After more than 20 years of watching PetSmart and Petco enjoy the lion’s share of consumer spending in the pet specialty channel, it appears that independent pet store chains are gaining ground and PetSmart & Petco are going downward dog!
According to the latest edition of the Pet Stores in the U.S. industry report (December 2018) from global market research firm IBISWorld, the two big-box chains’ combined sales accounted for less than half of the pet specialty retail market for the first time in a long time.
Nonetheless, with 47.2% market share between them, PetSmart (27.3%) and Petco (19.9%) are still the biggest dogs in the pound in this channel. However, it’s worth considering that just six years ago the two chains together reportedly accounted for almost 64% of the market. It seems clear to use here at Pet Engine Marketing that the independent pet stores are doing some things right!
Looking at Pet Business’s list of Top 25 Pet Retailers this year, we see that the total number of stores operated by the Top 25 Retailers in the pet specialty channel increased by 2,379 over the past six years—about 34 percent of which were opened by either Petco or PetSmart. However, over the previous five-year period, the two big-box chains were responsible for more than 70 percent of the Top 25 list’s store count increase.
Seems like the momentum has shifted towards independent and the stranglehold on the pet industry previously maintained by PetSmart and Petco is losing grip strength. Why?
We can point to the impact of online sales, which many industry experts say disproportionately hurt big-box retailers across every channel. That is because these chains typically compete primarily on price and convenience—two areas where internet outlets like Amazon excel. Making matters worse, neither PetSmart nor Petco have done a particularly good job luring online shoppers, although there are some signs that they have been making progress recently. However, in our experience online sales are generally not an area where most of our brick and mortar independent pet stores excel either.
What we think has played a much bigger role in shifting the balance within the pet specialty channel is the ongoing evolution of its independent retailers. Independent retailers (especially those working with Pet Engine) have upgraded their marketing strategy and spending, improved their brand loyalty by focusing on the customer experience, introduced new streams of revenue and in-store experiences, and built bigger localized footprints that draw in current, old, and potential customers with higher frequency. Smaller retailers have gotten better at leveraging their unique strengths to be formidable competitors.
Still, it’s not time to take the pedal off the gas. Just because PetSmart & Petco are going downward dog and feeling the pressure a bit, they’ll be adapting rapidly and approaching this problem with fresh perspectives and solutions.