Quantcast
Edit ModuleShow Tags
Edit ModuleShow Tags

Viewpoint: Differentiate or Die


Published:

As the pet industry continues to expand and mature, the plethora of product options has become mind-boggling, and the intensity of retailer competition has multiplied. As an independent pet retailer, how should you define a strategy for your store that sets you apart from the competitive herd?

In business, as in biology, the idea of “survival of the fittest” is really “survival of the most adaptable.” Brands and retailers that adapt to the rapidly changing pet business environment will survive. Those who don’t will become extinct.

The pet industry business environment is changing in three ways. Consumer behavior is changing, the retail landscape is changing, and the product landscape is changing. However, although these changing market forces are a lot to deal with, independent retailers can adapt and thrive in today’s business environment.

Let’s start by taking a look at consumers. In the post-recession economy, consumerism has changed. In the words of Youngme Moon, author and Harvard MBA professor, “Abundance is over, not because things are no longer abundant but because abundance has lost its status as our reigning aspiration.”

We are moving into an era of more thoughtful consumption. Buying decisions are informed by consumers’ values. Consumers don’t simply want more, they want better. They want things that resonate more deeply, something genuine.

Thoughtful consumption plays to an independent pet retailer’s strengths in several ways. First, independent retailers are closer to their customers, interacting with them on a daily basis, hearing first-hand what their consumers are looking for and what they value. It’s easier for an independent pet retailer to get into the head of their customers. More often than not, independent pet retailers live in the community they serve so they already have deep insights into their customer base. Buyers for large retailers rarely interact directly with customers. They generally get second hand feedback from store managers and sales associates, or from sell-through reports.

Since independents are closer to their customers, they can tailor their products and services more precisely. Independents are smaller and more nimble, allowing them to modify their product assortments on the fly to adapt to changing consumer preferences. Big-box retailers, on the other hand, are slower-moving organizations by nature. The bigger the organization, the more risk averse they are and the slower they move. Category reviews may happen only once a year and require multiple layers of review. Administration and logistics take longer.

Thoughtful consumption also minimizes the emphasis on price. Consumers today are willing to pay more for products that are meaningful for them. This opens up a world of product opportunities most large pet retailers won’t touch. Independent retailers should endeavor to sell products not found in big-box stores and not discounted on Amazon. The big-box model is built on low price and high volume. This is why a vast portion of the products they carry are produced overseas and why they are especially threatened by Amazon, which sells the same products at low prices. This lack of true differentiation leads to the commoditization of the products they sell.

In short, independent pet retailers have a unique apability to move quickly and carry the most relevant product assortments for the changing consumer who is more thoughtful about their purchases. Assortments that keep up with the changes in consumer preference can set your retail store apart while maintaining MSRPs and healthy margins.

The Retail Landscape

The second major environmental change in the pet industry is the retail landscape. Needless to say, more consumers are shopping online. The largest online retailers offer convenience, selection, low pricing and free delivery. They are formidable competitors. However, they don’t do everything well. Because of the algorithms they use, online retailers tend to promote best sellers—the low price, high volume items—that pit them against big-box stores. Products that don’t come up on the first page of a product search rarely get seen. As a result, e-commerce sites don’t do a good job with more specialized products, new products and products that require customer education. Furthermore, e-commerce sites are highly transactional. They don’t build community. Building community is the realm of the independent pet retailer.

The second notable change in the retail landscape is ongoing consolidation. Tractor Supply acquired PetSense. PetValu acquired Pet Supermarket. Bentley's and Kriser’s acquired other regional chains, to name a few. In addition, large brick-and-mortar retailers afraid of being left behind in Amazon’s wake are busy acquiring e-commerce companies: PetSmart acquired pet360 and completed its acquisition of Chewy. PetCo acquired Doctors Foster and Smith. Walmart acquired Jet. How does all of this consolidation impact the independent retailer? My view is that consolidation works to the advantage of independents. My logic is threefold.

When acquisitions occur, assortments are often narrowed down to create buying and operational efficiencies, resulting in homogenization of the product offering. Standardization makes things easier to manage. Second, acquisitions lead to larger, more cumbersome organizations. They can’t respond to changing consumer preferences as quickly as smaller retailers can. Finally, as chains nationalize, they lose regional specificity. Independents have an advantage in their communities because they can tailor their assortments precisely to the needs of their narrower customer base, and there are ample opportunities to separate your business in new and unique ways.

Remember that differentiation is not a tactic. It’s a commitment—a way of thinking and a mindset that comes from closely listening to and observing your customers. It’s easy to fall into the trap of trying to compete with larger brick-and-mortar and e-commerce retailers. But you should be focused on not competing with them. Instead, you have the opportunity to provide an alternative reality to the status quo that appeals to the changing tastes of consumers.

Product Arena

Finally, the product landscape is changing. According to the economist James Bessen, the number of packaged goods has more than doubled over the past 10 years. The rate of increase is even greater in the pet industry. Is this good or bad? One of the things that happens in product categories as they mature is SKU proliferation. More brands create more options, but the differences between them are smaller and smaller, resulting in a sea of sameness and ultimately the commoditization of the category. Youngme Moon calls this phenomenon “heterogeneous homogeneity.” Product proliferation is not the same as product diversity. As you seek out new inventory, ask yourself, how many new products are truly innovative and how many are just another version of a product that already exists?

So, what are some things for you to think about in a pet industry where consumers are becoming more conscious and thoughtful; in an industry where intense retail competition has created more sameness than differentiation, and in an industry where product choices continue to multiply but true innovation is scarce? Here are a few suggestions:

  1. Today, consumption has significance. Consumer purchasing behavior is a reflection of consumers’ values and priorities. Seek out “idea brands.” These are brands that play to a different standard, and that’s why people respond to them. These are brands that don’t take the status quo for granted. They offer something that’s hard to come by.
  2. Look for brands that are intensely human and speak genuinely to people rather than in the typical marketing language of today—“new and improved,” “20 percent more,” and “longest lasting,” for example.
  3. Identify brands that fulfill your niche. Understand what makes your store and your community different. Find the products that speak to your consumer in a more personal way—in a way that larger stores and e-commerce retailers simply can’t replicate.
  4. In a noisy marketplace of over-abundance, don’t be afraid to offer restraint—a cleaner, more purposeful assortment. Sometimes fewer choices are better.
  5. Don’t be afraid of experimentation. Unlike your larger competitors, you can fail quickly with little financial risk so use this to your advantage. Try new things. Learn from the results and keep iterating.
  6. Provide personalized, knowledgeable service which is difficult to replicate in other store formats and online.
  7. Think about differentiation as an escape from competition altogether by doing things in an altogether different way from your competitors.

Adam Baker is the founder of True Dogs, LLC and the SodaPup brand. True Dogs, LLC manufactures dog toys in the USA.

Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags