store to carry both the main products that are in these mass retailers and unique items.
Competition is good when it is well thought out and planned. I see many independents that are just down the street or even in the same plaza as mass retailers. These stores succeed because they have taken on the attitude of not complaining about the mass retailer, but competing with them directly and intelligently.
Products that a mass retailer carries are very limited but do meet the needs of the consumer. It is good for independent retailers to carry these items because they are strongly advertised and therefore are what the consumer is looking for. When this customer comes into the store to look for these items, it is the independent retailer’s job to convert them to something that may be more beneficial for this customer’s pet, even at the expense of a little more money.
Caryn Stichler, Vice President of Marketing, Sergeant’s Pet Care Products, Inc.
The future is bright for pet specialty retailers as they cater to pet parents in their stores. The pet specialty channel is thriving on many fronts, due to the magnificent relationships people have with their pets. Pets are important and cherished family members. Because of this, the pet industry remains resilient and healthy, even in a weak economy. Specialty retailers are in a particularly good position to take advantage of the resilience of the pet industry because they are able to respond more quickly to the trends than many other retailers that are not as nimble in their ability to execute, and that gives them an advantage.
To further strengthen their businesses, pet specialty retailers should focus on growing the areas or the niche that their stores fill, whether it is for reptiles, small animals, dogs or cats. It’s also a good idea to reduce duplication of items in smaller sets and work to make it easier for the consumer to shop with educational point-of-sale materials and clear signage. In addition, retailers need to capture their consumers in a database so that they can later communicate about promotions, events and information to bring consumers in and build store loyalty.
A View from the Top
Published: March 1, 2012
Executives from a variety of pet product companies sound off on the biggest issues facing the pet specialty channel, and how pet stores can rise to meet future challenges.