1. WWW.IBISWORLD.COM Pet Stores in the US February 2012   1Lucky dog: Pet owners will invest in premiumproducts as disposable income risesIBISWorld Industry Report 45391Pet Stores in the USFebruary 2012 Caitlin Moldvay2 About this Industry 16 International Trade 30 Industry Assistance2 Industry Definition 17 Business Locations2 Main Activities 31 Key Statistics2 Similar Industries 19 Competitive Landscape 31 Industry Data2 Additional Resources 19 Market Share Concentration 31 Annual Change 19 Key Success Factors 31 Key Ratios3 Industry at a Glance 20 Cost Structure Benchmarks 21 Basis of Competition 32 Jargon Glossary4 Industry Performance 22 Barriers to Entry4 Executive Summary 23 Industry Globalization4 Key External Drivers5 Current Performance 24 Major Companies8 Industry Outlook 24 PetSmart Inc.11 Industry Life Cycle 25 PETCO Animal Supplies Inc.13 Products Markets 28 Operating Conditions13 Supply Chain 28 Capital Intensity13 Products Services 29 Technology Systems14 Demand Determinants 29 Revenue Volatility15 Major Markets 30 Regulation Policywww.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
2. WWW.IBISWORLD.COM Pet Stores in the US February 2012   2About this IndustryIndustry Definition Pet stores sell a variety of pets, including shampoos, medication, toys, pet dogs, cats, fish and birds. Stores also sell containers, dog kennels and cat furniture. pet foods and pet supplies, such as Some stores offer pet services, such as collars, leashes, health and beauty aids, grooming and training.Main Activities The primary activities of this industry are Retailing pets Retailing pet food and supplies Providing pet grooming and boarding services The major products and services in this industry are Live animals Pet food Pet services Pet suppliesSimilar Industries 54194 Veterinary Services in the US Establishments in this industry provides veterinary services. 81291 Pet Grooming Boarding in the US Operators in this industry provide pet grooming and boarding services. 45411a E-Commerce Online Auctions in the US Businesses in this industry retails pet foods and pet supplies via the internet. 45411b Mail Order in the US Establishments in this industry retail pet foods and pet supplies via mail-order or catalogs.Additional Resources For additional information on this industry www.americanpetproducts.org/ American Pet Products Association www.petage.com Pet Age Magazine www.petbusiness.com Pet Business www.hsus.org The Humane Society of the United States
3. WWW.IBISWORLD.COM Pet Stores in the US February 2012   3Industry at a GlancePet Stores in 2012Key Statistics Revenue Annual Growth 07-12 Annual Growth 12-17Snapshot $14.7bn 2.8% 3.8% Profit Wages Businesses $634.1m $1.9bn 13,730 Revenue vs. employment growth Number of pets (cats and dogs)Market SharePetSmart Inc. 10 2104 4.3% 8 200PETCO Animal 6 190 % changeSupplies Inc. 4 180 Millions2 0.7% 2 170 0 160 −2 150 −4 140 Year 04 06 08 10 12 14 16 18 Year 03 05 07 09 11 13 15 17 Revenue Employment SOURCE: WWW.IBISWORLD.COM p. 24 Products and services segmentation (2012)Key External Drivers 4.5%Number of pets 10.2% Live animals Pet services(cats and dogs)Per capita disposableincomeExternal competitionNumber of households 27.3% 58% Pet food Pet supplies p. 4 SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COMIndustry Structure Life Cycle Stage Growth Regulation Level Medium Revenue Volatility Low Technology Change Medium Capital Intensity Low Barriers to Entry Medium Industry Assistance None Industry Globalization Low Concentration Level High Competition Level Medium FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31
4. WWW.IBISWORLD.COM Pet Stores in the US February 2012   4Industry PerformanceExecutive Summary   |   Key External Drivers   |   Current PerformanceIndustry Outlook   |   Life Cycle StageExecutive The Pet Stores industry is ahead of the the five years to 2012. From 2011 toSummary pack when it comes to sales. Even 2012, revenue is projected to gain 4.1%. during the Great Recession, which The emerging trend of pet parents has slowed most of the retail sector, the also brought about high demand for industry continued to yield positive premium pet products and services. revenue growth. This trend was mainly Since pets are often considered family driven by an increasing number of “pet members, pet owners frequently indulge parents” – pet owners who treat their them with all-natural and organic pet four-legged friends as family members. foods and treats, in addition to services During the economic downturn, when such as grooming and day care. These positive drivers, combined with rising sales, have increased profit margins forI ndulgent pet parents will drive up demand for industry players in the five years to 2012; IBISWorld estimates that margins havepremium pet food and services like grooming increased from about 3.7% of revenue in 2007 to about 4.3% in 2012. consumers of all income levels Over the five years to 2017, industry tightened their belts, pet parents cut revenue is projected to maintain back on their personal discretionary strong growth. As the economic spending first before scaling down on recovery gains traction and consumers their spending for their pets. are equipped with heavier wallets, Consequently, revenue growth slowed revenue from premium products and during the recession but maintained its services is projected to increase. From overall positive trend. Revenue is 2012 to 2017, revenue is forecast to expected to increase at an average rise at an average annual rate of 3.8% annual rate of 2.8% to $14.7 billion in to total $17.8 billion.Key External Drivers Number of pets (cats and dogs) household and leisure products before As households adopt more cats and cutting down on pet food and toys. A rise dogs, demand for industry goods such in per capita disposable income, though, as pet foods, medicine and accessories increases the propensity for households will increase. The average dog or cat to purchase a greater quantity of goods owner spends about $250 annually and more premium items that are higher just on food, according to the in price. This driver is expected to American Pet Product Association’s increase slowly during 2012. (APPA) National Pet Owner’s Survey. This driver is expected to increase External competition during 2012, creating a potential Pet food, toys and accessories supplied by opportunity for the industry. this industry compete with comparable products offered by supermarkets and Per capita disposable income grocery stores. Supermarkets and grocery Consumers increasingly perceive pets as stores often sell the same products or members of the family, so products for very similar products as pet stores, pets can be considered nondiscretionary. providing consumers with added A decrease in disposable income has little convenience. This driver is expected to effect on demand, since households remain flat but high over 2012, posing a typically reduce spending on other potential threat to the industry.
5. WWW.IBISWORLD.COM Pet Stores in the US February 2012   5Industry PerformanceKey External Drivers Number of households number of households will likely lead tocontinued According to the APPA’s most recent growth in pet ownership levels in the National Pet Owners Survey, 62.0% of United States, supporting industry US households own a pet. demand. This driver is expected to Consequently, an increase in the increase slowly during 2012. Number of pets (cats and dogs) Per capita disposable income 210 4 200 2 190 % change 180 Millions 0 170 160 −2 150 140 −4 Year 03 05 07 09 11 13 15 17 Year 05 07 09 11 13 15 17 SOURCE: WWW.IBISWORLD.COMCurrent Despite the economic downturn that undermined most of the retail sector, to increase at an average annual rate of 2.8% to $14.7 billion over the five yearsPerformance sales for the Pet Stores industry have to 2012. In particular, the industry is remained positive in the five years to expected to post an additional 4.1% 2012. Financial resilience in this growth in sales from 2011 to 2012 as industry has been powered by owners’ higher disposable income encourages tendencies to treat their pets like family greater spending on pets. members; by offering more innovative, With strong demand and rising sales, specialized and premium products and pet stores have experienced increasing services, pet stores have been able to profit margins over the five-year period. cash in on pet owners’ desires to pamper Sales of premium pet food and supplies their pets. In addition, growth in pet in particular have driven up profitability ownership in the United States has led because they typically have higher to higher demand for pet food and markups. IBISWorld estimates that in supplies overall. Consequently, revenue 2012, the industry will reach margins of for the Pet Stores industry is estimated 4.3% of total revenue.Growth during the Industry growth over the past five years Association (APPA), about 62.0% of USrecession is largely attributable to higher pet households own a pet, which equates to ownership and accompanying demand 72.9 million homes. Pet ownership has for pet products. According to the been growing slowly but steadily over the 2011/2012 National Pet Owners Survey past two decades. The APPA reports that published by the American Pet Products in 1998, about 51 million homes owned
6. WWW.IBISWORLD.COM Pet Stores in the US February 2012   6Industry PerformanceGrowth during the at least one pet; 64 million owned a petrecession in 2002; and 69 million owned one in R ising pet ownership ledcontinued 2005. Such growth rates have translated to high industry demand into rising demand for pet supplies in the five years to 2012, even during recessed despite the recession economic conditions. Because supplies such as food and of pet owners in 2010 conducted by Pet treats are required for the well-being of Business, a publication dedicated to the pets regardless of household income, pet supplies retailing industry, the demand for the Pet Stores industry has majority of respondents (68.0%) proved resilient against the headwinds of indicated that they had reduced their low confidence in the economy and spending on pet supplies compared with decreased disposable income. To this the previous year. end, pet food, which accounts for about With such declines in overall 58.0% of industry sales, has been the spending, operators have been actively leading contributor to positive sales adding pet services to capture more of during the recession. According to APPA the consumer dollar. Pet Business data, sales for pet food increased 3.7% in reported in another survey that in 2010, 2008, 4.5% in 2009 and 6.8% in 2010. 22.0% of retailers added pet-related Nonetheless, while many pet owners services, such as grooming and pet sheltered their spending on pets from boarding, to improve sales and margins. otherwise drastic cutbacks on household IBISWorld expects that in 2012, the and leisure items during the recession, continued emphasis on pet services will the endurance of these poor economic be a primary driver for sales. As the conditions has adversely affected the unemployment rate slowly subsides and industry to some extent. Between 2008 households gain more disposable and 2010, revenue growth slowed as income, consumers will likely increase consumers were forced to cut back on their spending on these discretionary specialty products. According to a survey pet services.Part of the family In the five years to 2012, the pet according to consumer research humanization trend has benefitted the website Packaged Facts. Examples of Pet Stores industry. A tipping point pet services go beyond the traditional was reached in 2005 and 2006 when grooming, dog walking and training; people began rewarding their pets in today, premium services like pet human terms, according to the APPA. therapy sessions and pet-only flights As such, the name “pet parents” was are available for four-legged family coined to describe enthusiastic pet members. Additionally, doggy hotel owners (especially of dogs and cats) services have emerged, equipped with who treat their pets as members of the heated beds and flat-screen TVs that family. With such humanization, the show high-definition DVDs in private interest in pet pampering has gained suites. The rise in demand for pet popularity over the five-year period, services has positively affected the leading to thriving demand for industry over the years. Since there are industry pet services. In fact, more few variable costs associated with these than $6.0 billion was spent on services, any increase in revenue nonmedical pet services in 2010, directly improves stores’ bottom lines.
7. WWW.IBISWORLD.COM Pet Stores in the US February 2012   7Industry PerformanceProduct innovation In 2007, melamine-contaminated dog pets, a strong push toward innovating and cat food reportedly caused the death higher-quality and personalized pet of more than 3,500 animals, prompting products has occurred in the industry. a nationwide recall and hurting the Examples of such products include industry’s reputation and sales. This monogrammed sweaters, digitized incident accelerated the trend toward collar tags, handmade treats and premium pet foods with natural and designer pet clothes and accessories. To organic ingredients. further support this trend, big Natural and holistic pet food sales companies such as Paul Mitchell, reached $15.0 billion in 2008 and Omaha Steaks, Harley Davidson and have been growing 20.0% annually Old Navy have also invested in pet since, according to Pet Business. The supplies, now offering products such as rising popularity of this food has dog shampoo, pet attire and name- brought in additional sales while brand toys. Over the five years to 2012, providing pet stores with an the trend toward pet indulgence has advantage over external competitors. been a significant contributor to the With the ongoing humanization of growth of industry revenue.Competition from Pet stores are traditionally small andbigger stores independently owned operations, with S maller operators compete about 58.7% of industry players being non-employers (stores without paid with big-box retailers employees). Even among businesses and pet stores alike, from that have employees, the majority Walmart to PetSmart employs fewer than four workers. Just 19.4% of total operators have more than 20. Because of their predominantly including pet supplies. Time-poor small size, industry enterprises have consumers have turned to this type of faced external competition from store to streamline and simplify errands. supermarkets and mass merchandisers, Meanwhile, mass merchandisers have while fending off big-box specialty emerged as major retailers of pet stores from within the industry. This products, offering cheaper prices for has contributed to overall consolidation money-poor consumers. Due to their of the industry. Over the five years to significant sizes, stores such as Walmart 2012, the number of industry operators and Costco exert higher buying power contracted at an average annual rate and purchase in bulk from wholesalers. of 1.5% to an estimated 13,730 The cost savings achieved become companies. This is partly due to bargain prices for consumers. During the increased external competition coupled recession, consumers were increasingly with continuing merger and acquisition drawn to discount retailers for this activity in the industry. reason. As such, grocery stores and mass In recent years, supermarkets have merchandisers have become leading lured customers from smaller specialty retailers of pet supplies over the five stores by offering the convenience of years to 2012. These external retailers one-stop shopping. Grocery stores allow represented 57.0% of the pet-care market consumers to shop for a wide range of and 61.0% of the pet food market in household products in one location, 2010, whereas specialty stores accounted
8. WWW.IBISWORLD.COM Pet Stores in the US February 2012   8Industry PerformanceCompetition from for 17.0% and 14.0% of the markets, savings down to consumers in the form ofbigger stores respectively, according to Pet Business. lower prices. Furthermore, these large Smaller operators even face stores have also provided premiumcontinued competition in selling premium products, products, a factor that had protected which are often a boon for small retailers. small specialty stores from external High-end goods are primarily sold competition. As a result, the big-box through specialty pet stores and other strategy has been a sweeping success in niche retailers, providing a degree of the Pet Stores industry. PetSmart alone guaranteed sales for operators and increased its market share from 39.3% in shielding them from direct competition. 2007 to an expected 44.3% in 2012. This Yet big-box specialty stores such as internal competition has placed PetSmart and PETCO offer customers the incredible price pressures on small best of both worlds by providing a broad specialty stores, some of which were selection of pet products while operating forced to exit or find niche markets to on a scale large enough to pass cost remain competitive.Industry The five years to 2017 look positive for the Pet Stores industry. Rising pet Industry revenueOutlook ownership is expected to serve as a 10 strong driver for demand and sales boost for pet stores. In addition, slowly 8 improving economic conditions will likely boost consumer spending, allowing 6 % change customers to splurge even more on premium pet products and services. As 4 such, revenue is projected to increase 2 at an average annual rate of 3.8% to $17.8 billion over the five-year period, 0 beginning with 4.6% growth from 2012 Year 04 06 08 10 12 14 16 18 to 2013. However, the Pet Stores industry will continue to face strong competition SOURCE: WWW.IBISWORLD.COM from grocery stores and mass merchandisers, which to some extent will dogs, is expected to rise over the five place a cap on the industry’s growth. years to 2017, primarily driven by The number of pets owned by more common single-person households in the US is the primary households and the aging population, driver for pet store demand. Because the demographic segments seeking industry sells pets, including cats, dogs, companionship. IBISWorld projects birds, hamsters and guinea pigs, an that the number of pets will increase at increase in ownership generally an average annual rate of 2.0% over translates to higher revenue. In addition, the five-year period, contributing to a rise in pet ownership leads to higher the industry’s growing revenue. demand for products such as food, treats With rising sales volumes, the and toys, since these goods are needed industry’s profitability will likely every day for pets’ general well-being. increase as well in the five years to Fortunately for industry players, 2017. IBISWorld forecasts profit demand for pets, especially cats and margins to increase from 4.3% of
9. WWW.IBISWORLD.COM Pet Stores in the US February 2012   9Industry PerformanceIndustry Outlook revenue in 2012 to 4.5% in 2017. Rising number of enterprises is projected tocontinued profitability will also continue to bring increase at an average annual rate of new entrants into the industry. The 1.9% to about 15,084 in 2017.Premium products will Since a devastating pet food recall of pets’ overall health, demand for naturalremain popular 2007, which is suspected to have caused pet food will likely remain strong. more than 3,500 animal deaths, pet With improving economic conditions, owners have become increasingly demand for specialized pet services is conscious of the food that they give expected to continue. Over the past five their four-legged companions. As a years, pet services have served as primary result, many natural and organic foods drivers of growth within the industry, a and treats have gained popularity, trend that will likely continue as per capita proving to be lucrative sources of disposable income is expected to grow on revenue over the past five years. average 1.8% annually from 2012 to 2017. IBISWorld projects that the 20.0% As now-rampant unemployment declines growth rates of previous years will over the later part of the five-year period, continue over the five years to 2017. As more consumers will use their extra households continue to review their income to pamper their pets with services animals’ diet as a means of improving such as grooming and boarding.Changing Over the five years to 2017, competitioncompetition from external operators such as S maller pet stores will need supermarkets and mass merchandisers to set themselves apart by is expected to decline slightly but remain strong. As consumers find targeting niche markets themselves armed with additional spending capital, they will likely pursue favorable conditions, competition from higher-quality pet supplies like supermarkets and mass merchandisers premium food. is expected to remain strong for basic During the recession and its pet supplies like dry pet food and cat aftermath, external retailers attracted litter. Because these products show little many budget-constrained consumers by product differentiation, consumers will offering a limited selection of low- to likely continue to shop at large retailers medium-quality goods at discounted to take advantage of discounted prices prices. However, as disposable income and the convenience of one-stop shops. levels increase in line with the economic Since much of the industry consists of recovery in coming years, customers are a high number of smaller stores, niche expected to loosen their budgets and product marketing will become splurge on higher-quality items for increasingly important as each operator everyday use. As a result, consumers attempts to set itself apart from other will seek options based on factors other stores. For example, personalized diets than low prices and thereby return to for pets are expected to serve as a patronizing smaller operators that offer potential niche market for industry higher quality and services. It is operators, including special food catered important to note that despite these to obese animals. According to the
10. WWW.IBISWORLD.COM Pet Stores in the US February 2012   10Industry PerformanceChanging American Pet Products Association’s potential opportunity for industrycompetition 2009/2010 National Pet Owners operators. Several pet food Survey, 13.0% of dogs and 21.0% of cats manufacturers have identified potentialcontinued are considered overweight. Since many growth in customized food options, pet owners have become health- taking into consideration pet breeds, life conscious regarding their pets, options stages, daily activities, amount of time to improve pet health presents a indoors and specific medical conditions.
11. WWW.IBISWORLD.COM Pet Stores in the US February 2012   11Industry PerformanceLife Cycle Stage The industry’s contribution to the economy is expected to grow over the 10 years to 2017 New products, such as premium pet food and services, are being introduced Pet ownership is continuing to rise steadily, expanding the industry’s target market 30 Maturity QualityGrowth%Growthofprofit/GDP KeyFeaturesofaGrowthIndustry Company High growth in economic consolidation; importance; weaker companies Revenue grows faster than the economy level of economic close down; developed Many new companies enter the market importance stable technology and markets Rapid technology process change 25 Growing customer acceptance of product Rapid introduction of products brands 20 15 QuantityGrowth Many new companies; minor growth in economic importance; substantial 10 technology change E-CommerceOnlineAuctions 5 PetStores VeterinaryServices 0 MailOrder AnimalFoodProduction Shake-out Toy,DollGameManufacturing Shake-out –5 Decline PotentialHiddenGems TimeWasters Crash or Grow? Future Industries Hobby Industries –10 –10 –5 0 5 10 15 20 25 30 %Growthofestablishments SOURCE: WWW.IBISWORLD.COM
12. WWW.IBISWORLD.COM Pet Stores in the US February 2012   12Industry PerformanceIndustry Life Cycle The Pet Stores industry is in a growth Products Association indicated that a stage of its life cycle, typified by new tipping point was reached in product introductions and rising number 2005/2006, whereby people beganT his industry of enterprises. In fact, industry valued rewarding pets in human terms.is Growing added, which measures the industry’s Consequently, new products and contribution to the US economy, is services have emerged in this industry to expected to increase 3.3% per year in the cater to this trend; increasing number of 10 years to 2017. In comparison, US GDP pet stores began to offer premium pet is projected to grow by 1.9% annually food and treats, in addition to services over the same period. This indicates that such as grooming, training, walking and the industry is growing at a faster rate full-service boarding. This trend of rapid than the economy, a sign that it is in the product introductions indicates that the growth phase of its cycle. Pet Store industry is in the developing Over the five years to 2012, the stage. However, new products industry has posted strong sales driven introductions are expected to slow down by pet owners increasingly humanizing in the five years to 2017, as product their pets. To this point, American Pet saturation is reached.
13. WWW.IBISWORLD.COM Pet Stores in the US February 2012   13Products MarketsSupply Chain   |   Products Services   |   Demand DeterminantsMajor Markets   |   International Trade   |   Business LocationsSupply Chain KEY BUYING INDUSTRIES 99 Consumers in the US The Pet Stores industry relies on consumers to purchase pet products and to utilize industry services. KEY SELLING INDUSTRIES 31111 Animal Food Production in the US This industry supplies pet stores with a vast array of pet food. 33993 Toy, Doll Game Manufacturing in the US This industry supplies pet toys and accessories to industry operators. 54194 Veterinary Services in the US This industry provides veterinary care services such as vaccinations to industry operators.Products Services Products and services segmentation (2012) 4.5% 10.2% Live animals Pet services 27.3% 58% Pet food Pet supplies Total $14.7bn SOURCE: WWW.IBISWORLD.COM Pet food organic ingredients. These premium pet Obviously food is a necessity for all pets, foods tend to be higher priced with larger so it is not surprising that pet foods make markups; as a result, this segment’s share up the largest product segment for the of revenue has been rising since 2007. industry. This segment covers a wide Today, a variety of premium pet foods are range of products such as dry and wet available to consumers. Examples include food for dogs and cats, bird feed, crickets the raw diet for dog and cat foods, weight and worms for reptiles and other treats control food for obese animals, specialized and supplements for household pets. In formulas for sensitive stomachs and 2007, however, this segment was hurt by a freshly baked cakes and cookies as treats. nationwide recall of melamine- In 2012, this segment is expected to contaminated dog and cat food, which account for 58.0% of industry revenue. reportedly caused the death of more than 3,500 animals. This incident, however, Pet supplies has contributed to the trend toward Products in this segment include food premium pet foods with natural and bowls, collars and leashes, pet clothing,
14. WWW.IBISWORLD.COM Pet Stores in the US February 2012   14Products MarketsProducts Services brushes and combs, shovels andcontinued scoopers, cat litter, cages birds and PetownershipsegmentationintheUS reptiles, travel carriers and any other (2011) various accessories for pets. Although Animal Share of total pets (%) this segment makes up the second-largest Birds 4.3 product market for the Pet Stores Cats 22.9 industry, this segment’s share of revenue Dogs 20.7 has been declining in the five years to Horse 2.1 2012 primarily due to competition; Freshwater Fish 40.0 because this segment encompasses a Saltwater Fish 2.3 wide variety of goods and there are no Reptiles 3.4 regulations that limit their sale, Small Animals 4.2 competition is quite high. To this point, pet supplies are being increasingly sold at SOURCE: AMERICAN PET PRODUCTS ASSOCIATION a variety of retail outlets (e.g. home improvement stores now retail doggie Live animal purchases doors and yellow lawn spot removers). In The live animal segment of the industry 2012, pet supplies are estimated to is expected to represent 4.5% of total account for 27.3% of total sales. industry sales, and this share has remained stable over the past five years. Services This product segment is small because a Pet services have been the fastest-growing pet is normally a one-off purchase, while product segment for the industry. It products in other segments, such as pet includes full service grooming, haircuts, supplies and pet foods, need to be baths, toenail trimming and tooth purchased throughout the life of the pet brushing, but excludes veterinary services. thus requiring repetitive spending. Other services may include such activities Furthermore, major players in the as training, boarding and day camp. Much industry only sell small animals and fish, of the rise of this segment has been driven and partner with local pet programs for by a greater interest in pet pampering. As cat and dog adoptions. On the other more pet owners adopted them as hand, smaller operations often sell all members of their family, demand for types of animals: cats, dogs, fish, rabbits, indulging animals also increased. In 2012, birds, small animals and even reptiles. this segment is expected to account for Further breakdown of live animal about 10.2% of revenue. purchases can be seen in the chart below.Demand Demands for pets and pet supplies of pets. Thus, as pet ownership increases,Determinants are affected by the rate of pet the number of pets purchased also rises, ownership, food and supply prices, leading to higher demand and sales for household income, demographics, and the industry. In addition, a rise this health awareness. number also leads to higher demand for products such as food, treats and toys, Pet ownership since these goods are needed every day Pet ownership is a main driver for for the well-being of pets. Pet ownership industry demand by definition, as has been on the rise over the last fourteen industry operators are primary retailers years. In 1998, 56% of US households
15. WWW.IBISWORLD.COM Pet Stores in the US February 2012   15Products MarketsDemand owned a pet. Comparatively, in 2012, that allow more comfort for both themDeterminants approximately 62% of households are and their pet to travel together. estimated to own a pet.continued Demographics and lifestyle Income The change in demographics and lifestyle Households with higher incomes are of households is also an important able to spend more on discretionary determinant of demand. If households are items and services sold at pet stores, frequently relocating or working longer leading to higher demand. As such, pet hours, then these factors may reduce a owning households with high disposable household’s willingness to purchase a pet. income have been the main customers In addition, households living in for luxury and trendy pet products, apartments are less likely to have pets including premium pet food and since many apartments do not allow pets. designer pet toys, in the five years to On a positive note, aging population may 2012. In addition, those with a higher increase demand for pets, since older income tend to travel more. In turn, demographics often purchase pets for they are more likely to utilize pet companionship after their children and boarding services or purchase products grandchildren leave home.Major Markets Major market segmentation (2012) 7% Consumers over 10% 65 years old Consumers under 25 years old 28% Consumers 45 to 54 years old 13% Consumers 55 to 64 years old 18% 24% Consumers 25 to Consumers 35 to 34 years old 44 years old Total $14.7bn SOURCE: WWW.IBISWORLD.COM The largest market for the Pet Stores Furthermore, consumers in this product industry is consumers between the ages market are typically employed and have of 45 to 54, accounting for 28.0% of total steady income streams, allowing them to revenue. Many members of this age spend freely on pet supplies. group look for pet companions to fill the The second largest market consists of empty space in their households after consumers between the ages of 35 to 44, their children leave home. As such, a who represent about 24.0% of revenue. large proportion of this segment can be Consumers in this market typically have considered pet enthusiasts, who consider children, and they consider the health pets family members, according to and behavioral benefits a pet can have on PetSmart, a major player in this industry. their children. According to the American
16. WWW.IBISWORLD.COM Pet Stores in the US February 2012   16Products MarketsMajor Markets Pet Products Association, about 38.0% of The two smallest markets are madecontinued households with children under 18 years of consumers under the ages of 25 old own at least one pet. (accounting for 10.0% of the market) Consumers between the ages of 25 and and consumers over the ages of 65 34 are estimated to account for 18.0% of (accounting for 7.0%). This is because the market. This demographic group consumers in these categories have accounts for a lower share as they are limited income, thus decreasing their often subject to busy schedules, making it ability to own or spend on pets. In difficult for them to own pets. Consumers addition, these two demographics between the ages of 55 and 64 are often do not live in houses; rather, expected to represent 13.0% of the market they rent apartments or live in in 2011. However, this figure is forecast to retirement homes. Many such increase over the next five years as dwellings do not allow pets, further consumers in the 45-to-54 group ages and hindering this segment’s ability to increasingly enters this category. own pets.International Trade International trade activity is accounted number of other non-pet related at the manufacturing level by products. However, trends in pet food convention; as such, this retail industry trade provide some insight into trends does not technically have imports or regarding overall pet-product trade exports. However, products and supplies levels (IBISWorld report 31111). in the Pet Stores industry are imported According to the latest official data and exported at the manufacturing level provided by the International Trade and then sold in the domestic market. Commission, imports for all kinds of pet Precise export and import data on pet food amounted to $883.1 million in products and supplies is not readily 2011, while exports reached $2.4 billion. available as they are categorized into Canada is the leading partner in trade broad segments that contain a large for both imports and exports.
17. WWW.IBISWORLD.COM Pet Stores in the US February 2012   17 Products Markets Business Locations 2012 West AK 0.2 New England ME Mid- 0.6 Great Atlantic 1 2 Lakes NY 3 WA MT ND 7.4 5 4 3.1 0.2 MN Rocky 0.3 1.7 WI OR Mountains SD 0.2 Plains 1.9 MI 3.5 PA 4.4 6 7 2.0 ID IA OH 9 8 0.5 WY 3.9 0.3 NE 0.9 IL IN WV VA 4.1 2.0 2.7West NV 0.5 0.3 KY UT MO 0.7 NC 0.9 0.7 CO KS 1.9 2.5 2.6 0.9 TN SC Southeast 1.5 CA 1.3 13.2 OK AR GA 0.9 0.5 AL 2.2 AZ MS 1.0 2.2 NM 0.6 Southwest 0.4 TX LA 1.0 FL 5.6 7.7West HI 0.4 AdditionalStates(as marked on map) Establishments(%) 1 VT 2 NH 3 MA 4 RI Lessthan3% 0.3 0.7 2.0 0.5 3%tolessthan10% 10%tolessthan20% 5 CT 6 NJ 7 DE 8 MD 9 DC 1.5 3.3 0.5 1.9 0.1 20%ormore SOURCE: WWW.IBISWORLD.COM
18. WWW.IBISWORLD.COM Pet Stores in the US February 2012   18Products MarketsBusiness Locations Pet Stores are primarily located in the Establishments vs. population Southeast, the West, the Mid-Atlantic and the Great Lakes regions of the 30 United States. Industry locations are based primarily on the number of households in each region, as well as the 20 median income level of households. % Southeast 10 The Southeast holds the highest number of industry establishments; in 2012, 21.8% of industry establishments were 0 located in the region. The Southeast is West Great Lakes Mid-Atlantic New England Plains Rocky Mountains Southeast Southwest the most populated region of the United States with a quarter of the nation’s population. Therefore given the higher proportion of households there is a greater demand for industry retailers. Establishments Within the Southeast, Florida has the Population highest proportion of industry SOURCE: WWW.IBISWORLD.COM establishments, estimated at 7.7% of the nation’s total. United States due to their large metropolitan centers. The region also West has higher-than-average income levels. The West has the second-highest Given that households within the proportion of industry establishments; in region have a larger amount of 2012, the region had 19.8% of pet stores. disposable income, they are more able California has the highest number of pet to afford to own a pet. stores in the country at 13.2%. The primary reasons for the higher-than- Great Lakes average number of pet stores in the West The Great Lakes region is the fourth- region are population density and most popular location for industry income levels. The West has 17.0% of the establishments. In 2012, 15.4% of pet nation’s total population. Furthermore, stores were located in the Great Lakes both California and Nevada have a region. Illinois is the fifth-highest higher-than-average median income by populated state in the nation and state. Additionally, within California therefore a popular center for industry more than 26% of households have operators. The state holds an estimated incomes within the top three quadrants. 4.1% of pet stores. Other small participating regions in Mid-Atlantic the industry include: the Southwest, New The Mid-Atlantic region has 17.6% of England, the Plains and the Rocky industry establishments. The most Mountains. Among the aforementioned popular states include: New York and regions, the Southwest commands the Pennsylvania which account for a largest share of industry establishments respective 7.4% and 4.4% of the at 9.3% of the total. These regions have industry’s locations. These states have smaller consumer markets, which some of the highest populations in the reduces demand for pet stores.
19. WWW.IBISWORLD.COM Pet Stores in the US February 2012   19Competitive LandscapeMarket Share Concentration   |   Key Success Factors   |   Cost Structure BenchmarksBasis of Competition   |   Barriers to Entry   |   Industry GlobalizationMarket Share More than half (65.0%) of the Pet StoresConcentration industry’s revenue comes from two Companiesbyemploymentsize specialty supply retailers: PetSmart and No. of employees Share (%) PETCO. The other portion of the industry 0-4 57.4Level consists of family-owned stores, small 5-9 23.2Concentration in franchises and small chains of pet stores. 10-19 13.0this industry is High The industry has a high level of 20-99 5.6 concentration with the top four companies 100-499 0.6 generating an estimated 70.2% of the 500+ 0.2 industry’s revenue. Although there is a StatisticsofUSBusinesses high level of concentration, small SOURCE: US CENSUS BUREAU operators are still able to find niche markets in their geographical locations, expected to grow their share of the and rarely expand beyond those areas. industry, with a steady stream of IBISWorld estimates that by the end customers patronizing their stores. This of 2012, the industry will have about is because these big-box retailers are 13,730 firms, of which about 58.7% of able to offer customers a “best of both those firms will be operated by single worlds” scenario, where they provide owner small family businesses. Of broad and industry-specific product businesses that have employees, about selections, while operating on a scale 57.4% enterprises have fewer than 5 such that they can purchase in bulk and employees, while only 19.4% have more pass on savings to the consumers. than 10 workers. Consequently, these stores are expected In the five years to 2017, major to grow at the expense of small stores in players PetSmart and PETCO are the industry.Key Success Factors Attractive product presentation such as major shopping precincts, in In order to draw customers and order to maximize store traffic and encourage purchases, eye-catching sales.I BISWorld identifies promotions and displays are essential250 Key Success for pet stores. Economies of scopeFactors for a Successful operators need a range ofbusiness. The most Experienced work force the most popular pets and pet supplies It is important to employ a highly at different levels of price and quality.important for this capable staff with clear knowledge of Offering a wider variety of products willindustry are: the pet industry to better assist attract a larger customer base. customers and boost sales. Effective quality control Proximity to key markets Operators must ensure that pet services Operators need to be located in high- are up to standard for the specific type traffic and high-visibility locations, of animal and breed.
20. WWW.IBISWORLD.COM Pet Stores in the US February 2012   20Competitive LandscapeCost Structure The Pet Stores industry is expected to Therefore, cost of goods per unit tends toBenchmarks obtain average profit margins equivalent be higher for these players, causing to 4.3% of revenue in 2012, up from 3.7% margins to be lower for smaller firms. in 2007. This increase in profitability has Purchase costs will remain the single been driven by growing pet population largest expense for the industry in 2012, and an increasing willingness of pet accounting for approximately 70.3% of owners to spend on their pets, total sales. Purchases include a wide particularly on premium or high margin range of pet food and pet supplies such as products. However, it is important to collars, leashes, medication, shampoos, note that the actual level of margins may dog kennels and pet toys, and a range of vary considerably between industry pets including dogs, cats, birds, fish, participants. For instance, larger players small animals and reptiles. Unfortunately such as PETCO and PetSmart typically for the industry, purchase expenses purchase in large quantities, which increased slightly over the five years to enable them spend less per item and 2012. According to Pet Business, a improve margins. In addition, the large publication for the pet and pet supplies scale allows major players to sell in high retailing industry, much of this has been volume at discounted prices, which due to price increases of goods from enables them to afford to lower markups upstream industries (i.e. manufacturing but to profit from the frequent rate of and wholesaling industries) passed down purchases made by customers. On the the supply chain. contrary, smaller players in this industry Due to the labor-intensive nature of do not have such purchasing power. the retail sector, wages are estimated to Sectorvs.IndustryCosts AverageCostsof allIndustriesin IndustryCosts sector(2012) (2012) 100 3.7 4.3 ■Profit ■Wages 13.7 13.1 ■Purchases 80 ■Depreciation ■Marketing ■RentUtilities ■Other Percentage of revenue 60 65.8 70.3 40 20 1.6 1.5 4.6 1.6 4.0 9.2 6.7 0 SOURCE: WWW.IBISWORLD.COM
21. WWW.IBISWORLD.COM Pet Stores in the US February 2012   21Competitive LandscapeCost Structure make up the second highest expense item industry as is it very labor intensive andBenchmarks for pet store operators, accounting for requires minimal capital costs in 13.1% of the revenue in 2012. In pet operations. Yet, this figure is highcontinued stores, labor is needed to provide care for compared other retailing industries as pets, maintain stock levels and to provide pet stores must acquire special cages and customer service. Furthermore, added tanks for animals, in addition to shelving focus has been placed on labor over the and cash registers for stores. Rent costs five years to 2012, as pet services have and utilities costs are expected to become one of the fastest-revenue represent 2.5% and 1.5% of total sales, generators for the industry. Nonetheless, respectively, in 2012. industry revenue has been growing at a Operators in this industry also incur a faster rate than the number of employees variety of other expenses, including or wages; as such, wages as a share of administrative, insurance, security and revenue has slightly declined in turn. advertising costs. In particular, large and Depreciation expenses are expected to small operators both invest much of their account for about 1.6% of industry income on advertising, in order to revenue in 2012. This low level of generate store traffic and boost sales of depreciation is typical for a retailing their products.Basis of Competition Due to medium barriers to entry and Internal growing profitability from premium Pet stores are constantly competing with products and services, there are a large each other in price, product variety,Level Trend number of pet store operations, giving customer service, brand awareness,Competition in the industry a medium level of variety of pet services, and store location.this industry is competition. This industry has been Since product purchases make up theM edium and the growing strongly over the past decade as majority of sales for pet stores, logically a result of favorable demographic trends their main basis of competition istrend is Increasing and the growing tendency of pet owners product range and quality, along with to treat their pets as members of the some influence by price. Large players family. In recent years, industry like PETCO and PetSmart benefit from participants have exploited these trends economies of scope and are able to and cashed in on higher margin products provide broad ranges of pets, pet foods, and services, such as premium pet food pet supplies and pet services with and high-quality grooming services. different levels of quality across a range The players in this industry are of prices to appeal to individual protected from external competition in consumer preferences. In addition, they the premium pet food product segment, are capable of offering products through because there are often manufacturer’s their private label brands at a lower restrictions on the distribution of price. Both of these players benefit from premium products to supermarkets. being able to buy products in bulk and Industry participants are also protected producing their own products at lower from external competition from cost, which allows them to offer products supermarkets, grocery stores and at a low price and still attain a profit. As discount retailers in the growing area of a result, smaller stores feel the pressure value added pet services such as to provide more products at a lower grooming and obedience training. price, which results in lower mark-ups
22. WWW.IBISWORLD.COM Pet Stores in the US February 2012   22Competitive LandscapeBasis of Competition by these stores and ultimately lower supermarkets generally enable them tocontinued profits. However, smaller stores benefit offer lower prices than specialty retailers. from their ability to offer personalized In recent years, additional competition customer services and mold to the has come from mass merchandisers and specific needs of the niche market in discount retailers such as Walmart and their local area. Costco that stock a wide variety of The two major players in this industry products at competitive prices. However, also invest considerable resources toward mass merchandisers and discount brand awareness and loyalty. For retailers do not sell ultra-premium pet example, PETCO is now the major products as they are limited by sponsor of PETCO Park, the new home of manufacturers’ restrictions. the San Diego Padres. In addition, both Further competition comes from the PETCO and PetSmart are heavily E-commerce and Online Auctions involved in pet charities and animal industry (IBISWorld Industry Report welfare organizations. In 2004, PetSmart 45411a) and the Mail-Order industry introduced a new customer loyalty (IBISWorld Industry Report 45411b). program in order to improve repeat These competing industries include customer traffic. companies such as Petstore.com through which consumers can purchase products External without physically having to visit a store; Historically, the sale of pet food products however, these operators are not has been primarily through the classified as part of this industry. In supermarket channel. Large addition, some competition comes from supermarkets stock a wide variety of pet veterinary services as they also sell food and supplies. Bulk purchases by customized pet food and some products.Barriers to Entry High levels of competition and stringent regulations associated with entering this BarrierstoEntrychecklist LevelLevel Trend industry may deter some from entering Competition Medium the industry. Nevertheless, there are Concentration HighBarriers to Entry various niche markets available for new Life Cycle Stage Growthin this industry are players to occupy, specifically those that Capital Intensity LowM edium and Steady specialize in premium and innovative Technology Change Medium food, products and services. Regulation Policy Medium A significant factor that can hinder an Industry Assistance None operator from entering this industry is government regulations. There are SOURCE: WWW.IBISWORLD.COM federal and state laws regulating pet shops and the sale of animals. For state requirements before permission to example, the Pet Animals Act 1951 operate is granted. requires pet shops to get a license in The industry’s concentration can be accordance with the Act before they can another barrier to potential entrants. open. In addition, the Animal Welfare There are only two national retail chains Act of 1966 dictates how pets sold in pet in this industry and together they account stores must be maintained. Pet shops for over half of industry revenue; smaller need to address a range of issues and stores and franchises account for the receive licenses based on federal and remaining portion. Although this
23. WWW.IBISWORLD.COM Pet Stores in the US February 2012   23Competitive LandscapeBarriers to Entry industry is highly fragmented, there is purchasing and maintaining inventorycontinued also intense price competition from mass levels, may be a barrier for new entrants. merchandisers, online operators and Barriers are greater for new smaller catalog retailers, which may provide a retailers because forming reliable supply barrier for new, independent retailers. relationships with wholesalers and Opening a new pet store and meeting manufacturers may prove to be difficult. licensing standards is expensive. In Existing and well established distribution addition, a significant share of funding relationships may deter potential may be directed toward marketing to operators from entering this industry, as build consumer interest and recognition. it provides an advantage to existing The initial cost of establishing or retailers by giving access to low priced purchasing a retail outlet, in addition to high quality goods.Industry This industry is characterized by a large within a local or regional scope. InGlobalization number of small players. Many of the addition, the industry’s major companies smaller, independent pet supply retailers are domestically owned. Therefore, thisLevel Trend are family-owned businesses that operate industry has a low level of globalization.Globalization in thisindustry is Low andthe trend is Steady
24. WWW.IBISWORLD.COM Pet Stores in the US February 2012   24Major CompaniesPetSmart Inc.   |   PETCO Animal Supplies Inc.   |   Other CompaniesMajor players(Market share) PETCO Animal Supplies Inc. 20.7% 35.0% Other PetSmart Inc. 44.3% SOURCE: WWW.IBISWORLD.COMPlayer Performance Since its establishment in 1987, Phoenix- boarding and day-care service with based PetSmart has become the top 24-hour supervision, an on-site specialty retailer of pet food and supplies. veterinarian, air-conditioned rooms andPetSmart Inc. PetSmart operates 1,210 stores, typically daily specialty treats called PetsHotel. arket share: 44.3%M located in regional shopping centers near About 189 of PetSmart stores include other superstores and warehouse stores, PetsHotel boarding facilities and Doggie and employs about 47,000 associates in Day Camps. Such emphasis on services the United States and Canada. By has been a driving success for PetSmart; offering more than 10,000 pet products pet services as a share of company and providing various pet services, the revenue increased from 8.8% in 2006 to retailer aims to provide a one-stop 10.9% in 2010 (latest data available), shopping experience with low prices. and net sales from services increased PetSmart categorizes its products into from $376.0 million to $618.8 million three main categories: consumables, hard during those years. goods and pets. Consumables include pet However, news has not been perfect foods, treats and litter, in addition to for the company. In 2008, PetSmart premium products, many of which are suspended the sale of birds in its stores not found in supermarkets or mass nationwide after discovering that a high merchandisers. Pet supplies such as number of birds carried a bacterial collars, leashes, health and beauty aids, infection that had the potential to spread shampoos, medication, toys, pet carriers, to humans. In addition, the company was dog kennels, cat furniture, equestrian damaged by a large recall of pet foods supplies, birdcages, aquariums and filters (manufactured by Menu Foods) that was make up the hard goods category. Pets contaminated by melamine and sold by the company includes fish, birds, melamine-related compounds. reptiles and small pets. Larger animals such as cats and dogs are not sold in Financial performance PetSmart; however, they are available for Over the five years to 2012, PetSmart’s adoption through the PetSmart Charities’ revenue is expected to increase an Adoption Program developed with average annual rate of 6.9% to $6.5 humane organizations. billion. As the economy gains traction In addition to selling products, and consumers gain additional PetSmart has expanded its service to disposable income to spend on their pets, include in-store boarding facilities, IBISWorld anticipates that company grooming services, obedience training sales will grow 7.0% in 2012, following an and full-service veterinary services estimated 7.2% increase in 2011 and (offered in 792 PetSmart stores). In strong growth in 2010. In fiscal 2009 and 2002, PetSmart launched a complete pet 2008, PetSmart posted strong sales, with
25. WWW.IBISWORLD.COM Pet Stores in the US February 2012   25Major CompaniesPlayer Performance revenue rising 5.4% and 8.4%, with aggressive expansion (the additioncontinued respectively. Such growth rates during of 104 new stores and 45 PetsHotels). the recession were aided by resilient Prior to the recession, the company industry demand; consumers barely performed even stronger, with 10.4% scaled back spending for their four- revenue growth in fiscal 2007. Some of legged companions even during times of the growth was driven by 112 new store low income. To this end, average same- openings, as well as a 2.4% increase in store sales increased 1.9% and 5.8% in comparable store sales. In addition, 2009 and 2008, while service sales higher demand for pet services became increased 9.2% and 15.8%, respectively. an increasing important sales avenue. With high sales, net income also After PetSmart added 35 new PetsHotels remained strong over the years. In fiscal that offered grooming, training, boarding 2008, however, income decreased about and day camp, service sales rose 22.0% $66.0 million due to costs associated during the year. PetSmartInc.–financialperformance Revenue NetIncome Year* ($ million) (% change) ($ million) (% change) Employees (% change) 2007 4,672.7 10.4 258.7 39.8 43,000 N/C 2008 5,065.3 8.4 192.7 -25.5 46,000 7.0 2009 5,336.4 5.4 198.3 2.9 45,000 -2.2 2010 5,693.8 6.7 239.9 21.0 47,000 4.4 2011* 6,103.8 7.2 301.8 25.8 47,500 1.1 2012* 6,531.0 7.0 348.3 15.4 48,500 2.1 *Estimates SOURCE: ANNUAL REPORT AND IBISWORLDPlayer Performance Established in 1965, PETCO Animal program (the Think Adoption First Supplies is the second-largest pet supply program) is used in partnership with specialty retailer in the United States. local animal welfare organizations.PETCO Animal The company is headquartered in San Over the past decade, PETCO has beenSupplies Inc. Diego, CA, and boasts about 1,100 stores subject to several major changes in its arket share: 20.7%M across the country with locations in all 50 business. In 2011, PETCO acquired states, making it the only pet store to Complete Petmart, an Ohio-based pet serve the entire nation. Its stores carry up specialty chain. The acquisition, to 10,000 different pet-related items at consisting of 29 stores, expanded the any time, including pet food, collars, company’s reach into Ohio and the leashes, grooming products, toys, health Southeast region. In 2006, Texas Pacific and beauty aids, kennels and pet houses. Group and Leonard Green Partners Like other industry participants, PETCO took the company private for the second offers a variety of veterinary and time; the deal was valued at $1.8 billion, obedience services for animals, but does including assumed debt. The same group not sell cats or dogs. Rather, an adoption took PETCO private for $600.0 million
26. WWW.IBISWORLD.COM Pet Stores in the US February 2012   26Major CompaniesPlayer Performance in 2000, but PETCO returned to the revenue will total $3.1 billion in 2012,continued public domain in 2002. marking an average 4.9% annual growth over the five-year period. Financial performance Strong sales of premium products are Because the company went private in expected to be the main driver for the 2006, PETCO’s financials are no longer growth. The company invested heavily in available to the public, limiting the ability this product segment in 2009 by to provide year-by-year analysis of launching Unleashed, a specialty store for financial performance. However, only premium, natural, organic and raw IBISWorld projects that, like the industry pet foods. PETCO operates 37 Unleashed as a whole, the firm has experienced stores in California, Maryland, positive growth in the five years to 2012. Massachusetts, New York, Virginia and IBISWorld estimates that PETCO’s the District of Columbia. PetcoAnimalSuppliesInc.–financialperformance* Revenue Year ($ million) (% change) Employees (% change) 2007 2,400 9.1 20,100 2.7 2008 2,550 6.3 22,000 9.5 2009 2,700 5.9 23,200 5.5 2010 2,800 3.7 23,500 1.3 2011* 2,925 4.5 24,400 3.8 2012* 3,050 4.3 25,500 4.5 *Estimates SOURCE: FORBES.COMOther Companies PetSmart and PETCO are the top dogs in Pet Supplies Plus the Pet Stores industry, accounting for Estimated market share: 3.6% more than half of total industry revenue Pet Supplies Plus is a franchise business in 2012. While the industry is operating about 239 stores across 22 concentrated at the top, the rest of the states. Pet Supplies Plus offers franchises industry is characterized by a large in selected states to single store owner- number of small and privately owned pet operators and also to area developers stores. In fact, about 58.7% of total who own all stores in a designated industry operators are estimated to be market region. According to company non-employers, which are stores without information, the purchase of a Pet any paid employees. Furthermore, even Supplies Plus franchise costs between among businesses that have employees, $500,000 and $750,000. about 57.4% of companies employ fewer Pet Supplies Plus stores are than 5 workers, while only 19.4% have generally located in high-traffic areas more than 10 workers. Due to this and are limited to about 5,000 to fragmented nature, the vast majority of 6,000 square feet in size for smaller industry players do not represent a markets and 7,000 to 9,000 square considerable share of the industry. feet in larger metropolitan areas. The
27. WWW.IBISWORLD.COM Pet Stores in the US February 2012   27Major CompaniesOther Companies smaller store concept was designed to medicine and clothing, as well as smallcontinued keep operating costs to a minimum in animals such as hamsters, guinea pigs, a bid to offer pet food and supplies at rabbits and tropical fish. IBISWorld competitive prices. The company also estimates Pet Supermarket will generate uses a just-in-time delivery system to about $235.0 million in 2012. offer a wide variety of products without extensive store space to stock Pet Food Express inventory. IBISWorld estimates that Estimated market share: Less than 1.0% Pet Supplies Plus will generate about Pet Food Express is an independent $540 million in 2012, accounting for retailer chain operating about 41 stores about 3.6% of the total market. throughout Northern California. The company offers a range of pet supplies, Pet Supermarket Inc. including beds, bowls, feeders, carriers, Estimated market share: 1.6% cages, flea control, food, grooming, With a market share of less than 2.0%, medication, sanitation, toys, leashes, Pet Supermarket Inc. is a small, family- harnesses and tanks. Many stores also owned retailer of pet supplies and feature self-service pet washes, adoptive medicines. Pet Supermarket operates services, dog-training classes and low- about 115 stores primarily in Florida but cost vaccination. The company also also in Alabama, California, Georgia, operates an online store at Kentucky, Nevada and North Carolina. petfoodexpress.com. IBISWorld Pet Supermarket sells more than 8,000 estimates that the firm will generate pet care products, including food, toys, about $90.0 million in 2012.
28. WWW.IBISWORLD.COM Pet Stores in the US February 2012   28Operating ConditionsCapital Intensity   |   Technology Systems   |   Revenue VolatilityRegulation Policy   |   Industry AssistanceCapital Intensity The Pet Stores industry, similar to most other retail industries, has a low level of Capital intensity Capital units per labor unit capital intensity. For every dollar spentLevel on wages, about $0.12 is invested in the 0.5The level of capital store and equipment. Most capital costsintensity is Low are related to shelving, store, cashier 0.4 equipment and other equipment such as 0.3 caging for animals, which do not need to be constantly replaced. On the other 0.2 hand, this industry is labor intensive 0.1 because employees are needed to operate and manage the stores, provide customer 0.0 Economy Retail Trade Pet Stores service and support, restock the merchandise and to provide care for pets. Dotted line shows a high level of capital intensity The level of capital intensity has SOURCE: WWW.IBISWORLD.COM remained steady in the last five years, reflecting the labor-intensive nature of high compared to that experienced by the retail industry. To this point, the cost competitors such as supermarkets, mass of labor within this industry is relatively merchandisers and online pet supplyToolsoftheTrade:GrowthStrategiesforSuccess NewAgeEconomy InvestmentEconomy Recreation,PersonalServices, Information,Communications, HealthandEducation. Firms Mining,FinanceandReal benefit from personal wealth so Estate.To increase revenue stable macroeconomic conditions firms need superior debt are imperative. Brand awareness management, a stable and niche labor skills are key to macroeconomic environment product differentiation. and a sound investment plan. CapitalIntensiveLaborIntensive E-CommerceOnlineAuctions PetStores Veterinary MailOrder AnimalFoodProduction TraditionalServiceEconomy OldEconomy Services WholesaleandRetail. Reliant Toy,DollGameManufacturing AgricultureandManufacturing. on labor rather than capital to Traded goods can be produced sell goods. Functions cannot using cheap labor abroad. be outsourced therefore firms To expand firms must merge must use new technology or acquire others to exploit or improve staff training to economies of scale, or specialize increase revenue growth. in niche, high-value products. ChangeinShareoftheEconomy SOURCE: WWW.IBISWORLD.COM
29. WWW.IBISWORLD.COM Pet Stores in the US February 2012   29Operating ConditionsCapital Intensity retailers. This is because the other stores industry-specific knowledge. For onlinecontinued do not retail pets directly which retailers, labor costs are exceptionally low inherently requires a smaller staff. In as they are not required to outlay addition, these stores do not incur costs expenditure on customer service, nor are associated with employee training, since they required to have shelving, displays workers at these retailers do not require or cash registers.Technology Technological advances in this industry that increases the speed at which Systems have included computer scanning cash information is passed, greater control registers and automated inventory over the distribution of goods andLevel equipment. The introduction of this reduced errors along the supply chain. technology has enabled retailers to New improvements will boost revenueThe level of better manage efficiency of operations for the larger stores who can afford toTechnology Change and inventory. Technology at checkout invest in the technologies. Foris Medium has led to computerized point-of-sale example, larger retailers will benefit equipment, which controls and records from Radio Frequency Identification merchandising, distribution, sales and (RFID), which provides real time stock markdowns. Furthermore, bar information on inventory and help to code scanning has offered the reduce shrinkage problems as well as advantages of higher labor productivity improve efficiency.Revenue Volatility Pet stores sell discretionary (e.g. pets and supplies in order to survive. To provide a toys) and non-discretionary products breakdown, pet food makes up about (e.g. pet food). While purchasing a pet is 58.0% of industry revenue, pet suppliesLevel generally discretionary, a large and medicine account for 27.3%, whileThe level of proportion of expenditure on a pet is new pet purchases represent for onlyVolatility is Low non-discretionary because the animal 4.5%. As such, the non-discretionary needs food, medicine and certain component of industry merchandise A higher level of revenue VolatilityvsGrowth volatility implies greater industry risk. Volatility can 1000 Hazardous Rollercoaster negatively affect long-term Revenuevolatility*(%) strategic decisions, such as 100 the time frame for capital investment. 10 When a firm makes poor investment decisions it PetStores may face underutilized 1 capacity if demand suddenly falls, or capacity 0.1 Stagnant BlueChip constraints if it rises –30 –10 10 30 50 70 quickly. Fiveyearannualizedrevenuegrowth(%) * Axis is in logarithmic scale SOURCE: WWW.IBISWORLD.COM
30. WWW.IBISWORLD.COM Pet Stores in the US February 2012   30Operating ConditionsRevenue Volatility accounts for the majority of industry of this industry low. To this point,continued revenue. This high level of non- year-on-year revenue fluctuations discretionary demand keeps the volatility averaged 2.1% over the five years to 2012.Regulation Policy There are industry specific and general certain animals from inhumane competitive regulations that apply to this treatment and neglect. The AWA industry. The transportation, handling requires that minimum standards of careLevel Trend and sale of small pets are governed by and treatment be provided for certainThe level of various federal, state and local animals that are bred for commercialRegulation is regulations. In addition, industry sale, used in research, transportedM edium and the participants are subject to commercially or exhibited to the public. environmental regulations imposed by Retail pet shops are not covered undertrend is Steady federal, state and local authorities in the Act unless the shop sells exotic or relation to the generation, handling, zoo animals or sells animals to regulated storage, transportation and disposal of businesses. Pets owned by private waste and biohazardous materials, and citizens are not regulated. Regulated the sale and distribution of products. businesses are required to keep accurate The Pet Animals Act 1951 deems it an records of acquisition and disposition offense to open a pet shop unless it is and a description of animals that come granted a license in accordance with the into their possession. Act. When deciding to grant a license, Many state and local governments district councils need to consider have passed additional animal welfare whether there is suitable legislation. Approximately 16 states have accommodation and enough food and regulations that allow consumers to water, whether the animals are sold at obtain a reimbursement when a sick too young an age and whether animal is purchased from a pet store. reasonable precautions have been taken This is known as a “lemon law” which is to curb the spread of disease. The designed to protect consumers that buy Animal Welfare Act (AWA) protects animals from pet shops.Industry Assistance The Pet Stores industry does not receive industry. Most notable among them is any specific government support, in the the American Pet Association which form of subsidies or otherwise. promotes pet ownership andLevel Trend However, there are several trade disseminates industry-relatedThe level of associations which represent the information to members.Industry Assistanceis None and thetrend is Steady Keytariffs Goods Lowrate Highrate Saddlery and harness for any animal (excluding dogs – see above) 2.8 2.8 Dog leashes, collars, muzzles, harnesses and similar 2.4 2.4 Pet food 0.0 0.0 SOURCE: USITC
32. WWW.IBISWORLD.COM Pet Stores in the US February 2012   32Jargon GlossaryIndustry Jargon HUMANIZATION A trend where pet owners treat pets PET BOARDING AND DAY-CARE Long- and short-term as humans, providing them with services such as pet options for owners who need assistance looking after hotels and grief counseling. their pets. Services include feeding, walking, grooming JUST-IN-TIME (JIT) A strategy implemented to and lodging. improve profitability by reducing inventory and PET PARENTS Pet owners who are enthusiastic about purchasing the raw materials that are needed for the their pets and treat them as members of their family. immediate term only.IBISWorld Glossary BARRIERS TO ENTRY Barriers to entry can be High, INDUSTRY CONCENTRATION IBISWorld bases Medium or Low. High means new companies struggle to concentration on the top four firms. Concentration is enter an industry, while Low means it is easy for a firm identified as High, Medium or Low. High means the top to enter an industry. four players account for over 70% of revenue; Medium CAPITAL/LABOR INTENSITY An indicator of how much is 40 –70% of revenue; Low is less than 40%. capital is used in production as opposed to labor. Level is INDUSTRY REVENUE The total sales revenue of the stated as High, Medium or Low. High is a ratio of less industry, including sales (exclusive of excise and sales than $3 of wage costs for every $1 of depreciation; tax) of goods and services; plus transfers to other firms Medium is $3 – $8 of wage costs to $1 of depreciation; of the same business; plus subsidies on production; plus Low is greater than $8 of wage costs for every $1 of all other operating income from outside the firm (such depreciation. as commission income, repair and service income, and CONSTANT PRICES The dollar figures in the Key rent, leasing and hiring income); plus capital work done Statistics table, including forecasts, are adjusted for by rental or lease. Receipts from interest royalties, inflation using 2012 as the base year. This removes the dividends and the sale of fixed tangible assets are impact of changes in the purchasing power of the dollar, excluded. leaving only the ‘real’ growth or decline in industry INDUSTRY VALUE ADDED The market value of goods metrics. The inflation adjustments in IBISWorld’s and services produced by an industry minus the cost of reports are made using the US Bureau of Economic goods and services used in the production process, Analysis’ implicit GDP price deflator. which leaves the gross product of the industry (also DOMESTIC DEMAND The use of goods and services called its Value Added). within the US; the sum of imports and domestic INTERNATIONAL TRADE The level is determined by: production minus exports. Exports/Revenue: Low is 0 –5%; Medium is 5 –20%; EARNINGS BEFORE INTEREST AND TAX (EBIT) High is over 20%. Imports/Domestic Demand: Low is IBISWorld uses EBIT as an indicator of a company’s 0 –5%; Medium is 5 –35%; and High is over 35%. profitability. It is calculated as revenue minus expenses, LIFE CYCLE All industries go through periods of Growth, excluding tax and interest. Maturity and Decline. An average life cycle lasts 70 EMPLOYMENT The number of working proprietors, years. Maturity is the longest stage at 40 years with partners, permanent, part-time, temporary and casual Growth and Decline at 15 years each. employees, and managerial and executive employees. NON-EMPLOYING ESTABLISHMENT Businesses with ENTERPRISE A division that is separately managed and no paid employment and payroll are known as keeps management accounts. The most relevant non-employing establishments. These are mostly set-up measure of the number of firms in an industry. by self employed individuals. ESTABLISHMENT The smallest type of accounting unit VOLATILITY The level of volatility is determined by the within an Enterprise; usually consists of one or more percentage change in revenue over the past five years. locations in a state or territory of the country in which it Volatility levels: Very High is greater than ±20%; High operates. Volatility is between ±10% and ±20%; Moderate Volatility is between ±3% and ±10%; and Low Volatility EXPORTS The total sales and transfers of goods is less than ±3%. produced by an industry that are exported. WAGES The gross total wages and salaries of all IMPORTS The value of goods and services imported employees of the establishment. with the amount payable to non-residents.
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