Introduction
The pet retail industry has grown significantly in the 21st century. In a recent study conducted by the American Veterinary Medical Association, nearly 60 percent of U.S. households owned at least one companion animal. The number of pet owners is growing at an astonishing rate while at the same time the relationship between humans and their furry friends also changed significantly because this time their animal companions are seen as family members. This is the reason why the pet retail industry has grown tremendously since 1994 making the sales of pet products the second-fastest-growing retail category in the United States. According to one report Americans now spend at least $41 billion a year for their pets – this is more than the gross domestic product of more than a hundred countries around the world. One U.S. based company has capitalized on this trend; PetSmart is a multi-billion dollar pet care business that shows no sign of slowing down. It can even increase revenue by expanding its product line, improving its online store, and establishing a new store overseas such as in Australia.
Background
There is now a considerable number of retailers who wanted to target the pet care business as a growth market and this is evidenced by the 7,500 shops that specialized in selling pets and 9,300 stores selling pet food and supplies. It is believed that as high as 90.
percent of Americans will agree with the statement that their pet is part of the family. If this is the current mentality of pet owners then it is understandable why Americans pay more for pet care than on the movies ($10.8 billion/year), playing video games ($11.6 billion/year), and listening to recorded music ($10.6 billion/year). There are at least three major revenue streams, these are sales from a) pet food and supplies; b) specialty products; and c) veterinary and other pet care services.
Although PetSmart is the leader of the pack, it would not be impossible for its competitors to dislodge it from its lofty position. One can easily understand that the company is a specialty store with the added feature of being a one-stop-shop wherein convenience and quality of products are two of the most important components. While it is admirable that they went through great lengths to build an organization where customers
can easily access the things that they need and at the same time allow the luxury of bringing their pets with them to help them choose the best products for their “loved ones”, PetSmart does not have a monopoly on this kind of marketing strategy. This means that any retailer with access to capital can easily copy these methods.
To the Next Level
Right now its biggest competitor is Petco. In 2002 PetSmart posted $2.5 billion in sales while Petco only managed to get half – $1.3 billion. But this is no assurance that Petco cannot overtake PetSmart. Aside from the challenge posed by Petco, PetSmart has to worry about the other retailers who are also very enthusiastic about the pet retail industry. While PetSmart is the market share leader this also means that the company is faced with difficulties and other problems that come from being a giant retailer. In 2002 they only have more or less 600 stores but today their official website boasts of having 1,145 stores and has made its mark in 48 states in the U.S. while at the same time able to establish its presence in Canada. It is not hard to understand that the bigger the company grows the slower is the growth rate.
If PetSmart would like to hold on to its present position then it has to find a way to increase store traffic, revenues, and profitability. When it comes to storing traffic, one avenue that they can explore is to find partners, who will be able to provide them with pet care specialty products. An example of a specialty product is Neuticles. According to its inventor Greg Miller the idea is to help pets feel normal after the neutering process. This has proven to be very successful as he is now selling the said item for $919 a pair. PetSmart can expand their pet care services to include this process and at the same time sell Neuticles in-store or online. They can go to the next level by developing teams that will do research and seek out inventors and radical entrepreneurs who are not afraid to think out-of-the-box for the sake of love for pets. In this way, they can offer a new line of exciting products that are exclusively available in their stores.
Since PetSmart’s business philosophy is to target “pet parents” and to foster the idea that pets are family members, they can add to their current roster of services a pet cremation service. According to one advertising campaign from a pet crematorium, this manner of dealing with pet loss is a tangible expression of honoring the memory of the companion animal. This does not mean that every PetSmart store must have its crematorium but the company can construct one that is accessible to its customers. PetSmart can expand the service to include a home service where they will pick up the dead animal from home and be the one to handle all the necessary details. This is an offer that is hard to refuse especially for “pet parents” who had bonded with their animal companions and would like to show their love for their pet for one last time. Others may also find it hard to transport the dead animal in their car and drive to a crematorium. PetSmart can provide this service and at the same time make more money by offering a new line of products – pet urns.
While it is important to take care of their physical appearance and to indulge them from time to time with expensive clothing and jewelry, a conscientious pet owner will never make the mistake of choosing clothes over nutrition. An overview of PetSmart’s pet food products available online will give the impression that they are only offering what other stores are offering. In other words, they are merely content on being able to provide the needs of the average consumer but the company is not yet into gourmet pet food especially those that will appeal to health buffs. If there are customers that are into organic food, chances are they will also desire for their pets to consume organically grown products and protein sources that does not come from discarded animal parts.
Having an expanded line of new products, PetSmart can increase its revenue even further by improving its online stores. They must develop a website that is very easy to use especially for elderly people who may find it hard to read the fine print in the online store at the same time may feel intimidated by the level of computer literacy required to purchase online. They must also attempt to develop an online store that is accessible by mobile phones. This will allow pet owners to complete sales transactions the moment they realize that they are already low on pet supplies.
PetSmart may do well to analyze the current situation of the Australian pet care industry. According to one think-tank, pet ownership in Australia is one of the highest in the world with 53% of households owning a cat or a dog. In 2006 alone there are at least 2.43 million cats and 3.75 million dogs that are household pets in Australia. With these conservative estimates – not including other species of animals – it is easy to understand how PetSmart can use its current resources and marketing savvy to make its presence felt in Australia. This is not the first time that they opened a store overseas. This time around they can capture a substantial portion of the Australian market assuming that they can improve their online business before they decide to expand overseas.
Conclusion
Currently, PetSmart is the market share leader when it comes to the pet retail industry in the U.S. But competitors like Petco can easily improve their product line and pet care services to increase their share of the market. Aside from that, this type of business is now very attractive for retailers and therefore retail giants like Wal-Mart can also become formidable competitors. PetSmart can retain its leadership position by thinking of innovative ways to improve its services. It can also increase its revenue by considering expanding to Australia, a country that is as pet crazy as Americans.
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