Big-Box Pet Retail Bets Big on Services
Eons ago, in the late 1990s, PetSmart and Petco began exploring pet care services including grooming, boarding and training. The rest is history.
For 2017, sales of services through the top two pet specialty big boxes rose to an estimated $1.3 billion, a figure that represents around 10 percent of their total (product and service) sales and 15 percent of all U.S. sales of nonmedical pet care services. Since the 1990s and 2000s, annual sales of PetSmart- and Petco-proffered pet care services have moderated from double-digit gains in the 20 to 30 percent range to around 5 percent, implying saturation. But with a large majority of pet owners still obtaining their services through local and regional pet care providers, there appears to be plenty of room for additional growth.
Both chains are betting there is, with exhibit No. 1 being Petco’s foray into “complete veterinary services.” Working with Vetco, Petco has long provided in-store vaccinations, but now, via a joint venture with Thrive Affordable Petcare, the retailer is rolling out a full suite of in-store veterinary services, a key draw being $10 exams for dogs and cats. The first Thrive animal hospital debuted inside a new Petco store in Aldine, Texas, in October 2017, with a dozen additional locations opening over the next few months in remodeled stores in Texas, California and Colorado. Presaging the initiative, in April 2017, Petco acquired PetCoach, a digital services company that connects pet owners with veterinary professionals for personalized expert advice. Identifying more closely with services from a branding perspective, Petco is renaming several of its smaller service-oriented Unleashed by Petco stores as simply Petco.
With a huge head start in veterinary services—most of Banfield’s more than 1,000 animal hospitals are located in its stores—PetSmart is branching out into pet care services another way. In October 2017, PetSmart opened its first Groomery, with another five locations slated to open in the coming months. At 1,800 to 2,500 square feet, the salon-style shops are about half the size of Petco’s Unleashed stores and focused exclusively on grooming.
Additional investment in pet care services comes from another big-box retailer; in acquiring Petsense in 2016, Tractor Supply Co. welcomed the opportunity for pet market diversification.
Retailers are not the only pet industry players looking to bulk up on the services side. In September 2017, Mars snapped up approximately 800 animal hospitals in 43 U.S. states and five Canadian provinces with its $9.1 billion acquisition of VCA. Factoring in its ownership of Banfield brings Mars’ animal hospital total close to 2,000.
No coincidences here. As e-commerce carves out an ever-greater share of product sales, brick-and-mortar pays the price. In one especially telling sign of the times, Walmart recently announced the closing of 63 Sam’s Clubs, 12 of which are being converted to e-commerce fulfillment centers. If there’s any area of pet retail where the internet can’t directly compete, it’s services, and with oodles of prime real estate, PetSmart, Petco, Petsense and other pet specialty chains can be expected to evolve ever further into service-oriented pet health destinations, with veterinary at the leading edge and additional top-dog product marketers joining forces.
David Lummis is the lead pet-market analyst for Packaged Facts, a division of MarketResearch.com. The data cited above is drawn primarily from Packaged Facts’ latest pet market report, U.S. Pet Market Outlook 2018-2019.
This article originally appeared in the March 2018 issue of Pet Product News.