Considering Consolidation
By Mark Kalaygian
Published: August 1, 2013

 

 

Mark Kalaygian

 

Will consolidation among the pet industry’s distributors end up irrevocably harming independent pet stores?

As you will read in this month’s cover story, many small mom-and-pop pet retailers are concerned that distributor consolidation could limit their access to the specialty items that help independents stand out from the competition, as well the level of service they can expect as mid-sized distribution companies are acquired by bigger players. However, consolidation is not likely to have as negative an impact as some industry members expect.

Many of the industry experts we spoke with for the cover story noted that the pet industry is full of small, niche distributors that are ready and willing to step in and pick up any specialty lines that do not fit into the business model of large distributors. In some cases, these may even be lines that specialty distributors didn’t have access to in the past. This, in addition to the rise of online wholesalers and the growing trend of small manufacturers selling directly to retailers, means that independent pet stores should continue to have access to products they need. You simply have to know where to look.

Let’s not gloss over the fact that working with the distributors that are growing larger through consolidation can provide real benefits to retailers. Each acquisition represents an opportunity for these distributors to achieve more of the efficiencies that come with the economies of scale. In some cases, consolidation can even broaden the range of brands that retailers can access by bringing the larger distributor’s product lineup into new territories, and vice versa.

While some might worry about a decline in service as distributors get larger, it is important to remember that the two major players on the acquisition front have long understood the important role that small mom-and-pops play in the overall health of the industry, as well as what these retailers need in order to be successful. It is hard to believe that crossing some imaginary threshold of size will undo that understanding.

At the end of the day, retailers’ ability to navigate a distribution channel in flux will depend on the level of flexibility in their supply chain. Today’s pet stores must be able to balance their approach to product sourcing in a way that gives them multiple options for accessing important items, while at the same time giving certain suppliers enough business to warrant a high level of attention.