Feeling, seeing, smelling

The sales price priority

Ever since the emergence of large e-tailers like Amazon, brick-and-mortar retailers have struggled to find the right price settings for their products. From the get go, online prices have been significantly lower than prices in ‘offline’ stores. As a result, more and more consumers are basing their choices on price considerations above anything else, valuing the appeal of the physical shopping experience less than the direct allure of financial benefit. All in all a development that profoundly impacts the procuring processes of retailers in the pet industry. “Brands are not always differentiating between retailers and e-tailers, they need to value the role a physical store brings. If they continue to do so it will result in a focus purely on retail price,” says Peter Pritchard, CEO of Pets at Home. 

“In the pre-Internet era, brands would take their time choosing the retailers they preferred to do business with,” former Petco CEO Jim Myers adds. “Back in the day, brands and retailers didn’t discuss prices all that much. Suppliers were more concerned about the match of brand image and shop concept.” 

“Previously, brands used to be more concerned about the environment in which their brands would be sold,” Pritchard continues. “Increasingly our buying teams are dealing with brands who are more interested in stocking points. The fact that physical retailers have more to offer than e-tailers sometimes is of minor importance to them.”

The private label solution

Pritchard argues that it is impossible for retailers to beat the e-tail industry on price. “Setting the right sales price is always tricky. The difference between e-tail and retail prices is in danger of becoming too big and that is not sustainable. In my opinion brands need to have more active control over their brands and respect that a face to face conversation with a customer in store is expensive but is how the category is grown.”

Fressnapf Group CEO Alfred Glander points out that retailers have a much lower volume turnover than e-tailers. “We depend on our margins. So in order to remain profitable in the future, we have to keep those margins as broad as we can. That is the main challenge. If our prices are too high, customers will turn away from our stores. Levelling our prices with those of the e-tail business, on the other hand, means we virtually lose our margins.” Small wonder, against this background, that so many large retail chains have failed to survive in the past few years. To avoid sharing their fate, the remaining retailers will have to keep up with the times. They will have to start innovating. Not just in their online activities, but also in terms of the general shopping experience. 

Sound competition

“The good news is that we have our private labels,” Peter Pritchard continues. “There, we can set our own margins and these proprietary products strengthen our bargaining position in dealing with the brands, creating sound competition and keeping the market alert.” 

Jim Myers agrees that both sides must cooperate to find a solution. “Like Pets at Home, we invest heavily in product presentation. Which is why I expect brands to make an investment as well, in exchange for shelf presence at our stores. Look at it as a form of advertising. Over the past decennia, all major brands have been building strong quality reputations. Which they wouldn’t have been able to do without support from the big retailers. In fact, we can turn small producers into major brands. Web shops can’t do that.” Fressnapf Group has chosen a different approach. 

“Our aim is to strengthen the name familiarity and brand value of Fressnapf Group itself. By means of TV commercials and printed advertising,” says Alfred Glander. “If brands meet the demands we set, they are welcome to support Fressnapf Group and make us an offer. If we reach an agreement, they profit from our success.” 

Shop experience and emotion

By offering customers a complete shop experience, retailers distinguish themselves from e-tailers like Amazon and Alibaba. “We deal directly and personally with our customers,” says Jim Myers. “E-tailers don’t. Online shops offer a twodimensional experience. There is only rationality, no emotion. With us, shopping is all about feeling, smelling, seeing. That is our strength. And we must use that strength to full advantage.” Peter Pritchard feels that speed and convenience are all e-tailers have to offer. “Retailers are all about what e-tailers simply don’t have.”

Extra services

Modern consumers appreciate a complete experience. Visiting a showroom-like environment has entertainment value as well. It inspires purchases, immediately or at some later point in time. Shops offer an experience that inspires the customer. 

Offering customers the service they want, at the very point-of-sale, requires good communication. The secret is getting the right message across at the right moment. The question is how to do that with maximum efficiency.

Jim Myers believes in extra services as a way to retain existing customers and attract new ones. Which, he emphasizes, is more than just offering advice. “Consumers have become more demanding. Apart from advice, we offer customers opportunities to learn, facilities for trimming their dog or washing their pet in special cleaning cabins. In short, we offer a complete service package. Which creates loyalty and makes customers come back to us.” 

“Trimming your dog or implanting a microchip are not services the internet can provide,” Peter Pritchard adds. “We sacrifice floor space to offer these services. Which goes against any retailer’s instincts, but it does pay off. People spend more time in the shop. They are engaged and we do more business.”

Waiting for the magic

Pritchard stresses the importance of planning. Offering top class services is not a thing accomplished overnight. “Make sure you have a solid plan in place and leave the actual work to professional specialists, like vets and experienced dog groomers. When all services and points of sale are operating harmoniously, then get ready to see the magic kick in. There is a synergy that will start working, a mutual reinforcement. The one-stop-shop concept, everything in one place. It is our way of making life easier for our customers, just like online shops do. Our stores are open seven days a week, for people to walk in and buy products, consult a vet or have their dog trimmed. Plus, free parking.”

Alfred Glander of Fressnapf Group agrees that extra services are the way to go. “We are aware of its importance and we are working on it. In 2016, for instance, we re-launched our grooming service ‘Fellini’ in Germany and Austria.”  

Spotting cool trends

To stay ahead of the game and successfully compete with the e-tail business, retailers will have to keep innovating, introducing new products and services all the time. Peter Pritchard finds the inspiration he needs at various trade fairs. “For us, the most important venues are SuperZoo in Las Vegas and Global Pet Expo in Orlando. We used to go to the European trade shows as well, but they have become less interesting. They don’t seem to pick up on trends very fast and I think they are lacking in clear vision for the future. Apart from that, our own goals in visiting trade fairs have changed as well. We used to have shopping lists, we wanted to see new products from specific brands. We don’t send our people out with lists anymore. Times have changed. Their missions are different. Now, we want them to spot at least five or ten cool new trends. Best place to do that is in the States.”

“New products can find their way to our shelves within twelve weeks,” Pritchard adds. “And if they don’t take off, we can replace them just as quickly. We use special shelves for new products. This way, over the past few years, we have been able to single out a number of top performers. In the classic purchasing models, this would have been impossible. 

No purchasing professional is going to give up shelf space on a gamble. So that experience is important to me. If we are not willing to take chances, there can never be growth in our product categories.” 

Pet fairs

“Today, brands contact us directly when they have new products,” Alfred Glander remarks. “Although I’m not sure if that is also true for smaller retail businesses. For us, as for Pets at Home, fairs are primarily scouting ground for new trends.” 

Jim Myers feels that the number of pet trade fairs has become excessive. “We used to send our purchasing people all over the world. But there is no need to do that anymore. Procurement has ceased to be a trade show business. Today, when we visit trade fairs, products are not our priority. We are interested in networking, and discovering new trends and services. I am convinced that introducing new services and extending our product range to include innovative products will give us a decisive lead over the e-tail business,” says Jim Myers. 

“I have worked in retail my entire career. Every once in a couple of years, the business is hit by a new trend wave. Like Wall-Mart in the seventies, when they became big. They were going to take over the world, or so everybody assumed. And of course, they are huge today, but they have never really disrupted our market.” 

“I predict the same sort of pattern for the e-tailers. They will grow, significantly, over the next few years. But then, things will start levelling off. They will never succeed in taking over our entire market. Wall-Mart hasn’t done so, and neither will the Amazons and Alibabas of this world. Of course, we need to keep innovating to stay ahead of the game. We must move with the times.”