Self Examination
By Mark Kalaygian
Published: October 1, 2013
Five retail executives discuss the pet industry’s strengths, weaknesses, opportunities and threats, as well as how these factors are impacting their businesses.

 

 

Sometimes finding the answers to complex questions can be a surprisingly simple process.


Such is the case when considering the prospects for the ongoing operation of a pet specialty retail business—and the overall pet care market. While there is a complicated matrix of both positive and negative factors that will ultimately dictate the fortunes of a pet retailer, or the broader pet industry, simply identifying those factors can go a long way in deciding how things will play out in the months and years ahead.


To this end, the SWOT analysis concept can be invaluable. A practice that has been around since the 1960s but has been garnering a lot of buzz in the business world as of late, SWOT analysis (also called SWOT matrix) is a simple but structured process for identifying an enterprise’s strengths and weaknesses, as well as the opportunities and threats facing it—hence, the SWOT acronym. It is a concept that can be applied to any situation, from an individual person to a specific business model to an entire industry; and when done accurately and honestly, it can provide a broad view of both the internal and the external factors that will drive success or failure.


To shed some light on the various dynamics that pet store owners and operators should expect to impact their businesses today and in the future, Pet Business asked executives from five pet retailers to offer their SWOT analysis of the pet industry, as well as how they expect those strengths, weaknesses, opportunities and threats to affect their individual businesses.

 

 

 

 

 

Paul Allen, CEO of Woof Gang Bakery, LLC
37 stores in Florida, North Carolina, Georgia, Texas, New Jersey & Nevada


Strengths   The biggest strength of the pet industry right now is that more and more people view their pets as members of their family. This is demonstrated by the proliferation of pet spas, dog walkers, pet hotels and premium pet services that pop up every day. This consumer attitude positively impacts Woof Gang Bakery because we position ourselves as a neighborhood pet store, providing quality foods and services that directly appeal to that type of consumer.


Weaknesses   An industry weakness is that there are no professional organizations ruling any aspect of the [retail] pet industry. Anyone can call themselves a dog walker, pet sitter, groomer, pet shop owner or dog massage therapist.
The challenge is that, in many instances, Woof Gang Bakery is competing against individuals who have not invested the time and resources in development, training, education or insurance that our company does to ensure a quality, consistent, safe customer experience. As an example, we’ve just invested in a 7,500-square-foot training facility to train our franchise owners on all aspects of the pet industry and run a successful Woof Gang Bakery franchise.

 

 

Opportunities  One of the biggest opportunities in the industry is that a growing number of pet owners have a deep interest in the health and wellbeing of their animals and understand that healthy food and lifestyle can improve the longevity and quality of life for their pets.


Six years ago, when Woof Gang Bakery started, we positioned our company to provide the products and services that people are seeking in greater numbers today. Originally, we were providing customer education at a grass-roots level; whereas today, there is an overall greater understanding that health, wellness and prevention are the basics of pet ownership.


Threats  The biggest threat to the pet industry today is market saturation. This doesn’t impact Woof Gang Bakery significantly, as we differentiate ourselves as being experienced, well-trained, customer service-oriented neighborhood pets stores. Each store is an integral part of the community it serves, giving our brand a unique position in the industry.

 

 

 

Joe Watson, president/CEO of Petland, Inc.
145 stores worldwide


Strengths  The love for pets is universal. The demand for pets in the United States remains strong, and recent forecasts indicate the future growth potential is steady. Our industry includes some of the largest names in corporate America. This, along with the long-time entrepreneurs who created this industry, has fostered an environment that has attracted some of the biggest investment banking names on Wall Street. This recognition by the investment world speaks to the potential of our industry’s long-term growth potential.


People love pets and our Petland franchisees feature the best pets. We are the premier pet specialty retailer that always features pets, while our Pet Counselors focus on educating our customers on proper pet selection, pet nutrition and specific pet care.

 


Weaknesses   We are a $55-billion industry that acts more like 55 $1-billion industries. Historical fragmentation has made our industry vulnerable to outside attacks, and we lack a consistent message with a single voice. Our opponents have leveraged this to their advantage.
As the country’s largest pet retailer, our future success is closely aligned with the success of our pet breeders. With legislative pressures increasing across the country, this creates downward pressures on the breeder community. Petland is proud to be working closely with breeders and industry leaders to strengthen the future of professional pet breeders.

 

Opportunities   We are a relatively young industry, and as we mature, our biggest opportunity remains our ability to communicate a consistent message from a single voice. If our industry can come together, our ultimate potential will be recognized. The majority that supports responsible pet ownership and the rights of people to purchase pets responsibly will overshadow the vocal minority that is winning the legislative battle.
The love for pets is growing around the world. Petland provides an operating system that enables us to match the right pet with the right customer and meet the needs of both. As bank lending becomes more available, the Petland brand is well poised to maximize its growth potential.

 

 

Threats   Our industry is fragmented to the point where companies are funding several different associations, all of which aim for a similar goal. The effectiveness of those dollars is diluted to the point where not a single association can make the necessary impact on the issues facing our industry. If our industry cannot come together and protect the rights of the public to keep and own pets responsibility, it will create a shortage of pets that will ultimately impact the industry growth potential.


As consumer household growth continues, the demand for pets in the home will follow that growth curve. Unfortunately, in some communities, the vocal minority has pushed anti-pet friendly legislation that limits the rights of pet owners and pet retailers. People—and pet retailers—are losing their rights to make responsible decisions on the types of pets they can bring into their homes and where they choose to acquire those pets.

 

 

 

Maranda Ward, marketing manager for ANIMART Pet, Inc.
Two stores in Wisconsin


Strengths   One of the strengths of the pet industry right now is the growth that it has been experiencing. During the recession, it was one of the few areas in which spending did not go down—it has actually been going up. We are an independent retailer that focuses on higher-end foods and products, so the recession was kind of tough for us, because while people were still spending on their pets, they were maybe taking their business elsewhere. We really had to focus on providing superior service to keep customers coming back and spending money with us.
Now, what is great for us is that we are seeing pet owners move toward higher-end foods and things like natural pet products. They are moving away from buying their dog food at the grocery store and going to specialty retailers like us; and we’re here, meeting their needs.


Another strength we have tried to capitalize on is pet health care, which has been a particularly strong area within the industry. People are spending more to keep their pets living better and living longer, and we want to be the ones to help them. That’s why we are working to grow our veterinary clinic in the store. We recently hired another veterinarian, and we are expanding the hours of the clinic and the services we offer.

 

 

Weaknesses   ANIMART sells more than dog and cat products; we have all kinds of products for reptiles, fish and other types of pets. Part of the weakness we see in the industry is the fluctuations that are happening in certain segments of the pet world. For example, many people in the industry have been talking about the decline in the number of aquarium hobbyists out there. That is something we have really felt, so we’re trying to reignite interest in the hobby and make sure that we are attracting the pet owners who are setting up aquariums. We are facing the same issues in other areas, such as bird product sales. We are trying to grow those departments at a time in which they aren’t growing industry-wide.


To accomplish this, we are listening to our current customers to better meet their needs. We are also working to attract new bird or fish customers who are already ANIMART customers, but currently just shop one department, like cat or dog. We are guiding them into those departments where we are seeing some weakness, but it can be difficult to get the mass consumer to embrace those areas.

 

 

Opportunities  Independent pet retailers like us have a great opportunity to convert pet owners who are receptive to the idea of feeding higher-end foods, like grain-free diets. Maybe they normally buy pet food at Walmart or the grocery store, but they’ve come into your store to see what you offer. They want to know what the grain-free and organic buzz is about. This gives retailers an opportunity to show those pet owners how these premium foods can really change the lives of their pets.


To make the most of this opportunity, we try to show everyone that, as an independent retailer, not only do we have we have the right products to meet any of their needs, we also have a highly trained staff that can answer any questions a pet owner might have. We believe that this type of focus on the service aspect of the business really sets us apart from the competition—particularly bigger competitors.

 

 

Threats  As a retailer that sells pets, we are very aware that there are many [local governments] looking at legislation to ban those sales. For example, in Chicago—which is just a few hours from our headquarters in Madison, Wis.— they have said that if Los Angeles passes an animal sales ban, they will follow suit. Los Angeles passed a retail animal sales ban in 2012.


We have also seen local legislation regarding exotic animals. One example is a local ordinance that placed ferrets on the list of banned exotic animals. Ferrets make great pets, and once local legislators were better informed, ferrets were taken off the list. We try to keep a close eye on those types of regulations, because there is a lot of misinformation out there about exotic pets.


Another threat to the industry is the belief that all pet store puppies come from puppy mills. As a retailer with puppies, we actually exceed state law requirements by doing things like sending our veterinary staff to personally inspect the facilities of our breeders on a regular basis. Every puppy is spayed or neutered before going to their new home, so they end up as pets, not breed dogs. We also rescue animals in the community and re-home them at our own expense, without the aid of tax dollars or volunteers. We have developed such a strong reputation for rescue that we have had some people leave puppies, kittens, bunnies, reptiles and even fish on our doorstep. Our goal is to change the negative image of pet sales through education and by setting the example of what a pet store should be.

 

 

 

Pete Risano, president of Pet Life
15 stores in Maine, New Hampshire & Massachusetts

 

Strengths  The emotional bond we form with pets is the magic that drives this industry and the source of its strength. Pets provide companionship, acceptance, protection and affection for people, and that doesn’t appear to be changing any time soon. Pet Life’s mission is to develop long-term relationships with pet people through outstanding customer service, knowledge and teamwork. We do our best to be thoughtful and respectful of that relationship that people have with their pets. Taking the posture of truly listening to our customers allows us to better cater our business to them.

 

 

Weaknesses  As any industry grows, there will be mergers and acquisitions, which sometimes result in a reduction of quality, service or options. When it does, one company’s strength can be viewed as an overall weakness by the end user. It keeps independent retailers like Pet Life busy finding new vendors and higher-quality offerings for our customers.

 

 

Opportunities  Education and professionalism are areas that our industry has struggled with since its inception and is a real opportunity for us. The concept of being a “pet expert” has changed with increased access to information via the Internet, which can be both good and bad. Pet Life has made a serious commitment to educating its employees via a full-time company education manager who is out training our staff year round. Having truly knowledgeable employees who are regarded as pet experts by our customers allows us to be better than the big-box pet stores.

 

 

Threats  The humanization of pets has helped our industry grow in ways that we couldn’t have imagined 20 years ago. That trend has also led to legislation being proposed by various organizations, in the name of pets’ rights, which threatens to ban the sale of pets altogether. It’s important for our industry to do what’s in the best interest of our pet companions and to uphold responsible pet breeding while maintaining the opportunity to have a pet. Pet Life doesn’t sell dogs or cats and instead supports our local shelters with weekly adoption events. We do, however, pay close attention to local legislation and contact our representatives when necessary in order to keep those rights.

 

 

 

 

Michael Levy, president of Pet Food Express
48 stores in the San Francisco Bay Area, Carmel and Sacramento, Calif.

 

Strengths   Independent pet specialty retailers really continue to be the strength of the overall pet industry. We pioneer new innovation and steer customers to quality health and wellness products—and I don’t just mean Pet Food Express, but all independent pet specialty retailers. I think we are a truly unique industry in this way. It’s all about the pets. Our customers are just extremely passionate about their pets, and that gives us an opportunity to interact with them and develop a special relationship with them.

 

 

Weaknesses  I think that, too often, independent pet specialty retailers feel like they need to compete against each other, instead of working together. They can and should be working together to educate pet owners about the importance of feeding quality foods and other issues, such as behavioral products.

 

 

Opportunities  I think that the biggest opportunity that independent pet stores have lies in embracing new and innovative brands—particularly in consumables, because they drive repeat sales. We really need manufacturers to get creative in introducing more diets and other products that serve a real function. I also think it is important that manufacturers put in place some sort of assurance for the independent retailer that growing their brand is not just going serve to peak the big-boxes’ interest. They have to stand behind the independents.

 

Threats  The biggest threat comes from mass and Internet retailers. Now that most of the larger independent brands have established themselves at Petco or PetSmart over the past five to 10 years, the only place they can go to continue expanding are the mass and grocery channels. We know that they’re somewhat on the Internet already anyway; they can work to control that more, either in a positive or negative way. It remains to be seen how that will go.


Another issue that concerns me is that we’re really not seeing the level of innovation that we once saw in reasonably priced pet diets—primarily traditional kibble. There are a lot of really good products out there, but there really aren’t major differences between them, and the innovation doesn’t seem to be forthcoming. Certainly, there has been growth in freeze-dried, dehydrated and raw diets, but if you look at the established kibbles, it’s more of the same in most cases.


So as mass and grocery retailers continually add more and more better-quality kibble foods, you have more potential for blurring, which is a concern.