Pet Spending Research Benefits Retailers

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The brick-and-mortar pet retail business is one that relies on everyday, face-to-face interactions, and it’s only human to make decisions based on the anecdotal evidence that such on-the-ground experiences would provide. Of course it’s crucial that retailers pay attention to what happens in their stores day in and day out.

But what about a bird’s eye view? Facts and figures can be daunting, true—but it’s essential that retailers learn the ebbs and flows of the pet market and the customer habits that drive them: how customers learn about products, where they shop, how much they’re willing to spend, what they expect from brands and retailers and much more. After all, in order to effectively and efficiently connect and engage with customers, retailers need to know a great deal about them. There’s no such thing as knowing too much.

Who’s Shopping?

“Here it’s actually a pretty wide array of people because it’s a really rural area where we are located,” said Miyuki Takeda, owner of High Paw Pet Supplies in Fairplay, Colorado. “If I had to guess, it’s probably married couples with kids, probably mid-30s range, [that are] the majority of my customers.”

No matter their location, retailers report similar customer demographics. From east to west, families seem to be the cornerstone of pet market earnings. “I would say we’re pretty family-focused,” said Laura Brewer, COO at Prehistoric Pets in Fountain Valley, California.

“I would say a large portion of our customers are going to be families who are buying either their first or second reptile pet… and have a medium income and are looking for a family pet to enjoy.”

And Prehistoric Pets is in a good position to help them. According to the American Pet Products Association’s (APPA) 2017- 2018 APPA National Pet Owners Survey, a high percentage of reptile owners live in the Pacific region of the United States.

“We do have the other portion, [which] I would say is young adults,” Brewer added. “They’re probably in the 18 to 25 [age] range, and they’re looking to get something a little more unique than what they started with. They’ve had their ball python for five, 10 years. They want to get another variation or… [keep] something a little bigger, a little more intensive in its care.”

These estimations more or less fall in line with what researchers say about pet industry spending, though the statistics on age skew a bit older. According to John Gibbons, the Pet Business Professor, the ultimate pet supplies consumer unit in 2016 was made up of a married couple between the ages of 45 and 54 with their teenage child. The family has an income over $200,000 and lives in a small suburb. In the pet food sector, Gibbons describes a similar consumer unit, though this married couple is between 55 and 64 years old with grown, independent children. They have a similar income and location.

“We serve a very, very mixed demographic, but in general, our most common customer seems to be highly educated, affluent women who are anywhere between 24 and 45,” said Gregg Bernhardt, owner of Bag of Bones Barkery in Hamilton, New Jersey, who points out that his store is located on the border of rural and urban areas. “Most of them do have children or a family, but they are also juggling a career.”

The research echoes Bernhardt’s observation of his customers’ “affluent” background. In fact, APPA’s 2017-2018 report states that pet owners have a higher percentage of home ownership—69 percent of all pet owners, compared to 65 percent of the total U.S. population. In addition, pet owners tend to have higher household incomes when compared to the general population. Owners of birds, fish, dogs and small animals all reported higher percentages of household incomes over $75,000 compared to the average American family.

Bernhardt also reports a recent increase in customers between the ages of 55 to 70, attributing the phenomenon to the group’s increasing comfortability with technology and social media.

In general, the numbers indicate that more people are using the internet to learn about new pet products. According to APPA, most pet owner respondents (58 percent) learned about new products by browsing store shelves—certainly good news for brick-and-mortar retailers. However, 38 percent of owners discovered new products through the internet, whether by surfing the web, through online banner ads or links from other websites. That’s almost on par with television ads, which informed 39 percent of respondents.

Raising the Bar

“Customer expectations today as opposed to, say, 10 years ago when we [first] opened are exponentially higher than they used to be,” Bernhardt said. “Now our customers are coming in and they’re expecting premium-quality products. They’re expecting a staff that can help them navigate a lot of these products because there are so many claims out there… that they don’t know who to believe or what to think… Expectations are probably at the same level as what they would be if they walked into a doctor’s office for themselves or their children.

“Price will always be a concern with customers… so people are expecting to walk out of a store like mine with the absolute best product they can afford and that also will solve an issue the best,” he added.

Takeda agrees.

“I think a lot of people really want the best food they can afford, essentially,” she said.

Takeda named Taste of the Wild, Earthborn, Natural Balance, Fromm and Champion Petfoods as a few of her store’s top sellers, saying that these brands are usually reliable sellers. She also carries supplies, accessories and apparel. In that category, she names Coastal Pet, Dogla and RC Pet as some her best-selling offerings.

Brewer, like Bernhardt, points to price as a factor in every purchase, though she, too, believes that customers prioritize quality.

“Price does play a factor, but they’ve come in [to the store] and they’re willing to pay a little bit more of a premium to get the service,” she said. “When we’re selling an animal, [we spend] somewhere between 10 to 30 minutes working with [the customer], educating, helping them choose the right animal.”

According to Bernhardt, Champion Petfood brands Orijen and Acana do particularly well at his store, pointing out that the company is “dedicated to the independent retailer as well.” Of 46 food brands offered, Fromm has been Bag of Bones’s best-selling brand for about the last three years. Zignature, Bernhardt says, is the store’s fastest growing brand.

“In terms of toys, chews [and] treats, [customers] want things that last,” Bernhardt explained. “They want things that will keep their pets busy. They want a good value when it comes to supplies.”

Explaining that there’s a growing segment of customers that he has noticed are willing to pay more for supplies that are lasting and durable, Bernhardt gives BenniBone, Tuffy’s Toys, Planet Dog, West Paw Design and Bowsers beds as examples of products that have done well at Bag of Bones. Pet owners’ spending habits indicate more and more that they are willing to pay as much as they can for higher quality pet food, too.

“In a very real demonstration of the humanization of our pets, in 2015 a large group of pet parents chose to upgrade their pet food to super premium. This generated a $5.4 billion increase in spending,” Gibbons wrote in a post on pet food spending that was published in January. His research, though, indicated a turning point in that spending. In 2016, pet food spending fell by $2.99 billion to $26.5 billion. However, this number was still 10 percent higher than pet food spending in 2014.

“The segment is just taking a pause in its upward climb,” Gibbons wrote.

Of course, that extra money didn’t simply collect dust in shoppers’ wallets.

“Consumers began seriously price shopping for their high-end food, at retail and on the internet,” Gibbons wrote in a post on pet supply spending published a week after his post on pet food spending. “They managed to save $2.99 billion, and they used some of this savings to spend $0.94 billion more on supplies and $1 billion more on veterinary services.”

“I think over the years, prices on premium pet food have slowly risen… so as prices slowly squeak their way up, people are always on the hunt for a deal,” Bernhardt said. “I don’t think it’s that people aren’t willing to pay a premium price; I think that being human we obviously don’t want to pay more if we can pay less.”

According to Maria Lange, business group director at GfK, both sales and prices of pet food have risen over time. A PetfoodIndustry.com story written by Debbie Phillips-Donaldson and published in October 2016 cited research presented by Lange in a webinar. Citing Lange’s research, Phillips-Donaldson wrote that from 2011 to 2016, the “average price per pound [of pet food] has risen 34 percent,” between complete diets and treats.

“Natural has become the basis—the foundation—of pet food in the pet specialty space,” Lange said, quoted by Phillips-Donaldson.

According to Lange, “natural” pet foods held a 70 percent market share of the pet food sector in 2016, with the Pet Food Spending (In Billions) 2014: $24.07 2016: $26.5 2015: $29.49 often-overlapping segment of grainfree accounting for 37 percent of the market. She also names small breed recipes, limited-ingredient diets and frozen/freeze-dried raw as important categories.

“Frozen sales are increasing nearly 27 percent a year, though from a total of only $97 million and a 1.2 percent share of pet specialty,” Phillips-Donaldson wrote. “Still, the number of pet stores selling frozen has increased from 38 percent in 2011 to 63 percent today.”

The Power of Strategy

“The resources are there if you’re willing to put in a little work as a retailer to partner with a manufacturer and pass along those savings to your customer,” he added, explaining that Bag of Bones puts out a circular each month, online and on their app. The retailer also follows a host of other strategies to encourage customers to shop consistently, even in difficult or uncertain times.

For instance, the store has invested in a powerful point-of-sale system which helps them quantify sales data and target customers with deals that are actually relevant to them. With the system, called Lightspeed Retail POS, users can track and manipulate information on sales and hone in on a specific product type, category or even customer. Bernhardt spoke of a time following a recall when the retailer used the system to find which brands were suffering the most to run promotions for those products and send specific customers coupons.

“You can’t just blanket people anymore,” he said. “With social media and online being the way it is now, people are getting 30, 40, 50 emails a day and a lot of it is marketing emails, so they’re just deleting them. You have to give them a reason to look at what you’re putting out. It has to be relevant to them because people are too busy now.”

Indeed, retailers seem to be adopting similar technology to help run their businesses more effectively. According to the 2017 Retailer Report, a survey Pet Age published in January of that year, 92 percent of respondents indicated that at least some part of their retail business was computerized. Point-of-sale systems were the third most common technology among those respondents, with 58 percent of the pool using one. Accounting systems (71 percent) and internet/email access (70 percent) were the only services that were more popular.

As a strategy, both Takeda and Brewer rely on service and in-person and online interactions with customers to get the word out about their stores. And, as most retailers would probably tell you, the best marketing tool is to do good business.

“You see a lot [of] younger, tech savvy people [at our store] so my focus has been a lot more toward marketing to those people,” Takeda said. “Being more involved with social media to promote flash sales and… get more of those people coming in because they are the ones who seem to be moving here.”

Other retailers can likely relate to Takeda’s experience of seeing younger customers. In 2016, Generation Y pet owners surpassed baby boomers to become “the largest generational segment of all pet types owned,” according to APPA. And of all pet owners who learned about new pet products online, 47 percent did so on Facebook—that’s second only to pet product company websites themselves (63 percent). Sites like Facebook, Twitter and others might also function as a sort of digital word-of-mouth, as many users post about their experiences with businesses or ask their “friends” for recommendations.

“We rely heavily on word of mouth for our facility because reptiles are… getting less unique, but they are still a thing you’re going to go to that specialty shop to get,” Brewer said. “For the retail area, we really don’t do any other advertising besides making sure we’re taking care of our customers because they’re going to be our best salesmen.”

The store’s resident animal care experts have created starter kits to ease the transition that comes along with the addition of a new pet. Brewer explains the importance of brand recognition, especially in the reptile category.

“In the reptile industry, there’s not a ton of brands,” she said. “There’s some developing brands but, like, Zoo Med’s been around basically [since] before there even was a reptile industry… Definitely Zoo Med and Exo Terra are [our] top two selling brands. I’d say they fill at least 90 percent of our product [offerings].”