The Changing Landscape

Date: 2014-03-24 Compiler:

The future certainly looks bright for the pet care industry. After 20 years of consistent growth, pet-related consumer spending continues to trend upward and seems poised to surpass the $70-billion mark by the year 2020.

But even as pet industry growth appears a foregone conclusion, a number of important questions remain: What product and service trends will drive this growth? What role will shifting pet owner demographics play? And, perhaps most importantly, which retailers will ultimately find themselves in the best position to take advantage of the expected growth of the industry overall?

The answers to these questions will undoubtedly play a significant role in dictating the course of the pet retail landscape through 2020 and beyond. With this in mind, Pet Business sat down with several prominent industry executives to discuss how they see the key issues playing out over the next six years, with an eye on what the future holds for pet specialty stores, in particular.


Jonathan Zelinger
Ethical Products 

 What do you think the state of the industry will be in 2020? 
The industry as we know it today will look completely different in the year 2020. We will see a proliferation of new, sophisticated companies in both retail and manufacturing entering into the industry. There will be increased competition from global players all around the world that will have successfully expanded their reach into the U.S. market by the year 2020. Companies that are enjoying success and growth today will not be able to sustain growth without a serious investment in technology and innovation.

We will see the continued consolidation of distributors and manufacturers, either by strategic acquirers or venture-capital firms. Technology will play a leading role in the ordering and delivery of pet products to the pet consumer, and independent pet shops will have to focus on innovative products and upgraded services to stay relevant and competitive.

We will continue to witness the growth of the all-natural category with an emphasis being on products that cater to the welfare, health and well-being of pets. Consumers will be inclined to purchase products from companies that they believe conduct themselves with ethical standards, are concerned with the environment and sustainability of the planet, and practice good corporate stewardship.

Animal-rights groups will be better organized and even more vocal than they are today, and the industry will have to devise a strategic plan for dealing with the continuing challenges that these groups will mount. Several of the initiatives implemented by groups within the pet industry, including HABRI, will have positively affected perceptions on the part of the pet owners and those contemplating pet ownership, and positioned pet ownership in a favorable light. On the legislative front, we can expect to continue to see increased legislative activity regarding pet ownership and care of pets, as well as increased regulation governing product liability, breeding facilities and puppy breeding practices.

What impact do you expect non-pet-specialty retailers to have on the category?
As an industry that’s poised for continued growth, the pet industry will attract the attention of non-pet retailers, and we can expect to see retailers such as office-supply stores, convenience stores, off-price retailers, club stores, do-it-yourself stores and garden centers expand or introduce a pet products section to fill the needs and desires of pet owners and their pets. Non-pet retailers will continue to look for opportunities to maximize per square-foot sales in their outlets, and as such, they will focus on the pet industry as an opportunity to expand. These non-pet retailers will advertise aggressively and will bring considerable price pressure on traditional pet retailers.

Over the past several years, mid-size pet specialty chains have experienced significant growth. How do you expect the next five to 10 years to play out for these types of chains?
I expect to see continued acquisition and consolidation amongst the mid-tier pet specialty chains currently operating in the United States. Those that do not merge or become acquired will continue to expand their geographical presence outside of their core markets. These stores will require truly innovative, large-ticket products to be developed by pet manufacturers in order for them to sustain comp-store sales that are necessary for them to attract outside investment. These stores must continue to renovate and update their appearance with new signage, flooring, shelving, etc., in order to stay current. They will also have to adhere to a strict-practice SKU rationalization.


Bo Nelson

What retailers are the biggest threats to independent pet stores?
Brick-and-mortar independent pet retailers face a growing number of competitive threats. In the ecommerce space, is gaining market share from independent retailers in a multitude of segments, including pet. The nation’s biggest mass market retailers and grocery chains have expanded their pet sections and are making concerted efforts to capture more pet spending. Over the past few years, the growth of PetSmart and Petco has leveled off, but several regional chains and franchises are aggressively opening new stores and markets.

While independent pet stores face competitive threats on many fronts, this class of retailers can and will remain viable by offering knowledgeable service, unique product assortments and best-in-class shopping experiences. Many storeowners have added ancillary services, such as grooming and dog walking, to their repertoires. Offering physical services that cannot be found online can add to a store’s bottom line and strengthen relationships with customers. Some urban-based brick-and-mortar retailers have added dog-food delivery services as a unique customer benefit. Another bright spot for independents is that pet products tend to be less price sensitive than many other categories of consumer goods. So, independent pet stores will continue to woo and capture shoppers with personalized service and unequivocal retail experiences.

How will the pet specialty channel have to respond to shifting consumer demographics? Are there any particular demographics that you believe will be important?
There are a number of U.S. demographic trends that present significant opportunities for pet specialty stores. Pet ownership continues to rise, and the number of single- and two-person households in U.S. is at an all-time high. Our growing population of senior citizens is healthier and more active than ever, and many empty-nesters are turning to pet ownership for valued companionship. Pet specialty stores, particularly independents, are well positioned and wise to cater to these audiences where a pet or pets might be a lifestyle focal point.

A key to the longevity of most enterprises is focusing on younger consumers. Millennials are and should be coveted by most industries, including pet. Rising U.S. Hispanic and Latino populations represent a large potential growth opportunity for pet stores. An ongoing challenge for pet specialty is household shoppers with busy families who often opt for the convenience of purchasing their pet products online or from mass and grocery stores where they are shopping anyway. Specialty pet stores can appeal to a breadth of demographics by focusing on the human-animal bond and what they offer to benefit this relationship.

What trends do you see popping up in the near future?
Pet ownership and pet spending will continue to gradually increase. “Useful,” “convenient,” “safe,” “fun,” “healthy” and “eco-friendly” will remain buzz words for new pet products. I do foresee more products and ideas originally developed for the human market making their way into the pet market. Solution-based ideas will remain a key driver in pet product innovation.

Indexed relative to inflation, I do not expect to see much of an increase in the prices of pet products and services. 
Like the rest of the world, the economy of the pet industry is changing faster than it ever has before. Retailers, manufacturers, and service providers who identify and can move to capitalize on product trends and shifts in customer dynamics will grow their businesses and lead the pet industry into the future. Today’s customers are more demanding, and their expectations rise every time they are presented with a better product or experience. Retailers and businesses of all shapes and sizes need to listen to their customers and be willing to evolve to meet customer needs. Pet industry businesses that innovate and improve to beat the competition will win the game.


Pete Reid
president and COO, 
Marshall Pet Products/Earth’s Balance Pet Products 

What will be the biggest keys for independent pet specialty retailers to remain competitive through the year 2020 and beyond?
Differentiation, innovation, creativity, service, uniqueness, value and niche creation are all key points in building and maintaining a competitive [retail business]. One of the  key points to remember is that there are many ways to purchase supplies in the pet business now. One primary factor that is often overlooked is that people love to deal with other people when it comes to their pets. Make the experience great.

Another key point is to reverse the trend of not selling pets at your store and actually sell pets. It is the pets in our industry that are the draw. Line up with world-class breeders and suppliers, and do it better than anyone else, and you will certainly differentiate yourself versus the current trend of no pets and supplies only. Someone has to be the specialist; maybe it should be you. Don’t underestimate the human-animal bond.

More and more pet specialty retailers are adding services like grooming, daycare and even veterinary clinics in order to create one-stop pet centers. How important will this trend be moving forward? Why?
Services are extremely important and a trend that is not going away. With consumers’ busy lifestyles, these value-added services can be in high demand. Most services do not require large amounts of inventory but are more human-resource and space driven. Services can be a low-cost add-on with significant profits. Pet daycare, yard services, obedience training, aquarium services, grooming services, vaccine clinics, pet hotels, etc.—the list of service considerations is long and opportunities substantial. Reflect on which services best fit your strengths as a retailer, focus on one or two, and do it better than anyone else.

Over the past several years, mid-size pet specialty chains have experienced significant growth. How do you expect the next five to 10 years to play out for these types of chains?
I think mid-sized chains are poised for future growth and have significant opportunity for market expansion. They can still react quicker, faster and more efficiently than larger chains, in regards to decision making and product choices. They have models that are successful, and if they continue to build their businesses off the principals that helped them achieve that success, that will keep them very competitive.


Paul D. Cooke
vice president/director industry development, 
Nestlé Purina PetCare 

What retailers have the most potential to effectively compete against pet specialty stores?
While pet specialty stores continue to see growth, many of our other retailers are experiencing solid growth in pet. They are winning in pet because they understand the importance of their pet customers across the entire store. These customers shop all the departments and their expectations in the pet category are higher than most. The successful retailers also understand these shoppers are passionate about their pets, they treat their pets as part of the family, they expect more from their retailer, and they shop where they feel most comfortable and appreciated. That’s why the most successful retailers have created a more engaging in-store experience in the pet department, treating it more as a full-service department, versus just another aisle or area.

What will be the biggest keys for independent pet specialty retailers to remain competitive through the year 2020 and beyond?
The number-one priority for all our retailers should be to protect and reward their current customers. They need to make the whole purchase experience the very best it can be, from start to finish.

These retailers need to understand that their shoppers demand everyday value, quality, convenience and an experience that meets or exceeds their expectations. Price is always important, but value is more important. We need to appeal to these shoppers by keeping an eye on emerging trends and reacting quickly–something many larger retailers inherently struggle with.

From a pet nutrition perspective, we at Purina have seen a huge trend toward owners focusing more on fewer ingredients and quality protein sources. In response, we’re seeing huge growth in the ultra/natural pet food category. This is a key area where pet specialty has always been strong and will continue to grow.

How should the pet care industry respond to shifting consumer demographics? Are there any particular demographics that you believe will be important?
As Baby Boomers age, we’re seeing an increase in the amount of Gen X and Gen Y pet owners. These younger generations are passionate about their pets, and they are also more mobile and comfortable with technology. This means that oftentimes they’re more informed and tend to make more researched decisions for their pet. However, the Gen X and Gen Y consumers also tend to be more time challenged. They want immediate solutions now, so marketers need to evolve to communicate through a simple and engaging message on emerging channels and trends. At the same time, we need to be careful not to abandon our strong Baby-Boomer consumer segment.


Ed Cebula
vice president of sales, 
Petsport USA, Inc. 

What impact will online retailers have on the pet specialty channel over the next five to 10 years?
 We have seen a big boom over the past couple of years with online retail stores and predict that it will continue to increase in the next five to 10 years. Online retailers make it easy for the consumer to shop around for the best price and find the exact product they are looking for with quick and easy comparisons. Not to say that this will overtake retail stores, there is still the appeal of going into the store and getting an idea of the weight, look and feel of a toy; also pet owners love taking their pets into the store to pick out their own goodies.

 What I think we will see is synergy between online retail and pet stores, people are going to be a little pickier about where they shop now that they can get all the facts about a toy before they buy. It will be crucial for pet stores to offer that something extra to their clients like demonstrations, promotions and other attractions to bring people into the store.



Over the past several years, mid-size pet specialty chains have experienced significant growth. How do you expect the next five to 10 years to play out for these chains?
There is a growing trend with the mid-size pet stores; as real estate costs have plummeted, many of these chains have been able to expand much faster than in years past. They are also focusing on high-end, organic, all-natural and specialty products that savvy pet owners appreciate. More and more people are opting to support local businesses more than bigger corporations; they prefer the help of people they know and trust, rather than a faceless retail chain.



hat trends do you see popping up in the near future?
I believe you are going to see a lot more eco-friendly, all-natural and organic products popping up as more and more customers become label readers. That was part of our inspiration for our eco-friendly line of toys. We are utilizing materials like loofah, jute fibers, canvas materials and burlap to ensure that dogs have a safe chew toy. We also make our Mojo and Gorilla balls out of TPR material, which is much safer than rubber and not as easily punctured, so you don’t have to worry about your pet ingesting harmful product. We are also starting to see the trend on quality over cost; consumers will spend the money on an item they feel will last and be healthy for their pet. That is Petsport’s goal—to make a quality product that your pet will enjoy at a price that is reasonable for the consumer.


Kevin Fick
Worldwise, Inc. 

What do you think the state of the industry will be in 2020?
I am optimistic about the potential of the pet industry as we look toward the future. However, I believe we will need to evolve as an industry if we want to realize that potential. Particularly, I believe the industry will need to address growing the number of pets in the home, reaching consumers through the media/social channels they are increasingly migrating to, and giving consumers a reason to shop, via meaningful education, innovation and branding.

Both an opportunity and a risk lie in today’s younger consumers. How do we get kids excited and interested in pet guardianship versus downloading yet another app to play on their electronic devices? On the other end of the spectrum are the Baby Boomers that have been a large pet-owning segment and are getting on in years. If we don’t find a way to augment this segment of pet guardians, we’re likely to face stagnant or declining numbers of pets in the home over time.


What factors could help or hurt the retail pet industry?
One of the hot areas of debate that could hurt the industry is pet legislation that is ill-conceived and/or implemented. I believe a great way to help the industry is to continue to define the benefits of pet guardianship and share [that knowledge] in a consistent and meaningful message to a broader audience.


How important will the trend of adding services to pet stores be moving forward? 
Being a “one stop shop” point of convenience for consumers will continue to take on increased importance as consumers are more and more time starved. These services are also essential for responsible pet guardianship and give retailers a wonderful opportunity to get consumers in the store, educate them on exciting innovations in goods and services, and expose them to a broader variety of pets.

Another key element that is achieved when consumers rely on pet specialty retailers for these services is the trust factor that is established with the consumer. Based on this trust, I believe there’s a halo effect that transcends to the entire store and the advice you receive from the store associate. When this occurs, it’s a positive for all of us.


From Pet Business