In 2019, selling pet products online became the largest single sales channel for the first time, reaching 22% of the total pet products market. That growth has been led by Amazon and Chewy, which was bought by PetSmart in 2017 for $3.35 billion. The coronavirus shutdown further accelerated the move to online sales, and is now driving online to 30% of the market.
But the pandemic also turned the overall industry forecast upside down: Packaged Facts said early this year that pet products would rise by 5% in 2020. Once the closure hit, the forecast changed to negative, with non-food pet supplies down 23% and non-medical pet services declining by 47%.
Sellers of pet products have had to race to catch up with the alarming rate of change in sales channels, mix of products being sold and the overall change from growth to decline.
As consumers have rethought where they buy their pet products, an even bigger opportunity has been created for online retailers and a more urgent and immediate challenge has been created for physical pet stores. The leading pet retailers, Petsmart and Petco (with over 3,000 stores combined nationwide), along with most pet retailers, responded to the pandemic by offering delivery and curbside pickup. But the big two have also had to reduce staff, cut advertising and shutter overhead.
Steve King, CEO of American Pet Products Association, says one of the unavoidable outcomes of coronavirus is more pet store closures. He’s certainly right, but the ways that consumers interact with pet sales channels will continue to change as stores, online merchants and direct-to-consumer brands reshuffle how they present themselves in order to compete more effectively.
One of the truest axioms of retail is that no one has ever invented a better way of converting a person from a browser into a customer than a good retail store. That’s because a knowledgeable sales associate who makes customers feel comfortable and welcome can’t be duplicated online or anywhere else. The problem is that as retail stores have been increasingly challenged over the last several years they have tried to cut the cost of retail operations. That has meant getting less qualified, less capable store help rather than more talented help and the change has advanced the downward spiral of many retail stores. Also, until the pandemic, unemployment was low and the cost of good store associate talent kept rising.
Michael Stoeckle, CEO of Ark Naturals, says that great sales associates need to be compensated, “not just for their time but for what they know, providing both a relationship and opportunities for consumers to learn…person-to-person.” While many retailers have a financial issue compensating store associates for their knowledge, Stoeckle says, “some store owners say they can’t afford it but in reality [they] can’t not afford it.”
The pet industry experts I talk to say that educating consumers about products and services with events is an important way for both online and physical store retailers to retain customers. Particularly in pushing back against Amazon and Chewy, who are focused on convenience, physical stores need demonstration events to draw pet owners in with interesting guidance and knowledge. Streaming those events online is an additional way for stores to compete on a more equal footing.
Combining channel strengths
Finn, a brand that makes nutritional supplements for dogs, uses online customer recruitment, including email and Instagram, to identify consumers. But instead of selling to them online, it directs consumers to local stores to buy their product, creating a unique selling channel that enhances its relationships with retailers.
The channels now are getting mixed—brands are using every advantage and relationship they can to make their product stand out and get help from the retailer. Retailers are using both online and in-store in concert to maximize their competitive advantage.
Pet diets are a driver
One key product for every pet owner is their pet’s diet. Because it’s replenished regularly, the market is highly competitive and a natural advantage for online merchants who can offer click-to-deliver for repeat customers. Because of the trend towards better quality products for pets, customized diets are exploding, especially since the shutdown. Zach Phillips, cofounder of custom food maker Nom Nom, which is sold direct-to-consumer, says that since the shutdown started, “we are experiencing Black Friday every day with growth of 300%.” While delivery and curbside pickup have helped stores push back, being able to compete online with equal convenience and ease of order will be critical for physical stores.
Trends now favor online merchants. But overall retail trends are moving towards a combination of physical stores for education and entertainment and execution of orders, especially replenishment orders, online. Pet merchants who can get that combination to work seamlessly will have the biggest advantage.