“If you look at the biggest retailers, it’s probably going to be a non-event,” said analyst Amy Ryan, who follows Petco Animal Supplies Inc. (San Diego) and PetsMart (Phoenix) for ThinkEquity (New York). “If you look at the numbers, these companies do less than 2 percent of their total sales from their online businesses. Plus, Wal-Mart is going to have a limited selection online and emphasize lower prices. And I’m not going to be able to bring my dog into Walmart.com, either.”

In fact, talk to retailers, analysts and industry officials, and there’s a sense that pet retailers are not Wal-Mart’s main target. Few people want to be pinned down, given Wal-Mart’s size, reputation and resources, but several are guessing that the world’s largest retailer might be going after grocery stores’ 37 percent share of the soon-to-be $36 billion pet supplies market. Wal-Mart, after all, has had the supermarket business firmly in its sights for much of the past decade.

“Anytime Wal-Mart gets into something, people sit up and take notice,” said Petco spokesman Don Cowan. “But as we have looked at it, they’re going to have mass merchant kinds of items, and not the pet specialty items we’re focused on. We just don’t think those items will appeal to our customers. We don’t see Wal-Mart customers as pet pamperers, which is how we see our customers.”

Consumer demand prompted the decision to add a separate pet section to Walmart.com at the end of March, said Walmart.com spokeswoman Amy Colella. “The main impetus for doing it was because our customers asked for it. Pet supplies were one of the most widely searched items on the site, and we felt we needed to respond to the demand for one of the most widely searched items.”

Seventy percent of Wal-Mart’s store customers have online access, and 90 percent of Walmart.com customers visit a Wal-Mart store at least once a month, Colella added. The company estimates that its online shoppers have slightly higher incomes than its typical customer.

• Has more than 5,000 SKUs, compared with just a handful—mostly gift items—before the rollout. Colella said the company expects to keep adding SKUs based on customer feedback.
• Includes items not necessarily in Wal-Mart stores, such as aquariums, gift baskets, photo frames and personalized merchandise. “We wanted to offer our customers something above and beyond what they could find in our stores,” Colella said.
• Doesn’t sell pet food, such as Ol’ Roy, the company’s private label that happens to be the best-selling dog food in the United States. Customers who want to buy food are referred to the nearest store. Colella said the company decided against selling pet food online not just because of the delivery difficulties, but also because the pet section’s goal is to complement what’s in the stores rather than duplicate it.

Colella referred questions relating to the company’s long-term plans (including whether it will upgrade its store pet departments) and goals for its online pet business to corporate headquarters, which did not respond to three requests for information. Reportedly, Wal-Mart wants to have 30 percent of the pet supplies market within the next five years.

Can Wal-Mart get one-third of the pet supplies market, using its online store as leverage? Past performance of online pet stores don’t bode well for Wal-Mart, given the failure of Pets.com and its brethren in the late 1990s.

But this is Wal-Mart, not a dot-com start-up. It’s probably too soon to tell what will happen, said Ryan of ThinkEquity. However, she noted that gaining that much market share might not be as difficult—or as disastrous for the industry—as it might seem. True, some of Wal-Mart’s market share could come at the expense of independents. But if the pet supplies market keeps growing—and it shows every sign of doing so—there might be room for everyone, from grocery stores to independents to Wal-Mart, she added.

Experts agreed on one thing: No one should underestimate Wal-Mart or its ability to sell pet supplies. Plenty of companies have gone out of business doing just that.

Said Rick Wamre, a Dallas small-business consultant: “If you’re already doing a good job, and offering the service that your customers can’t get at the big box stores, then you don’t have too much to worry about. And if you’re not doing those things, you should be worried regardless of what Wal-Mart is doing.”
--Jeff Siegel [June 2005 PET AGE]