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3:37 AM   September 01, 2014
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Treading Cautiously

Pet specialty retailers feel the credit crunch, but they’re optimistic going into the future.
By Wendy Bedwell-Wilson

Increasing Sales During Tough Times

Here are some ways to keep sales strong:

  • Showcase unique and interesting items that other stores don’t carry.
  • Stock shelves with quality products that are less expensive.
  • Increase inexpensive in-store events, such as holiday parties, anniversary specials and e-mailed coupons.
  • Put slow-moving stock on sale.
  • Promote store through print advertising and tout the advantages of supporting small local business.
  • Pass vendor and distributor deals to customers.
  • When customers buy a staple, offer 10 percent off anything else in the store.
  • Stay positive and pay special attention to customer service.
  • Upsell whenever possible.
As credit tightens for small businesses, pet retailers feel the pinch not from their banks and lenders, but from vendors’ rising prices and consumers’ waning confidence.

During October, in the wake of what some called the greatest financial crisis to hit the United States since the Great Depression, mainstream media outlets ran stories of frozen credit, rising interest rates and an imminent recession. Retail sales figures, on a steep September decline, and roller-coaster gains and losses on Wall Street fed those fears.
It was a scary time for business owners.

“In 20 years of business, I’d never seen that before,” said Steve Lane, owner of Steve’s Wonderful World of Pets in Buffalo, N.Y. “I’ve been through several recessions, and that was different.”

According to the National Federation of Independent Business’ Small Business Economic Trends report from Oct. 14, hope in the economy stagnated after banks, such as Lehman Bros., filed for bankruptcy in September.

“Dramatic improvements in the percent of owners expecting the economy to improve over the next six months and solid plans to invest in new inventories accounted for the early surge [in the NFIB’s Index of Small Business Optimism], but the bulk of the gains were erased by events from mid-month on,” said NFIB Chief Economist William Dunkelberg.

Though facing an uncertain future, pet retailers remained optimistic. Some storeowners, like Colleen White, owner of deMuddy Mutt in Fort Washington, Md., and Connie Packard Kamedulski, owner of Animal Fair Pet Shop in Ridgefield, Conn., actually reported modest gains in September sales.

“I’m seeing incremental growth of 1 to 2 percent on a month-to-month basis,” Kamedulski said. “And I’m expecting Christmas to be 10 to 15 percent better than last year.”

No Credit? No Problem
Susie Atherton, owner of Canine Creek Dog Wash and Pet Boutique in Tehachapi, Calif., said her community’s falling home prices have affected her home equity line of credit—and caused her to postpone store improvements.

“Because we live in a declining housing market, our home equity line of credit was recently frozen by our mortgage company,” she said. “Although we don’t use our HELOC to purchase inventory, losing this line of credit has forced us to be more careful in considering expensive store modifications or improvements.”

White reported trouble getting a bank loan for shop improvements. Her lender denied her funding when she wanted to expand her dog wash and boutique to include grooming.

“I needed a loan to put in a wall and cages, but I was turned down,” she said. “So instead, I’ve scaled down my plans to add services, such as nail clipping. It’s something that doesn’t need space.”

Jennifer Myerscough, owner of Imagine Ocean Aquarium Services Inc. in Canton, Ga., had to downsize her fish specialty shop. When she opened nearly seven years ago, she was saltwater only. Two years later, she expanded her shop and her fish selection, adding freshwater livestock. Things changed.

“Recently, we made the decision to stop carrying freshwater livestock, as sales weren’t generating enough revenue to justify the space and resources they were taking, so we are in the process now of downsizing back to one retail unit and have done away with freshwater fish sales,” she said.

Despite stories like these, many retailers report no problems with their credit lines. Biff Picone, owner of Natural Pawz in Texas; Jo Flora, owner of online store TheEnchantedDog.com in Greencastle, Ind.; Don Benson, owner of Rivertown Feed and Pet Country Store in Petaluma, Calif.; and Lane  enjoy the same cash access as before the credit crunch. They rely on greenbacks, bank loans and credit cards, which they pay off monthly, to cover purchases and expenses.

“I was expecting a freeze on my lines of credit, so I dipped in before that happened,” Lane said. “I took out some extra cash and put it in my account. But I’ve not seen the credit freeze. I deal with two different banks, and neither bank has restricted any of my lines of credit.”

The examples rang true among small businesses overall, according to the NFIB’s Small Business Economic Trends report. Thirty-three percent of small business borrowers report all their borrowing needs were met in September, compared to 6 percent who reported problems getting financing.

“Interestingly, 36 percent reported all credit needs met in the tumultuous second half of September, compared to 31 percent in the first half of the month,” Dunkelberg said.
 
Rising Costs, Cautious Consumers
Where retailers have felt the pinch is in vendors’ rising prices. They must either pass the increase on to their customers or they have to cut their own margins.

“The biggest problem I see is the increase in prices from dog food suppliers,” Kamedulski said. “I am having to raise prices on premium foods from $5 to $10 per bag. I have brought in a line of high-quality but more reasonably priced food, which I hope will take off. But people are balking at perceived price increases.”

As food prices increase, customers may be forced to make some tough decisions about their pets’ diets, said Ann Cipriani, owner of Woody's Self Serve Dog Wash & Boutique LLC in South Park, Pa.

“Rising pet food prices and rising prices in general may hurt the independent retailer if consumers go back to using cheap foods and box-store bulk discounts,” she said. “Unfortunately this results in the decreased health of pets, which could cause higher veterinary bills, so this would be a lose-lose situation for retailer and consumers.”

Retailers have also felt the pinch in lower traffic and sales. Consumer spending has slowed. Recession and inflation are looming. The last thing the buying public wants to do is spend money—or is it?

“My fear is that if the consumer credit situation freezes up, as the mortgage banking has, many of our customers will not have the cash flow to make purchases,” Atherton said.

Lane saw traffic dwindle after the market tanked, but he remained optimistic.

“Traffic is way down, down by almost 30 percent, and it has been, since the end of September,” Lane said. “But prior to that, it hadn’t been an issue, so I’m hopeful that it’s going to come up. Even in the last few days, it’s been better.”

Retailers report that consumers are spending money on essentials—food, litter and treats—and skipping fancy collars and clothing. In response, that’s how they’re stocking their shelves.

“I’m more careful about what I’m purchasing for the store, going more with the necessities and low-cost impulse buys,” Cipriani said.   
Atherton decided to stick to high-turnover consumables.

“Like most people in today’s economy, we’re being more cautious when buying inventory and are looking for less expensive products to meet customer requests,” she said. “We’re also concentrating on stocking high-turnover essentials, like food and treats, rather than too many new untested product lines.”

Opportunities Abound
Savvy retailers, like Lane, see opportunity in these trying times. When the economy retracts, he expands. He searches out deals, buys at bargain rates and passes these benefits to his customers.

“I haven’t been slowing down my buying because what I’m seeing is a lot of deals,” he said. “So if distributor says he wants to move some product and he wants to give me an additional 25 percent off a one-day-only buy, I’m taking advantage of it. I’ll buy heavy, and pass it all to the consumer.”

It’s a good strategy, Myerscough said.

“I watch the vendors specials and take advantage of products that turn over quickly by buying extra quantities when they are on special. More retailers need to do this to keep costs in check and keep product on the shelves.”

The pet industry will get through this, Lane said.

“I think we’ll be fine, and I think our industry will be one of the first to recover,” he said.

“I’m just treading cautiously into the future,” Flora said. <HOME>


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