New ways of getting product on retailers’ shelves prove beneficial to the industry overall.
By Wendy Bedwell-Wilson
Distributors in the pet industry aren’t like they used to be. While traditional companies remain a sturdy link in the supply chain, other companies, such as online brokers and hybrid distributors, are tying in, too. Each business model has its benefits and drawbacks, but they all have one common goal: To give retailers more products to choose from.
Jody Maddox, owner of Wag! Dog Emporium, says she actually looks forward to ordering product to sell in her store in Eugene, Ore. Like many boutique owners, she works with local distribution companies for food and hard goods, and orders many SKUs direct from manufacturers. Lately, however, she’s been taking advantage of the online purchasing platforms.
“You can see the products, you’ve got the price right there, and you can do it in the evening when you get home,” she says. “It’s all right there. You don’t have to thumb through your files for a catalog, worry about minimums, that sort of thing. I think it’s a great service.”
Brokering a Deal
Online ordering is quickly becoming a popular way to order merchandise. It makes sense: According to BIGresearch’s Consumer Intensions and Actions survey conducted in November 2008, 72.8-million shoppers planned to click through cyberspace to do their holiday shopping, up from 51.7 million in 2005. Consumers are doing it, and now many retailers are doing it, too.
Online virtual marketplaces allow a new generation of purchasing platforms to host a storefront of manufacturers’ and distributors’ goods, take retailers’ orders, notify manufacturers of the request and act as a buffer between them.
“They are companies or distributors or entities that are like a distributor but are virtual companies,” explains Steve King, president of Pet Industry Distributors Association (PIDA) in Bel Air, Md. “Often, they don’t take title to the goods they’re selling. They simply act as a conduit for retailers to purchase certain products.”
Rather than warehouse the goods, online purchasing platforms partner with smaller manufacturers and niche distributors that normally sell direct to dealers. They provide a portal for retailers to purchase goods not found through traditional independent distributors.
Distributors want retailers to be successful. If the pet stores thrive, their businesses thrive, too. To meet that end, the Pet Industry Distributors Association has developed an online tool to help pet-store owners train their employees with the goal of turning pet enthusiasts into successful retail salespeople.
“It’s something we think is a huge contributor to the success of independent retailers, helping them develop a well-trained workforce that can help solve customers’ problems,” says Steve King, organization president.
The program, which is accessible online, is usable alone or in conjunction with a store’s existing training program. It’s customizable, includes printable study guides and provides timely feedback to employees and managers.
“We’re getting a terrific response from dealers who are using it,” King reports. “It’s completely free, so there’s absolutely no reason why someone wouldn’t take advantage of it.”
Another free resource for retailers is MyOwnBusiness.org, reports Maureen Costello, president of United Pacific Pet LLC in Fontana, Calif. It teaches retailers how to be successful in learning how to manage their businesses day to day, she says.
“You are going to see other distributors who are trying to provide resources to independent retailers so that independent retail segment is more successful,” Costello explains.
“If a pet store is in a certain area and every store uses a local distributor, all the stores would start to look exactly alike,” reports Jessica Hewel, partner and vice president of sales and marketing for PetManufacturers.com. “So these online purchasing platforms allow them to create a niche market within their marketplace to draw more customers into their store, because they can now access goods that they can’t get through their distributor.”
Retailers can examine, research and purchase products at their leisure, giving them the time to tend to their stores and service customers. Sheri Scarborough, co-owner of GoToRovers.com, says most of her business is written at night after shops close for the day.
“Retailers are so busy during the day at the store, trying to do day-to-day business that they just don’t have time,” she says. “And we’re seeing that they’re getting home, having dinner, sitting down in their pajamas and placing their orders late at night. They’re e-mailing me at 10 at night and saying, ‘I’m so glad you’re there.’”
Because these companies work on commission rather than markup, retailers pay dealer-direct prices and enjoy savings, such as show specials, through the online purchasing platforms.
“We see more and more retailers cutting back on their travel costs to trade shows,” says Bruce Goodwin, owner of ElitePetWholesalers.com in Danvers, Mass. “Companies like these provide an easy, convenient and safe way for retailers to see many manufacturers’ and distributors’ catalogs, and to order at their convenience. The retailers also get any specials that are typically offered at the trade show.”
Mark Cowan, Vice President Sales & Marketing, Pet Stores USA, a web-based wholesaler and retail web-services supplier, agrees.
“Online purchasing platforms serve as a modern alternative to the traditional buying co-operative. Companies can serve as their customers’ eyes and ears, and saves them the expense of show travel, as well as negotiating favorable prices,” he says.
These companies cater to a younger generation of pet-store owners, ones who do most—if not all—of their business and correspondence online.
Bo Nelson, owner of WholesalePet.com in Richmond, Va., says his company’s average demographic falls into the female, early-30s category.
“Because they’re young, they tend to be more Internet savvy,” he says. “They realize the efficiencies of using the Internet as a business tool.”
“I’ve got some store owners who are in their 20s, and all they do is order online,” she says. “They just wouldn’t have it any other way.”
Will these online brokers replace traditional distribution networks? Not likely, say several industry insider sources. However, it is a segment some say will continue to grow.
“We’ll see close to 75 percent of sales online by 2011,” Hewel projects. “These platforms are a positive mark in the industry, helping the industry to grow at a faster rate because they’re allowing new and existing manufacturers to get out there. And the platforms allow stores to get certain product lines on their shelves that they normally couldn’t get. It’s creating a positive effect on the industry.”
Cowan reinforces the benefits of online-warehouse ordering for retailers.
“Many retailers do not want or need a truck or container-load’s worth of product. Because many distributors have long-term relationships with many manufacturers (and the resultant buying power), they can drop ship product directly to the retailers’ customers at the same, if not lower, prices than retailers buying at dealer price, and eliminate the need for inventory and warehouse expense,” he says.
Sticking with Tradition
So Far, So Good
Despite the softening economy, many distributors feel confident going into the future. Steve King, president of the Pet Industry Distributors Association says his organization’s members haven’t reported dramatic changes in either volume of business or the overall orders received from customers.
“But that’s not to say, however, there aren’t dark clouds on the horizon,” he adds.
Super-premium foods typically sold in independent pet stores should hold up, King says, but he reports some members have seen retailers start to trade down in the consumable-product segment, choosing lower-priced brands for consumers looking to save some money.
“Some customers of retailers may be starting to look at price points and deciding they can go with a slightly lower-price brand,” he explains.
King says that in order to stay competitive in the shaky market, distributors will be looking for ways to increase their product offerings and their reach.
“Competition may heat up in some areas where distributors look to expand geographically,” he notes. “If they feel like there’s enough potential business in an area, they may explore putting a salesperson on a route, communicating with dealers in that area to get some additional business.”
PIDA’s King says that while the newer online purchasing platforms give retailers—especially boutiques—access to more products, they’re not affecting most independent distributors’ business, which centers on dog and cat food.
“The typical PIDA distributor derives 71 percent of their total gross sales from dog and cat food,” he explains. “That’s a product that doesn’t lend itself to distribution through these online applications because you’re talking about a high-bulk, high-freight item that simply is impractical to ship across country except in high volume. So those types of products that most of our members rely on to be the high-volume part of their business, that’s not impacted at all by these online-type companies.”
Traditional distributors—those that purchase goods from manufacturers, store them in a centrally located warehouse and truck them to customers in their geographic area—remain a viable segment of the distribution network. In fact, they’re thriving, King reports. PIDA-member distributors tell him they’re connecting more with their retailers than ever before.
He explains that independent distributors that once serviced all segments of the industry—both mass-market and independent retailers—have seen the larger dog-food companies look to grocery distribution centers to get their products into the mass market. That leaves pet-product distributors to focus on their core customers: independent pet retailers.
“With that change, the distributors have really come to focus much more specifically on what is the major part of their customer base, which is the independent retailer,” King says. “That’s a positive development. Independents need good healthy wholesale distributors to get them the variety of product they need to differentiate themselves in the marketplace.”
United Pacific Pet LLC (UPP) in Fontana, Calif., exemplifies King’s point. In 1995, UPP was chosen to be the exclusive supplier of Iams and Eukanuba Premium dog and cat food in Southern California. When Iams sold to Procter & Gamble Co. in the early 2000s and subsequently entered into the grocery and mass-market segment, Maureen Costello, UPP president, decided to diversify. She added a number of new equine and non pet-food lines, offering product choice to customers. In 2005, when P&G gave its distributors permission to bring on other pet foods, she added many new lines and rebuilt the field sales force.
“We’ve gone back to what we used to be,” she explains. “We brought back some lines we had before we became Iams exclusive, and brought in many lines that have come into existence since then. We are experiencing consistent growth because we added so many new things, and we are working hard with our retailers and suppliers to grow our business and theirs.”
Banking on Boutiques
Besides supplying their customers with the many varieties of super-premium dog and cat food, some traditional distribution companies have looked to increase revenue by capitalizing on the boutique trends. They’re making room in their warehouses with things such as dog clothing and bling collars—products that have captured a growing segment of the retail market.
“Distributors will often look to adding additional brands,” King states. “If there’s an opportunity for them to perhaps take on some lines they hadn’t in the past, if they feel there’s an opportunity to expand their business, they’re more likely to bring on additional brands, especially when things are perhaps a little tighter.”
Nelson of WholesalePet.com has seen more distributors move in this direction over the past year. They’re watching where the market is booming and cashing in.
“This past year, I’ve seen distributors picking up more boutique brands,” he says. “They’ve seen zero growth for a while because there’s been more attrition with traditional pet stores than there’s been growth, and they realize the majority of the growth in the independent market is these little boutique stores. Therefore, some distributors have started picking up more boutique lines, like clothing, that they wouldn’t have thought about carrying previously. And they’re doing that to compete because that’s the way the market is turning.”
One distributing company has taken that business model to the extreme. DigPETS, based in Largo, Fla., stocks its warehouse exclusively with boutique-type products from manufacturers such as Catswell, Urban Hund and Wagatha’s. The company takes retailers’ orders online or by telephone, and it sends the product out in one shipment via UPS, not by truck. The benefits to retailers: There are no minimums, and they can access a variety of product lines in one place, reports sales associate Holly Huth.
“We focus strictly on the boutiques and the small businesses, making it easier for them to stock their stores,” Huth says. “And it’s good, too, because if they want to try one thing in their store, they can buy one thing from us without having to come up with all the money to buy the entire line.”
Other hybrid-distribution companies, e.g., PetEdge Dealer Services, RetailPets.com and CatalogDog.com, also warehouse product and ship it via UPS. The difference is the product mix.
“They primarily carry traditional distributor lines, such as Multipet and Kong, which are carried by traditional distributors, but they don’t carry food,” Nelson says. “They’re in one location but UPS orders all over the country.”
Filling a Growing Niche
As distributors diversify their product selection and find new ways to disseminate their goods, retailers will see the benefits in their bottom line, PetManufacturers.com’s Hewel says.
“As an independent store, you have to make yourself unique and carry things your customers couldn’t get in a big-box store,” she explains. “It’s natural for a store to work with a distributor because they have to get those heavier boxed goods in through a form other than shipping. But for all the other unique stuff they wouldn’t be able to get through a distributor, they can go online.”
Manufacturer Dave Colella, who owns and operates Earthdog with his wife, Kym, in Brentwood, Tenn., sees the benefits in these new distribution outlets for both manufacturers and retailers.
“As a manufacturer, the benefit to us is we’re represented with a whole smorgasbord of reputable retailers,” he says. “And for the retailers, it’s a big project to stock a store and keep up on all the thousands of continually offered pet products. It’s a nice convenience to hit one portal and have a variety of manufacturers available to you.
“I think it’s a really convenient business model for retailers,” he adds. “And it’s evidenced by its success. They appreciate it.” <HOME>
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