While they are nourishing companion animals better than ever, pet foods might be starving specialty retailers’ profit margins.

Since the creation of the premium pet food category, these products have largely served as a cornerstone of success for pet stores–not because they bring great margins, but because they drive traffic into the store. The crux of this profitable relationship was that customers drawn by premium pet food brands would inevitably pick up some higher-margin items, such as toys or leashes and collars, while they were in the store.

However, this relationship has been on its ear, to some extent, over the past two years. At the same time economic turmoil is leaving shoppers with less disposable income to lavish on their pets, rising pet food prices are putting even more pressure on their pocket books. Pet owners are a fiercely loyal bunch when it comes to the brand of food they feed their companion animals, so there is very little trading down going on in this segment of the industry. In fact, as you will read in this month’s cover story, many shoppers are actually trading up to feed their pets products that provide specific benefits, such as added vitamins or natural/organic ingredients–at a higher price point, of course. 

All of this has had serious repercussions for other, “non-essential” product categories (toys, home-grooming products and apparel, in particular) which largely have not enjoyed the same stability as the food category. What’s more, grocery and mass pet food brands have jumped on the latest pet food trends by introducing an increasing number of value-added and natural products. This, combined with shoppers’ growing affinity for one-stop shopping solutions, is clearly a formula that is chipping away at pet specialty retailers’ market share.

So, is it time for pet specialty retailers to throw in the towel when it comes to selling pet food? Absolutely not–stocking premium food brands is still the best way to drive repeat traffic into the pet store. However, retailers must be more aggressive in promoting the value of the products on their shelves, and convincing shoppers that this value cannot be found at the Wal-Mart down the street. They can no longer sit back and expect pet owners to come to this conclusion on their own.

This aggressive approach to conveying product value should also be applied to a pet retailer’s selection of “non-essentials.” Focusing the store’s impulse merchandising on items that offer real value to the pet owner, as opposed to novelty, will go a long way toward inspiring unplanned, higher-margin purchases from food shoppers.