Indie Pet Stores Can Leverage This Advantage Over Their Online Competitors
For mom-and-pop shops, being located in smaller spaces not available to the bigger competitors can be a boon.
Pet market observers have long predicted an e-commerce boom, but few expected it to shake up the business as much as it has over the past seven years. Not coincidentally, that timeframe conforms with the rise of Chewy.com, which entered the picture in 2011 and added more than $1 billion in sales per annum in 2017 and 2018. During its June IPO, which raised north of a billion dollars, Chewy divulged a 2018 sales figure of $3.5 billion, and the outfit is reportedly well on its way to chalk up another billion in 2019. The other pureplay e-commerce behemoth in the pet space, Amazon, is, of course, not to be sneezed at either, with projected pet product sales of $3.9 billion in 2019 and $5.4 billion in 2023.
The internet onslaught has animated every facet of the pet products industry, from R&D and manufacturing to marketing and, obviously, distribution and retail. At the retail level, the larger brick-and-mortar-based outfits are better able to roll with the punches by deep diving into e-commerce themselves, like PetSmart with Chewy.com and Walmart with Walmart.com and Jet.com, with both retailers ramping up BOPIS (buy online, pick up in-store) and super-fast delivery options and, more recently, online pet pharmacies. Where it will end, or even slow down, is anyone’s guess. But as of SuperZoo 2019, e-commerce is projected to account for 26 percent of pet product sales by 2023, up from 7 percent in 2015 and 18 percent in 2018.
Where are those dollars and market-share points coming from? The good news is that some of the growth is incremental—the internet has galvanized pet marketers and retailers and energized shoppers, who, due to auto-replenishment/subscription programs and free shipping dependent on minimum orders, are buying more regularly and in larger quantities. For companies not immersed in e-commerce or headed that way, the bad news is that a sizable portion of the internet shift has come at the expense of brick-and-mortar retail. Looking ahead, moreover, brick-and-mortar-based retailers will contribute further to the trend.
The hardest pressed will be those lacking the ability to effectively compete online, including a sizable chunk of the pet specialty channel. Leading the brick-and-mortar pet specialty pack, as of 2019, PetSmart and Petco combined account for 18 percent of U.S. pet product sales, followed by other pet chains at 5 percent and independent pet retailers at 5 percent. By 2023, pet specialty retailers’ brick-and-mortar share of pet product sales will slide from 28 percent to 25 percent, with independent pet retailers declining the most.
It’s not just e-commerce. Independent pet stores, especially, are having to contend as well with loss of exclusivity of superpremium brands such as Champion Petfoods’ Acana and Orijen, which advanced into Petco in January 2019, mass premiumization, lowered ownership levels for pets other than dogs and cats, and competition in dense metro areas from smaller-footprint pet specialty chains positioned as neighborhood stores.
In the United States’ $52 billion market for pet products, the multibillion-dollar question for independents is, as it pretty much always has been, how to compete with the big boys. To a large degree, it’s the same-old—not to mention a kind of déjà vu for those around long enough to remember when PetSmart and Petco burst onto the scene, spurring dire predictions of the end of the indie pet retailer. Not to downplay it too much, as plenty of mom-and-pops did go under. But many survived, thrived, and/or rose from the ashes, to the tune of several thousand independents today. Of course, almost any way you slice it, the e-commerce boom is a horse of a different color given the compelling allure of—with a few clicks—having just about any pet product home-delivered at a competitive price. Add to that, in the case of Chewy.com, a tremendously successful focus on customer service and there’s only one thing missing, a physical store, and omnichannel players such as Chewy/PetSmart, Petco, Walmart and Target have even this covered.
What no internet giant has, though, is the indie sweet spot. Ask any one of the thousands of independent booksellers still going strong, long after Amazon threatened to bury them. As in the pet business, many smaller stores did give up the ghost—it’s hard to think of anything better suited for online selling than a book. But independent bookstore operators eventually got the message: They really couldn’t compete e-commerce-wise, aside from group efforts like Indiebound.org, and so instead doubled down on what has long been any successful mom-and-pop’s ace in the hole: the in-store experience. Turns out, people weren’t going to bookstores just to buy a book, but to meet up with friends, hang out, attend an event or just get away from it all in a cozy environment. They were looking for direct contact with other human beings, including a shop staff that is welcoming and has done most of the product curating for shoppers tight on time (and who isn’t?).
Like their indie bookstore counterparts, pet mom-and-pops also have the luxury of locating in (or already being in) smaller spaces not available to big footprints, especially in urban and suburban locales. And, once again as with their independent bookstore brethren, specialization is the name of the game, including in the form of indie-exclusive brands, daring new products including locally sourced fare, raw/frozen and fresh pet foods whipped up in-store, and services and events coupled with community involvement. There are, alas, no silver bullets. But indie pet retailers willing and able to let go of a business that was and embrace one of their own making will share the rewards of a pet products market worth nearly $60 billion at retail by 2023. Could be worth putting in an espresso machine.
David Lummis is the lead pet-market analyst for Packaged Facts, a division of MarketResearch.com. The statistics and projections cited here are drawn from the latest edition of Packaged Facts’ annual report, U.S. Pet Market Outlook, 2019-2020, and from Packaged Facts’ July 2019 report, U.S. Pet Market Focus: Pet Specialty Channel and Internet Shoppers.