Perhaps to the regret of every brick-and-mortar retailer in the country, if not the world, Amazon.com is not going anywhere, anytime soon. The fact is that the giant e-commerce site will only get larger and get involved with more categories, including the various pet segments over the next few years, creating even more headaches for pet retailers who have previously only had to worry about the big box stores, mass merchandisers, grocery stores and other independents.
So how does the pet industry learn to live and even prosper despite this giant operation? Many industry experts say that pet retailers are far from defenseless. In fact, pet retailers possess a full arsenal of weapons with which to compete, including a reputation for a brand of customer service that online retailers cannot emulate and the ability to build an assortment of products that sets them apart.
The bottom line is that brick-and-mortar retailers need to do the things that Amazon can’t, and sell products that Amazon doesn’t.
A little over a decade ago, the realization that Amazon posed a big threat to pet specialty retailers had not quite sunk in for many in the industry. The online giant was just becoming profitable and beginning to prove its prowess after years of reportedly making billions while still losing millions annually. Back then, pet store owners like Kevin Willyerd were just getting a taste of the competition to come.
“It was not near the issue that it is now,” says Willyerd, owner of Animal Ark, a full-line pet store in Houston. “I would occasionally have someone say, ‘Well, I can get this or that online [for less],’ and depending on my margin, I’d tell them either that [the online offer] was a great price or I can match that.”
Today, Amazon’s impact—and the effect of e-commerce in general—is much more pronounced, and pet retailers cannot help but notice the effects. The most obvious threat the e-commerce giant poses to pet specialty retailers continues to be its ability to beat virtually any independent on price.
“Amazon has been competitive for a while, but it has become a lot more ubiquitous,” Willyerd says. “People take a picture of what I’ve got with a smart phone, and in seconds, they can see how much they can get it for online.”
Experts say the impact has been most damaging in high-margin product categories, and in the aquatics and herptile segments, in particular.
“It’s more of an issue with an expensive considered purchase, like an electrical component or any product that is expensive that doesn’t cost a lot to ship,” says Barry Berman, founder of NexPet, Inc.—a national co-op of pet retailers that provides marketing training assistance, discounts and rebates on products and services, and ways for storeowners to share ideas.
Amazon’s price reign has left many retailers with holes to fill on their shelves after having given up hope of competing in certain product categories. “There are a lot of things now that I have basically given up carrying, things I don’t waste the shelf space on,” Willyerd says.
Industry experts—and most everyone in any segment of retail—expect web-based competition to be a permanent fixture of the retail landscape. If the electronic habits of today’s kids—and tomorrow’s pet shoppers—are any indication, says Danny Selman, president and COO of San Antonio-based distribution company Lone Star Pet Supply, the industry can count on web-based retailing to be a mainstay. For most of these consumers, the Internet is as much a part of daily life as television or having dinner.
“The younger generation—which is growing up with their iPhones and iPads, with everything accessible and in the palm of their hand—is going to feel extremely comfortable shopping online, and that’s the threat 10 years from now,” Selman says.
So, as time rolls on toward a future certain to include online shopping as a way of life, independent pet retailers are embracing the idea that they will have to adjust and draw on their inherent strengths in order to keep customers walking through their doors. “I don’t think Amazon is going to wipe us out,” Willyerd says. “It just alters the way we do business.”
The industry has already weathered storms comparable to the one now raging on the Internet, and it does not take a particularly long memory to recall similar shake-ups in the market.
“You can compare Amazon to Walmart 10 years ago—everybody thought that Walmart was going to put every other retailer out of business,” Selman says. “It’s 10 years later and Walmart is still a threat, but our business is good and our industry is strong.”
The arrival of Petco and Petsmart hurt pet businesses in some of the same ways Walmart has, by beating them on convenience and sometimes on price. But despite the advantages these retail big shots have, many pet stores have found ways to thrive. These retailers’ success can largely be attributed to a combination of great customer service, unique product assortments and the ability to make a visit to the neighborhood pet store worth the customer’s time and effort, say industry observers. It will be these same traits that will get retailers through this next trial.
A Full Arsenal
The power of good customer service is the first line of defense against online competition, say retailers.
“It has always been our philosophy to offer personalized service,” says Jennifer Myerscough, owner of Imagine Ocean Aquarium Services, a Canton, Ga.-based service-oriented retailer specializing in saltwater aquariums. “No online service can do that.”
Myerscough has often been frustrated by customers who visit her store “to kick the tires” but then turn around to buy the same products online because she simply cannot match the prices. But, she says the face-to-face service her store provides, along with the expert advice it offers, ensures that customers have a reason to visit.
“I’ve seen plenty of people say, ‘even if it’s a dollar or two more, I’d rather see the money go into your cash register than some dot.com somewhere else,’” she says.
Myerscough’s store is also a haven for novice aquatic hobbyists who have run aground after trying to build tanks based on what they have gleaned from the Internet. “Once they find us, we try to make them feel that they are welcome and that we appreciate their business, and hopefully, at least psychologically, they’ll want to come back,” Myerscough says.
Willyerd also understands the power that retailers wield with pet owners and hobbyists who are often looking for guidance and information.
“Amazon can’t tell them all the benefits or why we prefer certain filters over others,” he says. “When customers’ animals are sick, they don’t call Amazon. And often, they call us long before they call the vet when there is a concern.”
NexPet also recognizes the link between customer service and profitability, and features customer service prominently among the tools it includes in its training program.
“We have programs that make it easy for employees to teach themselves how to perform personal relationships with the customers,” Berman says. “The Training program also teaches staff members how to sell products and how to be a resource for the consumers beyond what consumers can get from a website.”
Another thing Amazon cannot do is offer services, and Selman says retail-focused businesses may need to expand their offerings in this area to compete in a changing market.
“Boarding, dog training, grooming or aquarium maintenance—whatever is applicable,” he says. “Retailers need to diversify. You can’t just sell one thing and succeed, because someone else is going to come in and knock you off. Offering services to diversify a strictly retail business is something our retailers need to consider.“
Building a distinctive assortment is another way in which pet retailers can compete against Amazon and other web-residing competitors. “[Customer service] training is one step,” Berman says. “Another step is to shape your merchandise assortment to favor [those] who don’t sell to Amazon or other websites. It’s easier to do with foods and treats than in aquatics.”
It is a similar strategy to the one pet retailers use to compete with grocery stores, mass merchandisers and the large pet chains. “When some of the dog foods went into specialty mass—companies that said they never would—we just weaned ourselves off of those and found others,” says Willyerd.
It is also an approach that retailers in other segments are using today to cope with the pressures they face in an e-commerce-heavy environment.
“Look at Best Buy,” Selman says. “Best Buy is having to change their business model. They are looking at exclusive brands. They are looking at brands that won’t sell in Amazon.”
Berman suggests that retailers scour trade shows in search of new products and companies who are committed to supplying the independent pet retail channel exclusively.
“We have to cope with the environment we are in,” he says. “There are opportunities to find products where the pricing is policed. They won’t sell to Amazon. They will only sell to certain websites or on their own websites, where pricing is policed. There are certain products that are not sold online at all.”
Of course, it is becoming more obvious to retailers that many distributors and manufacturers are also using Amazon and e-commerce as a way to market and sell their goods—a thought that robs many storeowners of their peace of mind as they discover products sold online at wholesale value or just slightly above. But some experts predict that finding suppliers that are not tapping into that resource at all will become increasingly difficult.
“There is a lot of sentiment among retailers that you have got to be totally dedicated to our channel or we are not going to deal with you—I think that’s really short sighted,” Willyerd says. “That world is gone.”
Berman agrees. “If your refuse to do business with anyone who is doing business online, then you might not have that many suppliers [to chose from]. You really have to prudent with the fights you pick.”
Still, industry observers also say that distributors and manufacturers understand that their success is intertwined with that of the independent retailers that make up the lion’s share of their customer base, and thus they ultimately will want to do what’s best for the industry.
“I’m 4,000 square feet, so the effect I can have on [manufacturers’ and distributors’] bottom line is limited, but all together, we drive the market and drive the demand,” Willyerd says. “If we don’t have [a product] on the shelf, I think it is less likely to sell online to anyone. Because the fact is that, if I put it on my shelf that means I’ve looked it and decided it’s a good product—so my customers know that if it’s on my shelf, we back it up and that means that it’s a good product.”
Myerscough is equally convinced that the presence of brick and mortars in the pet arena is essential to the health of the pet industry as a whole.
“When the Internet started making itself known in our industry, a fellow I knew in the livestock wholesale industry often referred to the online sellers as parasites, because the brick and mortars were around long before the Internet, and they can survive with or without the Internet, but the Internet sellers really cannot survive without the brick and mortars,” she says. “The bottom line is I don’t know anybody who decided they want a reef aquarium because they saw it online.”
Pet Retailers Bite Back
Published: November 1, 2012
Pet specialty retailers are leveraging their arsenal of competitive strengths to battle against Amazon.com.