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August 15, 2018

The U.S. retail market is trending upwards. According to John Gibbons, president of A GPS For Pet Businesses, the market—which includes auto dealers, supermarkets, restaurants, online retailers and pet stores—reached $5.75 trillion in 2017.

According to Gibbons’ report, “this year’s increase of $235B (+4.3 percent) topped last year’s increase of $172B and was twice the increase from 2014 to 2015.” While one factor for this uptick is rising fuel prices putting gas station revenue back on the plus side, the pet industry made an impact too. In fact, two pet store chains made Gibbons’ list of 2017’s Top 100 U.S. retailers. Together, PetSmart and Petco accounted for $12.48 billion of the $5.75 trillion U.S. retailers raked in last year. That’s a 15.8 percent increase in combined sales over 2016.

“PetSmart’s growth is due to its acquisition of Chewy. Petco made big news last year by qualifying for the Top 100 for the first time at #98. This was evidence of the strength of the U.S. pet industry. They had a fair year in 2017 (+3.7 percent), but it’s a very competitive environment; they barely made the 2017 list at #100,” Gibbons wrote.

The 100 companies that make up the Top 100 Retailers in the U.S. Market account for 38 percent of the total market. Though only two are pet product specific stores, many others sell pet products.

“Pet products are an important part of the success of the Top 100. Sixty-seven companies on the list sell pet food and/or supplies in 142,000 stores and/or online,” Gibbons reported.

Those 57 companies that stock pet products in their stores generated $1.75 trillion in total sales.

“How much was from pet? Let’s ‘do the math.’ If we take out the $12.5 billion done by PetSmart and Petco and the remaining companies generated only 1.5 percent of their sales from pet, we’re looking at $26 billion in pet products sales from only 55 “non-pet” sources! (Note: The 1.5 percent share for pet items is a low end estimate based on data from the U.S. Economic Census.) The APPA reported $43 billion in pet food and supplies sales for 2017. That means that 55 mass market retailers accounted for 60 percent of the pet products sold in the U.S. in 2017,” Gibbons wrote.

According to Gibbons, PetSmart, Petco, and about 15 mass market retailers account for 75 percent of all the pet products sold in the U.S.

“Pet products are widespread in the retail marketplace but the [money is] concentrated. Regardless of your position in the pet industry, monitoring the Top 100 group is important,” he said in his report. “This group also reflects the ongoing evolution in the retail market. We see the growing influence of the internet and importance of value. The intense competition is evident in the turmoil of mergers and acquisitions. In business, just like in biology, you must adapt to a changing environment or face extinction!”

But back to that stat about PetSmart, Petco, and about 15 mass market retailers account for 75 percent of all the pet products sold in the U.S. What does that mean for independent pet retailers? How can they compete with those numbers?

According to Gibbons, differentiation is key. Services like grooming and pet sitting cannot even be the biggest differentiator now that chain stores offer those services, too. That means capitalizing on the personal.

“Have knowledgeable employees that engage your customers,” Gibbons told Pet Age. “Shopping for pet products for your pet children is very personal. Sixty-three percent of consumers prefer to make pet products buying decisions in store. The only category that has a higher percentage is fresh groceries. Talk to your customers. Ask if they have any questions or if you can be of any assistance.”

Looking for and trying new products was easy-to-recognize benefits is another way independent pet stores can set themselves apart from big box stores. And independents have to keep up with the changing times in order to compete, he says. Having a website and social media presence are ways to do that.

“If possible allow them to order online. If you do this, allow them the option to buy online, pickup in store—BOPIS,” Gibbons explained. “If they do, consider offering a discount on other things they buy when they pick up their order. Convenience and value for them—transaction building you.”

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