Evolving global pet retail

Adapting to change

The industry continues to perform well, particularly in the face of increasing economic and political uncertainty. Consumers are adapting to this uncertain climate and shifts are being perceived in many regions. 

Convenience has become king, with pet owners increasingly valuing being able to compare products, learn from their peers and then purchase online. The rise of subscription services such as Prime and the acquisition of Chewy by PetSmart, are just the tip of the iceberg.

One-stop shopping

Grocery retailers (which includes supermarkets, hypermarkets and discounters) account for the largest share of pet care value sales globally. The convenience offered by such outlets and the opportunity for one-stop shopping is important to many pet parents. Grocery retailers have a strong presence in most regions, but they are strongest in Australasia, generating 66% of all pet care value sales in a mature grocery retail environment. 

Grocery retailers have realised the category’s potential, and many retailers have diversified their product ranges. For example, Tesco in the U.K. has partnered with FreshPet in order to offer consumers raw and chilled fresh food. Another example comes from Aldi in Germany that has been launching new products with a more premium feel. In fact, recent shifts indicate that the competition is heating up significantly and ‘mass grocery’ is capturing increasingly more consumers as the recent success of Nutrish in the U.S. attests.

Competitive environment

Globally, pet shops and pet superstores have faced significant pressure from grocery retailers. With their economies of scale and price competitiveness, grocery retailers have managed to attract more price-conscious consumers. The specialist channel, comprised of pet shops, pet superstores and veterinary clinics, accounts for 30% of global pet care value sales, with significant differences across regions. 

Nevertheless, pet specialists are preferred by many pet parents due to the expertise they can provide. In the U.S., for example, the channel has been quite dynamic, generating substantial growth. Pet shops and pet superstores, which typically have a premium and diverse offering, have managed to attract not only affluent consumers but also a significant proportion of pet parents looking for alternative and niche products. The prominence of the natural trend has been a key driver in attracting such consumers. For manufacturers it has also been key and many opt to only place their products in such stores in order to guarantee brand equity. Having said that, brands such as Nature’s Recipe, once typically only sold in the pet specialists channel, are now also present in grocery retailers. 

Internet retailing

For all the recent shifts, nothing comes close to the increasing popularity of internet retailing. The channel is experiencing dramatic growth, with its value share doubling from 3% in 2011 to 6% in 2016. Both pure online and multichannel players have driven the growth and are benefitting from this trend. 

Pet care internet retailing has seen particular success in China, where the share of pet care value sales generated through internet retailing has rocketed from 3% in 2011 to 33% in 2016, not least due to local internet retailer Alibaba expanding aggressively in rural China. 

In Europe, pet care pure play Zooplus has reported significant success (a 24% increase in Q1 2017) and has been paramount in developing the channel as it is present in thirty countries. Pet superstores such as Fressnapf and Pets at Home are also stepping up their efforts. 

The competition posed by this channel is apparent, with PetSmart, the largest U.S. chain, acquiring Chewy, one of the largest pet care pure plays in the U.S. in 2017. Despite recent investments in its omnichannel strategy, the acquisition speaks volumes about the competition Chewy was placing on bricks and mortar. 

Opportunities

Overall, there are many opportunities in pet care as the industry has good growth prospects, but manufacturers and retailers need to work together in order to keep value in the industry. Channels need to be assessed as price competition on its own will not be successful in the long run. New strategies to attract consumers need to be devised going forward.