March 9, 2007
Retailers Fetching Lots of Doggie Dollars
By Tom Ryan
On March 3rd, Petco held its first-ever Spring Pet Fashion show nationwide. During the event, pets – mostly dogs but a few cats and iguanas as well – scampered down catwalks (dogwalks) across the chains’ 850 stores wearing the latest pet fashion trends.
“Spring tees with attitude are our top sellers,” said Therese Helmer, a Petco merchandise VP. “The black and white ‘Security’ tee is the hottest new item for 2007 and the ‘Diva,’ ‘Little Princess’ and ‘Spoiled’ collections are also among our pet fashionistas’ top picks.”
Pet fashion is just part of a “pet pampering” trend driving multiple sales opportunities across pet products. According to Mercanti Group, a Minneapolis-based investment bank, the pet industry has been growing at a healthy six percent annual clip per year. But in some segments – such as natural and organic food, veterinary care, and pet boarding and grooming – are expanding at a 10 to 15 percent rate.
“In the last ten years, consumer expenditures on their pets have more than doubled and we believe the pet industry is a ‘lifestyle’ industry, benefiting from important trends that will facilitate above average returns,” said Jim D’Aquila, managing director at Mercanti, which just released a report on the industry entitled: Are You Barking Up the Right Investment Tree?
What’s primarily driving pet product opportunities is a trend toward “humanizing” pets, or viewing Fido or Tabby as a member of the family. Pets are finding themselves increasingly being fed better food, sporting fancier collars and dog beds, and even included on family vacations.
Healthy demographics also help. According to the Department of Labor, in 2005, 60 percent of the pet products were brought by consumers without children. In that same year, 50 percent were bought by consumers making over $70,000 a year. Combined, that means relatively well-off pet owners without children are left splurging on their furry companions.
This has created both a ‘premium’ and a ‘health’ opportunity, according to Mercanti.
At the upper end, this supports demand for luxury accessories such as $18,000 Polo Ralph Lauren pet carriers and Burberry pet apparel as well as for grooming and boarding services, including PetSmart’s nearly 60 luxurious air-conditioned pet hotels. But their health-conscious parents are also creating a strong market for organic, natural or age-specific premium dog food, herbal shampoo and non-toxic toys. Finally, pet care is expanding to include chemotherapy, organ transplants, dialysis and MRIs and a recently FDA-approved drug for obese pets.
Beyond Petsmart and Petco, Saks, Nordstrom, Gap, Ikea, Lowe’s and Kroger are all exploiting the opportunity by expanding pet assortments. Target and Wal-Mart recently introduced premium food lines on the hopes that pet owners coming in for the food scoop up some higher-margin pet accessories. But Mercanti also noted that thousands of mom & pops serving niche markets are thriving.
Looking ahead, demographics should continue to improve as aging Baby Boomers, with children leaving the household, turn more of their attention to their furry friends.
“There are no signs that the pet segment of the consumer industry is going to slow down in the near or distant future,” said Mr. D’Aquila. “There are more dogs and cats in more homes and they are living longer, and the demographic, psychological and socio-economic trends that are fueling this growth are not likely to subside in the foreseeable future.”
Discussion question: What is your assessment of the opportunity associated with the premium health and luxury segments of the pet products market? How much of an opportunity is there for specialty stores and mom & pops operating in this space?
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First of all, pets (dogs in particular) did not just land on this earth and begin filling transferred human emotional needs and wicking away attention from what “really matters.” Let’s not forget that middle step between wolf and domesticated dog; selective breeding. People intentionally created the emotional and physical dependence and that calls for responsibility (a call that largely has gone unanswered as evidenced by the ridiculous lack of legal accountability and consequences for cruelty along with the deplorable conditions and high euthanasia rates in most shelters). Okay, jumping off of the soap box now….
I believe that many specialty retailers in smaller markets (outside of New York, LA, and other pet-friendly major cities) have forfeited a golden opportunity. As pointed out in previous posts, big box pet retailers still do not offer the consistently safe, well-made and healthy products that discerning pet owners crave. Target is one retailer that identified this void and filled it with a getting-better-all-the-time selection of products that don’t look like they were made out of leftover bed sheets or odd lots of rubber and leather. Pet is one category where I still see a lot of room for improvement, and opportunity, in the big space between mass and class!
This is a huge area of retail growth, i.e., one that can’t be over-estimated.
Pets are, in effect, the new children in many households, and they’re investment-grade children at that.
In every segment of the market’s dog garment world, it is as important as this family member having pet medical insurance!
Interestingly, the affluent young marriages having no children now love their new ‘baby,’ a lovely and human-like pet.
Do we have to say, anything else?
Hmmmmmmmmmmmmm
Pets have become a part of the family social structure and offer a surrogate outlet for love and affection. There is a huge opportunity for retailers and suppliers to fill the broader need for quality Pet Care versus just the traditional maintenance products. Many people today view themselves as pet guardians rather than just pet owners.
The challenge for retailers is to offer a Pet Care shopping environment that speaks to this need. Will Nordstrom welcome barking dogs into their stores? Will Starbucks offer lattes for Pets? The pet superstores offer not only a wide variety of Pet Care products but a welcome environment. If other retailers want to take advantage of the market opportunity, they may have to address his issue. Love me, love my pet!
I totally agree with Ian Percy. The pet market will remain strong and we (humans) will continue the outlandish spend on our pets (because they need us) while thousands of children go hungry in this country alone. It’s interesting to say the least.
I attended a trade show recently (home and garden) and there was a plethora of items for animal lovers, along with–to my amazement–people coming to the show, not with baby strollers but dog strollers. There were fur coats, rubber booties along with matching raincoat, and many other more elaborate expenditures for your cute little pet.
This reminds me of when I was in Napa, California working with a company. Past the beautiful Silver Oak Country Club up on a hill overlooking the entire valley (prime real estate), there was a cemetery. I remarked to my associate that the grave sites looked smaller and the memorials different…although still very elaborate. He told me it was a “pet cemetery.” Then I began to notice the numerous people just sitting and talking to the air, crying and obviously distressed.
I was amazed. Never have I seen so many in a “people cemetery”. I guess “dogs (or pets) are truly man’s best friend!
Mercanti’s observation that fewer children = more pets is the key to this industry’s sales growth. Fewer children is a long term trend unlikely to be reversed. Although the food margins are low, the service margins (vets, pet insurance, boarding) are good, and they’re going to stay good. For example, there are only 27 veterinary colleges in the USA. Very few professions are as supply-constricted as vets are.
There’s an interesting maybe even disturbing psychology behind people and pets. The key operative is “dependency”–we like a living thing totally dependent on us. My dog NEEDS me to put out her breakfast and dinner. She NEEDS me to pull the cactus barb out of her paw. How else can she get her heartworm medicine? We love to respond to helplessness. Heck, we love being needed!
On the news this morning there was an item about a dog trapped on the roof of a burning building in New York. Or the story yesterday about dogs who fell through the ice. Now I’m hesitant to say it but those stories will tug on the heart as much as (do I dare say more than) if it were people instead. Why? We respond to helplessness. People have a chance (we assume) to figure a way out of the problem, animals (we assume) don’t.
Here’s a test for you: If the jockey had been hurt instead of Barbaro during the Preakness (can you even name the jockey?) do you honestly think it would have stayed in the news all those months? There was even a Senate Resolution No, 27 in Pennsylvania honoring the horse–would there have been one for the jockey? What’s the difference? Helplessness.
Now just so I don’t draw undeserved ire–the value of a human life and that of an animal are not even in the same category. That said, both are precious.
Sorry–I strayed from the topic. But not all that far. Because animals have this dependency/helplessness pet stores have an enormous opportunity to leverage that. One of my pet suggestions that no retailer seems to have responded to yet is to differentiate pet food, chew things, etc. that are actually ‘good’ for your pet. Some chew bones for example, are infused with sugar. Dogs love it–but it’s not good for them. Tell the consumer which products are actually healthy and which are junk.
I predict we’ll see the same movement toward health in pet food that we’re seeing in human fast food. We’re seeing it already in an unfortunate way with pills to cure pet obesity. That’s our way–instead of learning to live and eat healthfully, take a pill! Pets assume that what you’re feeding them is good for them–but is it? We do to pets what we do to ourselves. We’ll eat fat saturated junk and drink a diet Coke. We give our pets sugary junk food and buy diamond studded collars.
There are no signs that the pet segment of the consumer industry is going to slow down in the near or distant future. There are certainly opportunities for the few in this space to capture their core customers wallets (i.e.) PetSmart, pets hotel is a revolutionary alternative in day and overnight care. Banfield, The Pet Hospital, co-partners within PetSmart. Banfield gives pets the same care we want for ourselves, making pet health affordable, strengthening the value of pets in families. Pet fashion will be another segment of the “pet pampering” trend driving multiple sales opportunities across pet products.
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First of all, pets (dogs in particular) did not just land on this earth and begin filling transferred human emotional needs and wicking away attention from what “really matters.” Let’s not forget that middle step between wolf and domesticated dog; selective breeding. People intentionally created the emotional and physical dependence and that calls for responsibility (a call that largely has gone unanswered as evidenced by the ridiculous lack of legal accountability and consequences for cruelty along with the deplorable conditions and high euthanasia rates in most shelters). Okay, jumping off of the soap box now….
I believe that many specialty retailers in smaller markets (outside of New York, LA, and other pet-friendly major cities) have forfeited a golden opportunity. As pointed out in previous posts, big box pet retailers still do not offer the consistently safe, well-made and healthy products that discerning pet owners crave. Target is one retailer that identified this void and filled it with a getting-better-all-the-time selection of products that don’t look like they were made out of leftover bed sheets or odd lots of rubber and leather. Pet is one category where I still see a lot of room for improvement, and opportunity, in the big space between mass and class!
This is a huge area of retail growth, i.e., one that can’t be over-estimated.
Pets are, in effect, the new children in many households, and they’re investment-grade children at that.
In every segment of the market’s dog garment world, it is as important as this family member having pet medical insurance!
Interestingly, the affluent young marriages having no children now love their new ‘baby,’ a lovely and human-like pet.
Do we have to say, anything else?
Hmmmmmmmmmmmmm
Pets have become a part of the family social structure and offer a surrogate outlet for love and affection. There is a huge opportunity for retailers and suppliers to fill the broader need for quality Pet Care versus just the traditional maintenance products. Many people today view themselves as pet guardians rather than just pet owners.
The challenge for retailers is to offer a Pet Care shopping environment that speaks to this need. Will Nordstrom welcome barking dogs into their stores? Will Starbucks offer lattes for Pets? The pet superstores offer not only a wide variety of Pet Care products but a welcome environment. If other retailers want to take advantage of the market opportunity, they may have to address his issue. Love me, love my pet!
I totally agree with Ian Percy. The pet market will remain strong and we (humans) will continue the outlandish spend on our pets (because they need us) while thousands of children go hungry in this country alone. It’s interesting to say the least.
I attended a trade show recently (home and garden) and there was a plethora of items for animal lovers, along with–to my amazement–people coming to the show, not with baby strollers but dog strollers. There were fur coats, rubber booties along with matching raincoat, and many other more elaborate expenditures for your cute little pet.
This reminds me of when I was in Napa, California working with a company. Past the beautiful Silver Oak Country Club up on a hill overlooking the entire valley (prime real estate), there was a cemetery. I remarked to my associate that the grave sites looked smaller and the memorials different…although still very elaborate. He told me it was a “pet cemetery.” Then I began to notice the numerous people just sitting and talking to the air, crying and obviously distressed.
I was amazed. Never have I seen so many in a “people cemetery”. I guess “dogs (or pets) are truly man’s best friend!
Mercanti’s observation that fewer children = more pets is the key to this industry’s sales growth. Fewer children is a long term trend unlikely to be reversed. Although the food margins are low, the service margins (vets, pet insurance, boarding) are good, and they’re going to stay good. For example, there are only 27 veterinary colleges in the USA. Very few professions are as supply-constricted as vets are.
There’s an interesting maybe even disturbing psychology behind people and pets. The key operative is “dependency”–we like a living thing totally dependent on us. My dog NEEDS me to put out her breakfast and dinner. She NEEDS me to pull the cactus barb out of her paw. How else can she get her heartworm medicine? We love to respond to helplessness. Heck, we love being needed!
On the news this morning there was an item about a dog trapped on the roof of a burning building in New York. Or the story yesterday about dogs who fell through the ice. Now I’m hesitant to say it but those stories will tug on the heart as much as (do I dare say more than) if it were people instead. Why? We respond to helplessness. People have a chance (we assume) to figure a way out of the problem, animals (we assume) don’t.
Here’s a test for you: If the jockey had been hurt instead of Barbaro during the Preakness (can you even name the jockey?) do you honestly think it would have stayed in the news all those months? There was even a Senate Resolution No, 27 in Pennsylvania honoring the horse–would there have been one for the jockey? What’s the difference? Helplessness.
Now just so I don’t draw undeserved ire–the value of a human life and that of an animal are not even in the same category. That said, both are precious.
Sorry–I strayed from the topic. But not all that far. Because animals have this dependency/helplessness pet stores have an enormous opportunity to leverage that. One of my pet suggestions that no retailer seems to have responded to yet is to differentiate pet food, chew things, etc. that are actually ‘good’ for your pet. Some chew bones for example, are infused with sugar. Dogs love it–but it’s not good for them. Tell the consumer which products are actually healthy and which are junk.
I predict we’ll see the same movement toward health in pet food that we’re seeing in human fast food. We’re seeing it already in an unfortunate way with pills to cure pet obesity. That’s our way–instead of learning to live and eat healthfully, take a pill! Pets assume that what you’re feeding them is good for them–but is it? We do to pets what we do to ourselves. We’ll eat fat saturated junk and drink a diet Coke. We give our pets sugary junk food and buy diamond studded collars.
There are no signs that the pet segment of the consumer industry is going to slow down in the near or distant future. There are certainly opportunities for the few in this space to capture their core customers wallets (i.e.) PetSmart, pets hotel is a revolutionary alternative in day and overnight care. Banfield, The Pet Hospital, co-partners within PetSmart. Banfield gives pets the same care we want for ourselves, making pet health affordable, strengthening the value of pets in families. Pet fashion will be another segment of the “pet pampering” trend driving multiple sales opportunities across pet products.