This franchise pet company is continuously working to further improve its competitiveness, including with new in-store offerings and upcoming projects to boost its online presence while preserving its local identity.
With over 700 stores, Pet Supplies Plus is the largest franchise pet retailer and the third largest bricks-and-mortar specialist retailer in the US. The company expects to increase its network by 50 new stores this year and to add up to 80 locations per year from 2025 onwards.
Christopher Rowland, who has been leading the company for the past 10 years, is a strong believer in this particular business model for providing pet parents with the best possible local service. But how can the pet retailer safeguard – and grow – its business in the face of fierce competition in the American pet supplies sector?
How have you tackled the challenge of having multiple operators in the business?
When I came on board as CEO, I changed our strategy from being corporate focused to leading franchise growth. We’re only successful if our franchisees are successful, and the focus of my entire team is on making individual franchisees successful. That often means adjusting strategy, focusing on more local aspects or putting the franchisee’s benefit ahead of the franchisor’s. And fortunately, I’ve had very supportive investors who have allowed me to continue with that strategy.
Do you have a consistent offering across all your locations?
Most of the offering is the same because we provide operators with the purchases. We have distribution centers; we provide the marketing and all the support. What we ask them to bring to the table is customer service, and we expect their outreach to the local communities to become the face of the company. But we also give them tools to go ahead and bring in local products for their particular store. So about 98% of the mix will be consistent across the whole chain and the rest is where they really focus their time to make local products come to life.
Would you ever consider changing the business model?
No, because there are already corporate-run stores like PetSmart and Petco, and I think we do a better job than our competitors. Our franchise owners are often in their store every single day. They are planning to hand their store down to the next generation and their children are part of the organization. So, there’s much higher motivation versus a corporate-run retailer.
Has inflation shifted preferences among your customers?
High pet adoption rates during COVID led to an exponential rise in our hard-goods market penetration as there were a lot more first-time purchases. In 2023, we saw our mix go exactly back to our 30-year-old historical level of selling consumables, like pet groceries, as well as hard goods.
What are the best- and worst-performing categories?
After a spike during COVID, live animals have been down a little bit, with low single-digit year-on-year growth. First-purchase items like beds, kennels, crates and dog leashes also slightly declined in 2023 as the number of adoptions has fallen. However, we are seeing very strong performance in our services business, with a 20% year-on-year growth rate. Grooming and pet wash continue to be our highest- performing categories. Dog food and cat food also continue to perform exceptionally well, growing at a mid-single-digit rate year on year.
What do customer buying patterns look like?
We want to allow our customers to shop how they want, where they want and when they want. Currently, 1% of our customers subscribe to Auto Ship and we do not see this increasing beyond 10% in the future as most prefer to shop at local stores, often with their pets. An ideal situation would be a customer who buys pet food with us every month on Auto Ship and also comes in a few times a year to pick up hard items like bowls, dog beds or kennels. We would also like to have them coming back 6 to 8 times a year for grooming or pet wash.
The curbside pick-up option seems to be popular…
Curbside pick-ups account for around 5% of our business, but some locations achieve almost double this. In fact, this is significantly bigger than online, because a lot of customers are shopping for pets when they have an immediate need. This takes them away from the platforms of our competitors, who ship within 48 hours as opposed to our same-day offer.
And what about online?
We’re investing heavily in the online space and we will launch a new platform to enhance our capabilities to meet our customers’ needs with new partnerships. In the future, the tool will also include an app to add a lot more partner websites, tying in prescription foods or more third-party online services.
What are your expansion plans for this year?
We are currently present in 41 states and our expansion is driven by demand from the franchisees. We hope to see more units in the Pacific Northwest and the West Coast this year. In the short term, we’re likely to see more incremental store growth where we’re significantly under-penetrated, including Arizona and Nevada. We don’t have plans to expand in Hawaii or Alaska, but we are aiming for coverage in 48 states in the next 5 years. This will include New Mexico and likely Oklahoma, and we are not certain about the Dakotas yet.
You acquired Wag N’ Wash last year. How is that business going?
It is growing against competitive stores where we are under-penetrated or have no market presence. We doubled the number of stores from 12 to 24, as well as converting some existing stores from a competitor. We’ve signed a lot of new deals that will open as franchise stores over the next 3 years and we anticipate doubling stores again in the next 24 months.
How are you improving your distribution logistics?
We initially had our main distribution center in Seymour, Indiana. It provided 100% of the hard goods products, but that left us vulnerable if anything were to happen to that facility. Therefore, we recently opened a new distribution center in Orangeburg, South Carolina. It was really a dual strategy to reduce the travel time to stores along the Eastern Coast and to provide some redundancy in the case of a catastrophic event affecting Seymour. We should have it operating at full capacity by the end of this year. We anticipate opening our next facility to the west of the Mississippi in 3 to 5 years. It could be in Nevada or Utah, but it really will depend on the availability of good distribution space, the availability of labor and, ultimately, where our store growth ends up taking us.
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