The online threat

The online retail impact

To say that online retail channels are making an impact on pet product sales would be an understatement. According to a recent study by Packaged Facts, online sales contributed $4.5 billion (€3.8 billion) to the $48 billion (€41 billion) in pet products sales in the US in 2016. Amazon alone took in $2 billion (€1.7 billion), a 40% increase from 2015. Other major online retailers include Chewy (purchased by PetSmart in 2017) and Walmart/Jet. 

Independent pet specialty retailers, the principle customers of pet product wholesaler-distributors, continue to grow despite the increased online competition. 60% of brick-and-mortar pet retailers responding to a recent survey indicated that sales were up in the previous twelve months, with the average sales growth a respectable 5.3%. These companies see online retailers as their biggest competitive threat with convenience and pricing cited as virtual retailers’ main advantages.

Different generations, different needs

It would be a mistake to view the American market as monolithic with a one-size-fits-all solution to capturing consumers’ business. Urban, suburban and rural shoppers have different needs that are met by a variety of retail formats. Likewise, three generations of consumers – baby boomers, gen X’ers and millennials – seek different retail experiences that cater to their unique lifestyles. Pet specialty retailers are not ready to cede the future of retailing to online competitors without a fight. 

Convenience and pricing 

If convenience and pricing are the online retailers’ ace-in-the-hole, brick-and-mortar stores have an array of tools available to them to counter the competitive threat. 

Neighbourhood pet stores that know customers – and their pets – by name, that have well-trained, knowledgeable employees who can answer customers’ questions and offer solutions to their pet problems, and that offer loyalty programmes to encourage repeat purchases are positioned to counter online shopping’s convenience factor. Independent retailers are increasingly offering home delivery in their markets and services such as in- store grooming, do-it-yourself dog washing and even boarding that online sellers cannot offer. 

The ability to compete on price with online retailers has been one of the most difficult challenges facing independent retailers. But that is changing too. An increasing number of manufacturers are implementing ‘minimum advertised pricing’ policies that level the playing field for all retailers. 

Manufacturers in the US may unilaterally determine the price at which that company’s products may be advertised. The policy helps defend the company’s brand from price erosion. Enforcement is up to the manufacturer and may include an array of remedies for violations, including revoking the right of offending retailers to purchase goods from the manufacturer or its distributors. 

Power of independent retailers

Independent retailers and their distributor partners are still significant influencers of pet product purchase decisions in the pet specialty channel. Natural, raw and limited ingredient food and treats were all pioneered by these retailers. 

Products for small animals, fish, reptiles and birds continue to be sold primarily through independent and pet specialty retailers. Manufacturers with innovative products that have pricing policies that protect their brands from price erosion by online sellers will do well in today’s changing market.