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2016-2017 Pet Age Retailer Report: Trends Old and New


January 13, 2017

As the industry closes the chapter on 2016 and sets its sights on a new year, players from all corners of the market can look back fondly on a year that seemed, overall, profitable and full of positive change.

To gain a more in-depth understanding of independent retailers and the state of their businesses, Pet Age sent out the 2016-2017 Retailer Survey via email. The respondents reported information on their businesses, ranging from which products they stock to whether or not their store processes are computerized.

Overall, the profitability of pet stores has reportedly remained in good health. Net profit data shows that 70 percent of respondents indicated increased profits at their store, with 11 percent of survey takers reporting net profit increases of 25 percent or more for the fiscal year 2015. The remaining 59 percent of respondents who saw increases reported them to fall between 1 and 24 percent.

Products on the Rise
What may come as no surprise are sales increases detected in several product categories—namely, grain-free and raw foods.

Last year, all natural treats for dogs and dog food were reported as the two fastest growing categories for businesses in 2014. These numbers have remained relatively the same, with 15 percent of respondents naming all-natural treats for dogs their fastest growing product category in 2015, and 14 percent of those surveyed naming dog food their fastest growing product category.

“I think the growing success of the all-natural and organic pet market is a direct reflection of human trends translating to the pet space,” said Heidi Nevala, president of Natura Petz. “Pet parents are analyzing ingredient labels, demanding ingredient transparency, are more interested in LID diets (limited ingredient diets), and seeking the same functional foods they eat to be part of their pet’s daily diet. We founded the company on organic products so we couldn’t be more thrilled with the natural trajectory in pet.”

For most, it would come as no surprise that consumer demand for all-natural ingredients continues to rise. And manufacturers, in addition to pet retailers, have taken note.

“Consumers are becoming increasingly aware of the importance of feeding their dogs quality, natural nutrition and how directly related their pup’s diet is to their well-being,” said Chris Meiering, Zuke’s director of innovation. “We took our cues and inspiration directly from nature and the result is what health-conscious pet parents have been craving.”

Some manufacturers have even made a point to consult directly with store owners and consumers online.

“Everything that we’ve released this year and that we’re releasing next year in terms of new SKUs has been completely market driven, both customer and store feedback,” said Andrea Tovar, founder of Bocce’s Bakery, based in New York City. “The introduction of our grain-free line was completely customer-driven. It was the top request we would get from all of our customers on social media, on facebook, and through email.”

Displacing grooming products in the No. 3 spot is grain-free food, with nine percent of survey takers seeing the fastest growth from this category. Close behind is raw foods and diets with 7 percent. Both placed higher than grooming products, which garnered 6 percent—that’s down two percentage points and three spots from last year.

“[Raw food] is definitely doing better, but it’s not growing like when grain-free came out—it really caught on like wild fire and it’s still growing,” said Brian Alt, manager of Concord Pet Food & Supplies in Cherry Hill, New Jersey. “Raw has been out; it’s been around for a long time and it is growing but it is also expensive, so the price of it keeps it so that not everyone can put their black lab on a raw diet.

“A couple of the dry [food] companies have come out with foods that come with freeze dried raw mixed in with the kibble and that’s helping,” he added. “Almost all of the raw companies that produce raw meals have come out with raw treats—that’s helping to get people to try raw. And then we also have raw goat milk, and I am the champion of raw goat milk; I want everyone to try it. I always have one open in my refrigerator ready to let a dog try raw goat milk.”

Continuing the trend from last year, the two most common food and supply categories among respondents were for dogs and cats. Most respondents reported slight upticks in business for these categories, so stocking these products seemed to be a beneficial choice for store owners.

While bird food and supplies were the third most common to be carried by respondents (excluding gifts), the category only garnered 29 percent of responses, meaning a majority of stores don’t carry bird food and supplies. Dog and cat food and supplies were the only categories which most stores reportedly stock, though a majority of respondents who carry food and supplies for birds, small animals, fish and reptiles reported an increase in business for those categories.

“It’s nothing really extensive and it’s mainly because the sales aren’t there,” Alt said. “[But] people who own a dog usually own some other kind of pet also, whether it be a cat or a small animal, a hamster. A lot of family oriented people come to the store for their dog, and their kid has a hermit crab, a beta, a hamster or a rabbit.”

Stores and Services
Even a glance at the 2016-2017 Retailer Report makes apparent the changes in ancillary services offered by independent pet retailers.

First, the percentage of respondents who offer ancillary services in their stores has increased by two percent over last year’s numbers, landing at 38 percent of those surveyed indicating they offer services such as grooming, pet sitting, agility training and more. Though these stores are in the minority for another year, it seems that might change over time.

The data gets even more interesting when considering the breakdown of ancillary services offered and those that retailers plan to add to their arsenal. Last year, grooming was the most popular service available at independent retailers, and that number has remained the same: 54 percent.

“When I opened my store, it was to not only teach people about food, but also to have grooming because it’s all encompassing; it’s all in one,” said Tazz Latifi, owner of Petropolis Beastro & Grooming Salon in New York City. “I believe that if you don’t maintain the animal physically [and] externally, you can’t maintain them emotionally and internally. So, that’s why I did it together.”

On the other hand, self-service dog washes have seen an 11 percent increase from last year, moving them from the No. 8 to the No. 1 spot in our list of most common services. In doing so, their popularity has overcome that of delivery, obedience and agility training, day care, aquarium or pond installation/maintenance and boarding services.

Supporting the authenticity of this increase is the data on services that retailers plan to add to their businesses. Last year, grooming held the top spot over delivery services by only an 8 percent margin, making it less surprising to see delivery services in the number one spot in the 2016-2017 list with 33 percent. Making leaps and bounds once again in this survey list are self-service dog washes.

With only 18 percent of survey responses last year, self-service dog washes occupied the eighth spot in our list of services that retailers were planning to add. This year, self-service dog washes shot up 25 percentage points to tie with delivery services for the most commonly cited service that retailers plan to launch. The data supports an interesting trend: Retailers are increasingly offering self-service dog washes—and those that don’t do so are planning to in the future.

“It brings consumers in so they’ll buy products,” Latifi said. “So, if your main store was retail only, you’ll wind up selling more products [by offering services].”

Digitization Continues
The marketing aspect of running a pet business also seems to be undergoing changes, though the shifts are a bit more gradual than those apparent in the services category.

Advertising spending in 2014 was concentrated mostly in the “up to $1,999” bracket, and 2015 was no different. A large majority of respondents spent this much on advertising in 2015—56 percent to be exact. This seven point increase from last year’s number seems to have manifested as a decrease in other brackets of spending become visible.

All brackets denoting spending between $2000 and $10,000 or more have experienced decreases (except for the $8,000 to $9,999 bracket, which remained the same at 2 percent of responses), culminating in a 7 percent decrease overall. Therefore, the data seems to indicate that retailers are increasingly spending less money on advertising, perhaps taking advantage of less expensive marketing avenues. The breakdown of advertising areas in which retailers saw the best results seems to support this theory.

“Social media’s really cheap,” Latifi said, explaining that she took promotion into her own hands after observing little to no business being generated by paid advertising. “I’m on Twitter, I’m on Facebook, I communicate directly with my followers. We’ll write articles and have talks at my store—I’m licensed in pet nutrition so I do food education. It’s a word of mouth process.”

Among all advertising avenues in the Pet Age survey, respondents indicated that internet/website/email marketing/social media marketing yielded the best results for their businesses. This and the second most referenced mode, referrals/word of mouth, outranked more traditional marketing techniques by a large margin. Direct mail/coupon mailers, magazine advertising, newspaper ads/shoppers/classified ads, phone directories/yellow pages, radio advertising and television ads all charted below 10 percent of respondents. Seven percent of respondents indicated that they used none of these marketing techniques to promote their stores.

“Bottom line is that the best advertisement is customer service and getting my staff to give the best service and get others to advertise for us through word of mouth,” Latifi said.

What’s Next
Overall, respondents were hopeful about the state of business and the coming years. Fifty-nine percent of respondents had been in business for longer than 10 years, and only 4 percent of businesses were less than a year old. In addition, 90 percent of respondents said they had no plans to close or sell their business within the next few years.

Another sign of good business is the 56 percent of retailers planning to improve or expand their stores, which matched last year’s survey results. Of these respondents, the most commonly referenced plans were decorating/updating stores’ cosmetics (52 percent) and remodeling current facilities (36 percent).

In line with the digitization of life and business, most respondents (92 percent) reported that their business was computerized in at least one capacity. Accounting/bookkeeping (71 percent), internet/email (70 percent) and point of sale (58 percent) were the most common forms of business computerization cited.

“It ensures accountability,” Latifi said. “You can see who makes the mistakes, where the mistakes are made and who’s made the most sales so you can reward them. It’s really fabulous for accountability, financials, and it’s the best thing any small business—I don’t care how small you are. It’s the best thing to have.”

Inquiries into the most pressing challenge for the coming year produced a clear frontrunner. At 56 percent of responses, competition with other stores was the most commonly referenced challenge. While this concern was also the most common in last year’s survey, it received a 7 percent increase from the last report.

Several clear trends are either emerging or continuing from years past. In an industry that is constantly undergoing change in some capacity—whether that be the rise of technology, new standards for ingredients or otherwise—it is both healthy and essential to acknowledge, study and understand the metamorphosis of the pet market. And numbers don’t lie.

For more facts and figures, view the digital edition of our Retailer Report in our January 2017 issue.

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