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WWW.IBISWORLD.

COM Pet Stores in the USJuly 2018   1

Puppy love: Pet owners will invest in premium


products and services as the economy improves

IBISWorld Industry Report 45391


Pet Stores in the US
July 2018 Kelsey Oliver

2 About this Industry 15 International Trade 27 Revenue Volatility


2 Industry Definition 16 Business Locations 28 Regulation & Policy
2 Main Activities 29 Industry Assistance
2 Similar Industries 18 Competitive Landscape
2 Additional Resources 18 Market Share Concentration 30 Key Statistics
18 Key Success Factors 30 Industry Data
3 Industry at a Glance 18 Cost Structure Benchmarks 30 Annual Change
20 Basis of Competition 30 Key Ratios
4 Industry Performance 20 Barriers to Entry 31 Industry Financial Ratios
4 Executive Summary 21 Industry Globalization
4 Key External Drivers 32 Jargon & Glossary
6 Current Performance 22 Major Companies
8 Industry Outlook 22 PetSmart Inc.
10 Industry Life Cycle 23 PETCO Animal Supplies Inc.
25 Pet Supplies Plus
12 Products & Markets 25 Pet Retail Brands
12 Supply Chain
12 Products & Services 26 Operating Conditions
13 Demand Determinants 26 Capital Intensity
14 Major Markets 27 Technology & Systems

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com


WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   2

About this Industry

Industry 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 also offer pet services, such
collars, leashes, health and beauty aids, as 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 supplies

Similar Industries 54194 Veterinary Services in the US


Operators in this industry provide 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


Operators in this industry retail pet foods and pet supplies via the internet.

45411b Mail Order in the US


Operators 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
www.petbusiness.com
Pet Business
www.humanesociety.org
The Humane Society of the United States
WWW.IBISWORLD.COM Pet Stores in the US July 2018   3

Industry at a Glance
Pet Stores in 2018

Key Statistics Revenue Annual Growth 13–18 Annual Growth 18–23


Snapshot
$19.6bn 2.9% 2.3%
Profit Wages Businesses

$783.0m $2.8bn 13,428


Revenue vs. employment growth Number of pets (cats and dogs)
Market Share
PetSmart Inc. 6 220
27.2% 210
4
PETCO Animal 200
2
% change

Supplies Inc.

Million
190
19.9% 0
180
-2 170

-4 160
Year 10 12 14 16 18 20 22 24 Year 9 11 13 15 17 19 21 23
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 22
Products and services segmentation (2018)

Key External Drivers 4.7%


Live animals
Number of pets 9.0%
Pet services
(cats and dogs)
Per capita disposable
income
Percentage of services
conducted online 45.7%Pet food
Number of households

40.6%
Pet supplies

p. 4

SOURCE: WWW.IBISWORLD.COM

Industry 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 Medium Competition Level High

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   4

Industry Performance
Executive Summary   |   Key External Drivers   |   Current Performance
Industry Outlook   |   Life Cycle Stage

Executive The Pet Stores industry purred along go beyond traditional grooming, dog
Summary over the five years to 2018 as cats, dogs, walking and training; today, premium
fish and birds remained popular home services, such as pet therapy sessions, are
companions. Pet parents, or pet owners on the rise. PetSmart Inc.’s PetsHotel
who treat their four-legged friends as offers 24/7 supervision for pets and
family members, grew increasingly boosts sales due to its added convenience
common and facilitated demand for pet as a one-stop shop for pet product
stores. Accelerated by favorable purchases and services. These positive
macroeconomic conditions, the industry trends, combined with rising disposable
expanded strongly during the five-year income, are expected to increase profit
period, despite increased competition margins during the period. While new
from supermarkets, mass merchandisers operators are joining the industry, Petco
and online retailers typically offering Animal Supplies Inc. and PetSmart
consumers greater convenience and account for more than half of industry
revenue and steadily increased their
respective market shares over the past
The
emerging trend of pet parents has five years.
bolstered demand for premium pet products Over the five years to 2023, the Pet
Stores industry is projected to maintain
and services strong growth. As the economy continues
its upward trajectory and consumers
competitive pricing. Despite mounting have more discretionary income, revenue
external competition, IBISWorld expects from premium products and services is
revenue to increase at an annualized rate projected to increase. Moreover, the
of 2.9% to $19.6 billion over the five years number of pet-owning households is
to 2018. In 2018 alone, industry revenue expected to continue rising, yielding
is expected to grow 3.1% due to rising greater demand for industry products.
disposable income. For basic pet supplies, however,
The emerging trend of pet parents competition from supermarkets, discount
bolstered demand for premium pet department stores and online-only
products and services. Since pets are retailers is expected to accelerate and
treated as family members, pet owners limit demand. As a result, over the five
frequently lavish them with all-natural years to 2023, industry revenue is
and organic pet foods and treats, as well forecast to rise at an annualized rate of
as high-end services. These pet services 2.3% to $21.9 billion.

Key External Drivers Number of pets (cats and dogs) number of pets is expected to increase
As households adopt more cats and in 2018, representing a potential
dogs, demand for industry goods, opportunity for the industry.
such as pet foods, medicine and
accessories, increases. According to Per capita disposable income
the American Pet Product Association’s Consumers increasingly perceive pets as
National Pet Owners Survey, the members of their family, meaning
average dog or cat owner spends products for pets can be considered
between $200.00 and $300.00 nondiscretionary. A decrease in
annually on food for their pet. The disposable income has little effect on
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   5

Industry Performance

Key External Drivers demand because households typically increase in the percentage of services
continued reduce spending on other household and conducted online will likely decrease
leisure products before cutting down on demand for traditional brick-and-mortar
pet food and toys. A rise in per capita stores, suppressing industry revenue.
disposable income, however, increases The percentage of services conducted
the propensity for households to online is expected to rise in 2018,
purchase greater quantities of more posing a potential threat to the industry.
expensive goods and premium items.
Per capita disposable income is expected Number of households
to increase in 2018. According to the American Pet Products
Association’s most recent National Pet
Percentage of services conducted online Owners Survey, 65.0% of US households
Online shopping poses a direct threat to own a pet. Consequently, an increase in
traditional industry retailers. Many the number of households will likely
online retailers are able to offer products increase the number of pet owners in the
similar to those offered by pet stores, but United States, supporting industry
at lower prices, with wider inventories demand. The number of households is
and the ease of direct home shipping. An expected to increase in 2018.

Number of pets (cats and dogs) Per capita disposable income

220 4

210
2
200
% change
Million

190 0

180
-2
170

160 -4
Year 9 11 13 15 17 19 21 23 Year 11 13 15 17 19 21 23

SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   6

Industry Performance

Current The Pet Stores industry is anticipated to


post strong gains over the five years to Industry revenue
Performance 2018, thanks to the growing number of
6
pet owners who treat their pets like
family members. By offering a wider
4
array of innovative, specialized and
premium products and services, pet

% change
stores cashed in on owners’ desires to 2
pamper their pets. In addition, rising pet
ownership in the United States led to 0
overall higher demand for pet food and
supplies. Consequently, industry revenue -2
is expected to increase at an annualized Year 10 12 14 16 18 20 22 24
rate of 2.9% to $19.6 billion over the five
years to 2018. Moreover, industry SOURCE: WWW.IBISWORLD.COM

revenue is expected to rise 3.1% in 2018


alone, as higher disposable incomes employment and wage hikes, translating
encourage greater spending on luxury pet to a drop in wages’ share of revenue.
foods and treats. Nevertheless, overall wages are still
With strong demand and rising sales, projected to increase at an annualized
pet store profit margins are expected to rate of 4.2% to $2.8 billion over the five
grow during the five-year period. Sales of years to 2018. Rising price-premium
premium pet food, organic products, pet product and service sales offset
supplies and services particularly drove increasing wages expenses during the
up profitability because they typically period. As a result, profit margins for the
have higher markups. Furthermore, average company remained stable at
revenue growth outpaced rising 4.0% in 2018.

Pets and products Increasing pet ownership and Moreover, millennials were also found
accompanying demand for pet products to spend more than average on
supported industry growth over the past pampering pets, supporting industry
five years. According to the 2017-18 demand. Millennials were also more
National Pet Owners Survey published likely to throw their pets parties and
by the American Pet Products buy premium pet food products. Over
Association (APPA), an estimated 68.0% the five years to 2018, the number of
of US households own a pet, with over pet cats and dogs is projected to rise at
42.0% of pet owners owning more than an annualized rate of 0.9%, translating
one. Most notably, the millennial to increased demand for pet products
generation stands out as a driving force and services.
for this industry. The survey highlights Operators actively added pet services
that more than 10.0% of pet owners are to capture more of the consumer dollar.
new pet owners, the majority of which According to the APPA’s industry
are millennials. According to the latest spending figures and future outlook,
APPA survey, millennials surpassed the total spending on US pets is expected to
baby boomer generation, accounting for increase to $62.8 billion in 2016 (latest
35.0% of all pet owners surveyed. Baby data available). Continued emphasis on
boomers accounted for 32.0%. pet services will be a primary driver for
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   7

Industry Performance

Pets and products sales. This is particularly important as unemployment rate continues to fall and
continued pet stores opt to differentiate from household disposable income levels rise,
supermarkets and other retail outlets consumers will continue to increase
selling pet food and supplies. As the spending on discretionary pet services.

Competition from Pet stores are traditionally small,


independently owned operations; more Supermarkets have lured
bigger stores
than half of industry operators are customers away from
nonemployers (stores without paid
employees). Even among businesses smaller specialty stores
with employees, most employ fewer
than four workers. Due to the in bulk from wholesalers. Such cost
predominantly small size of industry savings lured price-conscious consumers,
operations, external competition from enabling larger stores to capture higher
supermarkets and mass merchandisers market share. Moreover, many
pressured industry demand. Moreover, consumers gravitated online to purchase
small operators within the industry competitively priced products;
simultaneously experienced heightened e-commerce stores can sell products at
competition from big-box specialty lower prices while maintaining profit
stores within the industry; stores such margins because they do not maintain
as Petco Animal Supplies Inc. benefit a retail storefront and, therefore, avoid
from strong buyer power and shared costly rental rates associated with
operational resources through economies high-traffic retail space.
of scale. Such competition contributed High-end goods are primarily sold
to overall consolidation of the industry through specialty pet stores and other
and placed downward price pressures niche retailers, providing a degree of
on small specialty stores. As a result, guaranteed sales for operators,
the number of industry operators is shielding them from direct competition.
expected to lag relative to industry This is because manufacturers typically
performance, rising a mere annualized place restrictions on ultra-premium pet
0.7% to 13,428 companies. products, selling only to specialty pet
In recent years, supermarkets lured stores. Such restrictions aided niche
customers away from smaller specialty retailers targeting high-end markets
stores, offering the convenience of over the past five years.
one-stop shopping. Grocery stores Big-box specialty stores, such as
enable consumers to shop for a wide PetSmart Inc. and Petco, combine the best
range of household products, including of both worlds; these stores offer a broad
pet supplies, in one location. Time-poor selection of pet products and operate on a
consumers turned to these types of scale large enough to pass cost savings
stores to streamline and simplify down to consumers. Furthermore, many
errands. Meanwhile, mass merchandisers large stores also provide premium
emerged as major retailers of pet products, a factor augmenting competition
products, offering lower prices for for small specialty stores. As a result,
frugal consumers. Due to size, stores big-box stores have posted healthy gains
such as Walmart and Costco exert during the five-year period, increasing
higher buying power and can purchase market share.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   8

Industry Performance

Industry The Pet Stores industry will continue


fetching a growing share of the consumer
As a result, industry revenue is projected
to increase at an annualized rate of 2.3%
Outlook dollar over the next five years as pet to $21.9 billion over the five years to 2023.
owners opt to spoil pets. In addition to Despite this growth, the Pet Stores
rising pet ownership, improving economic industry will continue combating strong
conditions will boost consumer spending competition from grocery stores, mass
and encourage customers to purchase merchandisers and a growing number of
price-premium pet products and services. online-only retailers.

Pet ownership to grow The number of pets owned by households


in the United States is the primary driver A
rise in pet ownership
of demand for the industry. Since the will lead to higher demand
industry sells pets, including cats, dogs,
birds, hamsters and guinea pigs, an for industry products
increase in pet ownership rates
translates to higher revenue for the expenses over the next five years. The
industry. In addition, a rise in pet average profit margin expected to
ownership will lead to higher demand remain steady at 4.0% in 2023, while
for discretionary and nondiscretionary wages are expected to increase alongside
products, such as food, treats and toys. revenue, rising at an annualized rate
To the industry’s benefit, demand for of 2.4% to $3.2 billion. Price-based
pets, especially cats and dogs, is expected competition from online retailers and
to rise over the five years to 2023, driven supercenters is expected to limit returns,
by three demographics increasingly but rising demand and industry
owning pets: single-person households, consolidation are projected to steady
millennials and the aging population. profit margins. Furthermore, expanding
IBISWorld projects the number of pet pet ownership levels will continue
cats and dogs will increase at an attracting new entrants to the industry.
annualized rate of 2.4% during the The number of companies will continue
five-year period, contributing to the increasing slowly due to high competition
industry’s growing revenue. from Petco Animal Supplies Inc. and
Moreover, a rising trend toward PetSmart Inc., rising at an annualized
higher-margin premium pet products rate of 1.0% to 14,136 enterprises over
and services is expected to buoy average the five years to 2023 as industry
profit margins against rising wage consolidation stems growth.

Premium products will IBISWorld expects natural and organic value. Natural and organic foods were
remain popular foods and treats will continue gaining once a niche segment; however, major
popularity during the outlook period, food manufacturers, such as Nestle’s
as households continue to view diets as a Purina, Mars’s Pedigree and Del Monte
means of improving pets’ overall health. Foods all now market natural products
According to the research company sold at major retailers. These high-
Mintel, nutritional value and flavor are margin products will be lucrative
two of the top reasons owners cite for sources of revenue and profit for pet
choosing pet food, just after price and store operators over the next five years.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   9

Industry Performance

Premium products will With improving economic conditions, expected to grow an annualized 1.9%
remain popular demand for specialized pet services is over the five years to 2023. With
expected to continue rising. Over the unemployment expected to remain
continued
past five years, pet services served as low over the next five years, more
primary drivers of growth within the consumers will use extra income to
industry, a trend likely to continue pamper pets with services such as
as per capita disposable income is grooming and boarding.

Changing As disposable income levels increase,


competition customers, namely pet parents, are Competitionfrom
expected to loosen budgets and
splurge on higher-quality items for supermarkets and mass
pets. As a result, consumers will seek merchandisers is expected
options based on factors other than
low prices and return to smaller
to remain strong
operators that offer premium services
at higher prices. Despite favorable attempts to set itself apart from other
conditions, however, competition stores. For example, personalized diets
from supermarkets and mass for pets are expected to serve as a
merchandisers is expected to remain potential niche market for industry
strong for basic pet supplies, such as operators, including special food catered
dry pet food and cat litter. Since these to obese animals. Since many pet owners
products show little differentiation are more concerned with pets’ health,
among brands, consumers will likely the creation of options to improve pet
continue shopping at large retailers health presents a potential opportunity
due to discounted prices and for industry operators. Several pet food
increased convenience. manufacturers identified potential
Since much of the industry consists of growth in customized food options,
a high number of smaller stores, niche taking into consideration pet breeds, life
product marketing will become stages, daily activities, amount of time
increasingly important as each operator indoors and specific medical conditions.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   10

Industry Performance
Life Cycle Stage The industry’s contribution to the
economy is expected to grow
Product innovation and services are improving
Pet ownership is continuing to rise steadily,
expanding the industry’s target market
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   11

Industry Performance

Industry Life Cycle The Pet Stores industry is in the growth started offering premium pet food and
stage of its life cycle. While product treats as well as services such as
introductions and new service offerings grooming, training, walking and full-
This industry are taking place within the industry, service boarding. Expansion of premium
is G
 rowing such growth is predominantly product offerings indicates the industry
attributable to changing consumer is still growing.
sentiment toward pet care and As an industry made up of retailers
expenditure. Industry valued added specializing in pet supplies, the industry’s
(IVA), which measures the industry’s main threat comes from large general-
contribution to the US economy, is line retailers such as supermarkets and
expected to increase at an annualized mass merchandisers and discount
rate of 3.0% over the 10 years to 2023. retailers such as Walmart stocking a wide
In comparison, US GDP is projected to variety of products at competitive prices.
grow at an annualized rate of 2.2% Online pet store retailers also pose an
during the same period. increasing threat as improved web
Over the five years to 2018, the interfaces and delivery systems make
industry posted strong sales driven by shopping online easier and less costly.
pet owners increasingly humanizing Over the long term, both forces threaten
pets. To this point, American Pet industry growth prospects as many
Products Association indicated a tipping specialized retailers will not be able to
point was reached in the mid-2000s, compete with the economies of scale and
prior to the recession, when people extensive distribution networks these
began rewarding pets in human terms. retailers command. Specialty pet stores
Consequently, new products and services will likely further diversify into services,
emerged in this industry to cater to this away from their traditional product lines,
trend. For example, more pet stores have to stay competitive.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   12

Products & Markets


Supply Chain   |   Products & Services   |   Demand Determinants
Major Markets   |   International Trade   |   Business Locations

Supply Chain KEY BUYING INDUSTRIES


99 Consumers in the US
The Pet Stores industry relies on consumers to purchase pet products and to use 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 (2018)

4.7%
9.0% Live animals
Pet services

45.7%
Pet food

40.6%
Pet supplies

Total $19.6bn SOURCE: WWW.IBISWORLD.COM

Pet food Today, a variety of premium pet


Since food is a necessity for all pets, it foods are available to pets. Examples
is not surprising pet foods make up include raw diets for dog and cat
the largest product segment for the foods, weight control food for obese
industry. This segment covers a wide animals, specialized formulas for
range of products such as dry and wet sensitive stomachs and freshly
food for dogs and cats, bird feed, baked cakes and cookies as treats.
crickets and worms for reptiles and This segment endures a high degree
other treats and supplements for several of competition, however, from
different household pets. Over the past supermarkets and mass merchandisers
five years, retailers increasingly selling competitively priced pet food
provided all-natural and organic food products. Consequently, the segment’s
products. These premium pet foods tend share of revenue declined slightly over
to be higher priced with larger markups, the past five years, accounting for
a factor benefiting industry revenue. 45.7% of total revenue.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   13

Products & Markets

Products & Services Pet supplies 9.0% of total industry revenue. Pet
continued Products in this segment include over- services include full service grooming,
the-counter medicines, food bowls, haircuts, baths, toenail trimming and
collars and leashes, pet clothing, brushes tooth brushing. This segment excludes
and combs, shovels and scoopers, cat veterinary services. Other services may
litter, cages birds and reptiles, travel include activities such as training,
carriers and other various accessories boarding and day camps. Greater
for pets. During the five-year period, this interest in pet pampering drove much
segment’s share of revenue increased, of the rise of this segment. As more pet
largely due to rising consumer spending owners consider their animals as family
on over-the-counter medicine products, members, demand for specialty pet
such as flea medicine. This segment services also increased.
accounts for 40.6% of total industry
revenue. Spending on pet medicine Live animal purchases
increased due to soaring costs of Live animals are the industry’s smallest
pharmaceuticals, as well as higher segment at 4.7% of total industry
standards of routine care. Other pet revenue. This product segment is small
supplies and accessories sold by because a pet is normally a one-off
industry retailers also encounter purchase, while products in other
competition from supermarkets and segments, such as pet supplies and pet
grocery stores, namely because there are foods, need to be purchased throughout
no regulations that limit their sale. To the life of the pet, requiring repetitive
this point, pet supplies are increasingly spending. Furthermore, major players
sold at a variety of retail outlets such as in the industry only sell small animals
home improvements stores. and fish, and partner with local pet
programs for cat and dog adoptions.
Services Conversely, smaller operations often
Pet services were the fastest-growing sell all types of animals: cats, dogs,
product segment for the industry over the fish, rabbits, birds, small animals and
past five years, reaching an estimated even reptiles.

Demand Demand for pets and pet supplies is day for the well-being of pets. Pet
Determinants affected by the rate of pet ownership, ownership is on the rise, facilitating
food and supply prices, household industry growth.
income and demographics.
Income
Pet ownership Households with higher incomes are
Pet ownership is a main driver for able to spend more on discretionary
industry demand by definition, as items and services sold at pet stores,
industry operators are retailers of pets. leading to higher demand. Over the past
Thus, as pet ownership increases, the five years, pet-owning households with
number of pets purchased also rises, high disposable income were the main
leading to higher demand and sales for customers for luxury and trendy pet
the industry. In addition, a rise in this products, including premium pet food
number also leads to higher demand for and designer pet toys. In addition, those
products such as food, treats and toys with higher incomes tend to travel
because these goods are needed every frequently, so they are more likely to use
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   14

Products & Markets

Demand pet boarding services or purchase reduce a household’s willingness to


Determinants products permitting pets to accompany purchase a pet. In addition, households
them while traveling. living in apartments are less likely to
continued
have pets since many apartments do not
Demographics and lifestyle permit pets. The aging population,
Changes in demographics and lifestyle however, may increase demand for pets,
of households are important since older demographics often purchase
determinants of demand. Frequent pets for companionship after children
relocation or longer work hours may and grandchildren leave home.

Major Markets Major market segmentation (2018)


4.9%
Consumers aged

26.0%
75 and older
12.1%
Consumers aged 65 to 74
Consumers aged 45 to 54

16.6%
Consumers aged 25 to 34

22.8%
Consumers aged
55 to 64
17.6%
Consumers aged 35 to 44
Total $19.6bn SOURCE: WWW.IBISWORLD.COM

The largest market for the Pet Stores between the ages of 55 and 64 are
industry includes consumers between expected to represent 22.8% of the
the ages of 45 to 54, who account for an market; however, this figure is forecast
estimated 26.0% of total revenue. A to increase over the next five years as
large proportion of this segment can be consumers aged 45 to 54 increasingly
considered pet enthusiasts, who enter this age range.
consider pets family members, The third-largest market consists of
according to PetSmart. Consumers in consumers between the ages of 35 to 44,
this age group are also likely the sole who account for 17.6% of revenue.
financial providers of the household, and Consumers in this market typically have
therefore responsible for household pet families or young children who wish to
expenditures. Furthermore, consumers have family pets. Given how pet
in this product market are typically companionship can benefit health and
established in their careers and have behavioral development in young
steady income streams, enabling them to children, consumers in this age group
spend freely on pet supplies. It has also often decide to add a pet to the family.
been suggested that members of this age According to the American Pet Products
group look for pet companions to fill the Association, a reported 38.0% of
empty space in households after households with children under 18 years
children leave home. Consumers old own at least one pet.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   15

Products & Markets

Major Markets Consumers between the ages of 25 and limited income, decreasing their ability to
continued 34 are estimated to account for 16.6% of own or spend on pets. In addition, these
the market. This demographic group two demographics tend to rent
accounts for a lower, but growing, share. apartments or live in retirement homes,
The smallest market is made of and many of these dwellings do not
consumers over the age of 75 (4.9%). permit pets, hindering the ability of these
Consumers in these categories have demographics to own pets.

International Trade International trade activity is accounted products and supplies is not readily
for at the manufacturing level by available, as they are categorized into
convention; this domestic retail industry broad segments containing large
does not technically have imports or numbers of non-pet related products.
exports. Products and supplies in the Pet Trends in pet food trade provide some
Stores industry, however, are imported insight into trends regarding overall
and exported at the manufacturing level, pet-product trade levels, and are
then sold in the domestic market. included in the Animal Food Production
Precise export and import data on pet industry (IBISWorld report 31111).
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   16

Products & Markets

Business Locations 2018

West
AK
0.2 New
England
ME
Great Mid- 0.6

Lakes Atlantic 1 2
NY 3
WA MT ND 7.7
5 4
3.2 0.3
0.2 MN
Rocky 1.5
WI
OR Mountains SD
0.2
Plains 1.8 MI
2.9
PA
4.4
6
7
1.9 ID IA OH 9 8
0.2 WY 0.8 3.7
0.2
NE IL IN WV VA
3.7 1.7 2.6
0.3
West NV
0.5
KY
0.9 UT MO
0.9 NC
0.7 CO KS 1.6 2.7
2.6 0.8 TN
1.5 SC
CA
13.5
OK AR
Southeast 1.2

GA
0.9 0.5 AL 2.3
AZ MS 0.8
NM
2.6
0.6 Southwest 0.4

TX LA
0.9 FL
6.1 8.2

West
HI
0.3 Additional States (as marked on map) Establishments (%)

1 VT 2 NH 3 MA 4 RI Less than 3%
0.3 0.8 2.4 0.4 3% to less than 10%
10% to less than 20%
5 CT 6 NJ 7 DE 8 MD 9 DC
1.6 3.3 0.5 1.7 0.1
20% or more

SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   17

Products & Markets

Business Locations Pet stores are primarily located in the


Distribution of establishments vs. population
Southeast, West, Mid-Atlantic and Great
Lakes regions of the United States.
30
Industry locations are based primarily
on the number of households in each
region, as well as the median income 20
level of households.

%
Southeast 10
The Southeast holds the highest
number of industry establishments;
22.4% of pet stores are estimated to be 0
in the region. The Southeast is the most

West

Great Lakes

Mid-Atlantic

New England

Plains

Rocky Mountains

Southeast

Southwest
populated region of the United States
with one-quarter of the nation’s
population. Given the higher proportion
of households, there is greater demand Establishments
for industry retailers. Within the Population
Southeast, Florida has the highest SOURCE: WWW.IBISWORLD.COM

number of pet stores at 8.2% of the


nation’s total. some of the highest populations in the
United States due to large metropolitan
West centers. The region also has higher-than-
The West has the second-highest average income levels. Given households
proportion of pet stores in the country within the region have a larger amount of
with an estimated 20.0% of industry disposable income, they are better able to
stores. California has the highest number afford to own a pet.
of pet stores in the country at 13.5%. The
primary reasons for the higher-than- Great Lakes
average number of pet stores in the West The Great Lakes region is the fourth-
are population density and income levels. most popular location for industry
The West has 17.2% of the nation’s total establishments. An estimated 13.9% of
population; furthermore, both California pet stores are located in the Great Lakes
and Nevada have higher-than-average region. The region is also the fourth-most
median incomes by state. populated in the nation, accounting for
4.6% of the total population.
Mid-Atlantic Other small participating regions in
The Mid-Atlantic region has an estimated the industry include: the Southwest
17.8% of pet stores. The most popular (10.2%), New England (6.1%), the Plains
states include New York and (5.6%) and the Rocky Mountains (4.0%).
Pennsylvania, which account for These regions have smaller consumer
respective 7.7% and 4.4% of the markets, therefore limiting demand for
industry’s locations. These states have pet stores.
WWW.IBISWORLD.COM Pet Stores in the US July 2018   18

Competitive Landscape
Market Share Concentration   |   Key Success Factors   |   Cost Structure Benchmarks
Basis of Competition   |   Barriers to Entry   |   Industry Globalization

Market Share Nearly half of the Pet Stores industry’s Over the five years to 2023, PetSmart
Concentration revenue comes from two specialty and Petco are expected to grow in their
supply retailers: PetSmart Inc. share of the industry because big-box
(PetSmart) and Petco Animal Supplies retailers are able to offer customers a
Level
Inc. (Petco). The remainder consists of “best of both worlds” scenario, which
Concentration in this family-owned stores, small franchises includes providing broad and industry-
industry is M
 edium and small chains of pet stores. Despite specific product selections while
the moderate degree of concentration, operating on such a scale that they can
small operators are still able to find purchase in bulk and pass savings on to
niche markets in their geographical consumers in the form of lower prices.
locations, rarely expanding beyond Consequently, these stores are expected
those areas. to grow at the expense of smaller stores.

Key Success Factors Attractive product presentation as major shopping precincts, to maximize
To appeal to customers and encourage store traffic and sales.
purchases, eye-catching promotions and
IBISWorld identifies displays are essential for pet stores. Economies of scope
250 Key Success Successful operators need a range of the
Factors for a Experienced work force most popular pets and pet supplies at
business. The most It is important to employ a highly capable different levels of price and quality.
staff with clear knowledge of the pet Offering a wider variety of products will
important for this
industry to better assist customers and attract a larger customer base.
industry are: 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 standards for each specific
traffic and high-visibility locations, such animal and breed.

Cost Structure Profit typically purchase in large quantities,


Benchmarks Industry profit, as measured by earnings enabling them to spend less per item and
before interest and taxes, is expected to improve margins. In addition, their large
account for 4.0% of revenue in 2018, scale enables them to sell in high volumes
unchanged from 2013. A growing pet at discounted prices. Consequently, they
population and an increasing willingness can afford lower markups and profit from
of pet owners to spend on pets, larger sales volumes. On the contrary,
particularly on premium or high-margin smaller players in this industry do not
products, stabilizes industry profit have such purchasing power; therefore,
margins. Furthermore, pet stores the cost of goods per unit tends to be
increasingly offer pet services, which higher for these players, causing lower
typically have higher margins. It is margins for smaller companies.
important to note, however, that actual
level of margins may vary considerably Purchases
between industry participants. For Purchase costs will remain the single-
instance, larger players such as Petco largest expense for the industry,
Animal Supplies Inc. and PetSmart Inc. accounting for an estimated 55.8% of
WWW.IBISWORLD.COM Pet Stores in the US July 2018   19

Competitive Landscape

Cost Structure revenue. Purchases consist of a range of care for pets, maintain stock levels and
Benchmarks pet food and pet supplies, including provide customer service. Furthermore,
collars, leashes, medication, shampoos, added focus was placed on labor over
continued
dog kennels and pet toys, and a range of the five years to 2018 as pet services
pets, including dogs, cats, birds, fish, have become one of the fastest-growing
small animals and reptiles. Purchase sources of industry revenue. Nonetheless,
expenses increased slightly over the past industry revenue grew at a faster rate
five years. According to Pet Business, a than the number of employees or
publication for the pet and pet supplies wages, therefore decreasing wages’
retailing industry, much of this growth share of revenue.
was due to higher prices from upstream
industries (i.e. manufacturing and Depreciation
wholesaling industries) that were passed Depreciation expenses are expected to
down the supply chain. consume 0.9% of revenue in 2018.
Minimal depreciation is typical for
Wages retailing industries, which are very labor
Due to the labor-intensive nature of the intensive and require minimal capital
retail sector, wages are estimated to make costs in operations. This figure is high
up the second-highest expense item for compared with other retailing industries
pet store operators, accounting for 14.4% because pet stores must acquire special
of total industry revenue in 2018. In pet cages and tanks for animals in addition to
stores, employees are needed to provide shelving and cash registers for stores.

Sector vs. Industry Costs

Average Costs of
all Industries in Industry Costs
sector (2018) (2018)
100 3.1 4.0 n Profit
9.0 n Wages
14.4 n Purchases
80 n Depreciation
n Marketing
n Rent & Utilities
n Other
Percentage of revenue

60
68.0 55.8

40

0.9 1.9
20 0.9 9.4
4.4 1.7
12.8 13.6
0
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Pet Stores in the US July 2018   20

Competitive Landscape

Cost Structure Other costs insurance, security and advertising costs.


Benchmarks Rent and utilities costs are expected to Companies invest 1.9% of revenue toward
represent 9.4% of revenue. Operators incur marketing and advertising to generate
continued
other expenses including administrative, traffic and boost sales.

Basis of Competition Internal External


Pet stores compete with each other based Historically, supermarkets were the primary
on price, product variety, customer sellers of pet food products as they stock a
Level & Trend service, brand awareness, variety of pet wide variety of pet food and supplies and
 ompetition
C in services and store location. Since product bulk purchases generally enable them to
this industry is purchases make up the majority of sales offer lower prices than specialty retailers. In
Highand the trend for pet stores, their main basis of recent years, additional competition came
competition is product range, quality and from mass merchandisers and discount
is I ncreasing
price. Large players like Petco and retailers such as Walmart and Costco
PetSmart benefit from economies of scope stocking a wide variety of products at
and are able to provide broad ranges of competitive prices. Mass merchandisers and
pets, pet foods, pet supplies and pet discount retailers typically do not sell
services with different levels of quality ultra-premium pet products because they
across a range of prices, enabling stores to are limited by manufacturers’ restrictions.
appeal to individual consumer Further competition comes from the
preferences. They are also capable of E-commerce and Online Auctions industry
offering products through private label (IBISWorld report 45411a) and the Mail-
brands at lower prices. Both players Order industry (IBISWorld report 45411b).
benefit from being able to buy products in According to the most recent National Pet
bulk and producing their own products at Owners Survey, there is a growing
lower cost, enabling them to offer prevalence of online and social media
products at a low price and still attain a networks specifically for finding pets and pet
profit. Smaller stores are then pressured products, including companies such as
to provide products at lower prices, which Petstore.com, through which consumers can
results in lower mark-ups and ultimately purchase products without physically
lower profit margins. Smaller stores visiting a store. However, these operators
benefit from the ability to offer are not classified as part of this industry. In
personalized customer services and mold addition, some competition comes from
themselves to the specific needs of niche veterinary services as they also sell
markets in their local areas. customized pet food and some pet products.

Barriers to Entry High levels of competition and


regulations associated with entering this Barriers to Entry checklist

Level & Trend industry may deter some potential Competition High
entrants. Nevertheless, there are various Concentration Medium
 arriers to Entry
B niche markets available for new players Life Cycle Stage Growth
in this industry are to occupy, specifically those specializing Capital Intensity Low
Mediumand S  teady in premium and innovative food, Technology Change Medium
products and services. Regulation & Policy Medium
A significant factor that can hinder an Industry Assistance None
operator from entering this industry is
High levels of competition and SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Pet Stores in the US July 2018   21

Competitive Landscape

Barriers to Entry regulations associated with entering this Industry concentration can be
continued industry may deter some potential another barrier to potential entrants.
entrants. Nevertheless, there are various The only two national retail chains in
niche markets available for new players this industry account for more than
to occupy, specifically those specializing one half of industry revenue; smaller
in premium and innovative food, stores and franchises account for the
products and services. remaining portion. Although this
A significant factor that can hinder an industry is highly fragmented, there is
operator from entering this industry is intense price competition from mass
government regulations. There are merchandisers, online operators and
federal and state laws regulating pet catalog retailers, which may provide a
shops and the sale of animals. For barrier for new, independent retailers.
example, the Pet Animals Act 1951 Opening a new pet store and meeting
requires pet shops get a license in licensing standards is expensive. In
accordance with the act before they can addition, a significant share of funding
open. In addition, the Animal Welfare may be directed toward marketing to
Act of 1966 dictates how pets sold in pet build consumer interest and recognition.
stores must be maintained. Pet shops The initial cost of establishing or
need to address a range of issues and purchasing a retail outlet, in addition
receive licenses based on federal and to purchasing and maintaining
state requirements before permission to inventory levels, may be a barrier for
operate is granted. new entrants.

Industry This industry is composed of a large therefore, this industry has a low level of
Globalization number of small players. Many of the globalization. The industry’s largest
smaller, independent pet supply player, PetSmart has a network of stores
Level & Trend retailers are family-owned businesses in Canada, while Petco expanded to
that operate within a local or regional Mexico and Puerto Rico; however,
 lobalization
G in this scope. In addition, the industry’s major international sales are still low relative
industry is L owand companies are domestically owned; to the United States.
the trend is S  teady
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   22

Major Companies
PetSmart Inc. | PETCO Animal Supplies Inc. | Other Companies

Major players
(Market share)
PETCO Animal Supplies Inc. 19.9%

52.9%
Other

PetSmart Inc. 27.2% SOURCE: WWW.IBISWORLD.COM

Player Performance Since its establishment in 1986, Phoenix- shampoos, medication, toys, pet carriers,
based PetSmart Inc. (PetSmart) has dog kennels, cat furniture, equestrian
become the top specialty retailer of pet supplies, birdcages, aquariums and filters
PetSmart Inc. food and supplies. PetSmart operates make up the hard goods category. Pets
Market share: 27.2% over 1,600 stores, typically located in sold by the company include fish, birds
regional shopping centers near other and reptiles. Larger animals, such as cats
superstores and warehouse stores. The and dogs, are not sold in PetSmart;
company employs over 55,000 people in however, they are available for adoption
the United States and Canada. By offering through the PetSmart Charities’ Adopt a
more than 11,000 pet products and Pet Program, which was co-developed
providing various pet services, PetSmart with humane organizations. In 2016,
aims to provide a one-stop shopping PetSmart acquired AllPaws, one of the
experience. In March 2015, the company largest online and mobile platforms for
went private through an $8.7 billion adopting pets.
buyout by BC Partners. Pet services are a growth segment for
PetSmart categorizes its merchandise the company and currently account for
into three main categories: consumables, more than 10.0% of revenue. In addition
hard goods and pets. Consumables to expanding its services segment,
include pet foods, treats and litter, as well PetSmart continues to expand its retail
as premium products, many of which are presence nationwide through store
not found in supermarkets or mass expansions. In fiscal 2017, the company
merchandisers. Pet supplies such as opened 70 new locations. In addition to
collars, leashes, health and beauty aids, selling products, PetSmart expanded its

PetSmart Inc. (US industry-specific segment) - financial performance*


Revenue Operating Income
Year** ($ million) (% change) ($ million) (% change)
2013-14 5,575.5 10.6 537.3 29.4
2014-15 5,706.2 2.3 572.0 6.5
2015-16 5,867.4 2.8 574.8 2.2
2016-17 5,591.7 -4.7 230.1 -60.7
2017-18 5,340.0 -4.5 151.0 -34.4
2018-19 5,325.3 -0.3 212.3 40.6

*Estimates; **Fiscal year-end January 31


SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   23

Major Companies

Player Performance service offerings to include in-store with other online retail giants such as
continued boarding facilities, grooming services, Amazon.com.
obedience training and full-service
veterinary services. PetSmart offers a Financial performance
complete pet boarding and day-care Over the five years to fiscal 2018,
service called PetsHotel with 24-hour revenue from PetSmart’s industry-
supervision, an on-site veterinarian, specific US operations is expected to
air-conditioned rooms and daily specialty decline at an annualized rate of 0.9% to
treats. Nearly 200 PetSmart stores $5.3 billion. Total brick-and-mortar
include PetsHotel boarding facilities and sales in the US declined due to
Doggie Day Camps. PetSmart also offers decreased in-store traffic and increased
full-service veterinary hospitals in over external competition from online
900 of its stores through a partnership retailers. Revenue losses were partially
with Banfield Pet Hospital. In addition to offset by rising sales of premium and
expanding it service offerings and natural food products and increased sales
partnerships in the company’s brick-and- from pet services. The company’s pet
mortar business, PetSmart has recently services line experienced strong demand
diversified its retail channels. In May over the past five years, enabling this
2017, PetSmart acquired Chewy, the category to consistently expand faster
largest online retailer for pet food. This than its merchandise-products category.
acquisition is expected to offset declining Over the next five years, the company is
traffic at brick-and-mortar locations, as expected to continue to expand its online
well as position the company to compete retail operations.

Player Performance Established in 1965, Petco Animal format Unleashed by Petco neighborhood
Supplies Inc. (Petco) is the second-largest shops and 10 Pooch Hotel locations
pet supply specialty retailer in the United throughout the United States, Mexico
PETCO Animal States. The company is headquartered in and Puerto Rico. The company expanded
Supplies Inc. San Diego and operates an estimated to Puerto Rico and Mexico in 2012 and
Market share: 19.9% 1,552 Petco stores, more than 80 smaller- 2013, respectively. The company also
Industry Brand Names
Unleashed by Petco
PETCO Animal Supplies Inc. (US industry-specific segment) financial
performance*
Revenue Operating Income
Year** ($ million) (% change) ($ million) (% change)
2013-14 3,590.4 7.3 129.1 -14.3
2014-15 3,789.8 5.6 115.4 -10.6
2015-16 3,999.2 5.5 184.0 59.4
2016-17 3,810.5 -4.7 118.1 -35.8
2017-18 3,821.6 0.3 152.1 28.8
2018-19 3,900.4 2.1 155.5 2.2

*Estimates; **Year-end January 31


SOURCE: US SECURITIES AND EXCHANGE COMMISSION
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   24

Major Companies

Player Performance significantly expanded its e-commerce markets. Finally, the company’s recent
continued offerings in recent years, most notably acquisition of Drs. Foster and Smith in
through the acquisition of Drs. Foster 2015, a mail order and e-commerce
and Smith in 2015 and a leading digital company, is anticipated to increase its
services company, PetCoach in 2017. The online presence considerably as
company generated $4.0 billion in total consumers shift to the online
company revenue in fiscal 2014. In marketplace. In addition, the company
August 2015, the company filed for an acquired PetCoach in 2017 for an
initial public offering (IPO), but withdrew undisclosed amount. PetCoach is an
its offering on February 2016 following a online service and mobile app that
$4.6 billion acquisition by the Canada connects users to veterinarians and
Pension Plan Investment Board and CVC other pet health professionals to
Capital Partners. dispense health advice.
Petco stores carry up to 10,000
different pet-related items, including pet Financial performance
food, collars, leashes, grooming products, IBISWorld estimates that over the five
toys, health and beauty aids, kennels and years to fiscal 2018, the company’s US
pet houses. Like other industry revenue generated from brick-and-
participants, Petco offers a variety of mortar stores will rise at an annualized
grooming, veterinary and obedience rate of 1.7% to $3.9 billion. Strong sales
services for animals, but does not sell of premium products were one of the
cats or dogs. Instead, the Think company’s main drivers of growth.
Adoption First program is used in Petco invested heavily in this product
partnership with local animal welfare segment amid the recession when it
organizations. The company also launched Unleashed by Petco, a
operates an independent nonprofit neighborhood specialty store for
organization, The Petco Foundation, premium, natural, organic and raw pet
which has invested more than $175.0 foods. As Petco shifts focus to the
million to support local animal welfare smaller store model, the company will
groups since its inception in 1999. also concentrate on increasing online
Petco has significantly expanded its presence through an acquisition
smaller-store concept, Unleashed by strategy. Between 2005 and 2015,
Petco. The smaller-store chain specializes online sales reportedly increased from
in natural, organic and higher-end pet 1.2% to 8.5% of total revenue, according
products and is geared toward expanding to the company’s 2015 IPO filing (latest
the company’s presence into urban data available).

Other Companies PetSmart and Petco are the top dogs in more than half of companies are
the Pet Stores industry, accounting for nonemployers. Furthermore, more than
nearly half of total industry revenue 80.0% of all companies employ fewer than
in 2018. Overall, the industry is five workers, and at the other end of the
characterized by a moderate to high spectrum, less than 10.0% have more than
degree of concentration controlled by 10 workers. Due to the fragmented nature
these two retailers. The rest of the of the industry, most players do not
industry is composed of several small individually account for a considerable
and privately owned pet stores. In fact, share of the industry’s revenue.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   25

Major Companies

Other Company Pet Retail Brands is a chain retailer of America, with stores primarily along the
Performance pets, pet supplies and wellness products. East Coast. The company employs nearly
The company was formerly known as Pet 2,200 associates and sells more than
Supermarket Inc. and was founded in 7,000 pet care products, including food,
Pet Retail Brands 1973 in Fort Lauderdale, Florida. In July toys, medicine and clothing, as well as
Market share: 4.0% 2016, Pet Supermarket merged with Pet small animals, such as hamsters, guinea
Valu Inc. to form Pet Retail Brands. Pet pigs, rabbits and tropical fish. The
Valu was founded in 1976 and is based in company offers a range of high-value pet
Markham, ON. Pet Retail Brands now products and luxury pet items.
operates as a subsidiary of Pet IBISWorld estimates Pet Retail Brands
Supermarket. The combined business will generate 3.4% of total industry
operates over 930 stores in North revenue in 2018.

Other Company Founded in 1988 in Livonia, Michigan, Pet Supplies Plus stores are generally
Performance Pet Supplies Plus is a franchise business located in high-traffic areas and are
with over 375 stores across more than 25 limited to about 5,000.0 to 6,000.0
states. Pet Supplies Plus offers square feet in size for smaller markets
Pet Supplies Plus franchises in select states to single store and 7,000.0 to 9,000.0 square feet
Market share: 3.5% owner-operators and also to area in larger metropolitan areas. The
developers that own all stores in a smaller store concept is designed to
designated market region. Pet Supplies keep operating costs to a minimum
Plus differentiates itself by providing to offer pet food and supplies at
all-natural food products. In addition, it competitive prices. IBISWorld
offers a range of different services, such estimates that Pet Supplies Plus will
as grooming, self-service pet wash generate 4.0% of total industry
stations and adoptions. revenue in 2018.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   26

Operating Conditions
Capital Intensity   |   Technology & Systems   |   Revenue Volatility
Regulation & Policy   |   Industry Assistance

Capital 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 spent
Level
on wages, an estimated $0.06 is invested 0.5
The levelof capital in the store and equipment. Most capital
intensity is L ow costs are related to shelving, store, 0.4

computers, cashier equipment and other 0.3


equipment such as caging for animals,
which do not need constant replacement. 0.2

Conversely, this industry is labor 0.1


intensive because employees are needed
to operate and manage stores, provide 0.0
Economy Retail Trade Pet Stores
customer service and support, restock
Dotted line shows a high level of capital intensity
merchandise and provide care for pets.
The level of capital intensity remained SOURCE: WWW.IBISWORLD.COM

steady over the past five years, reflecting


the labor-intensive nature of the retail compared with competitors such as
industry. To this point, the cost of labor supermarkets, mass merchandisers and
within this industry is relatively high online pet supply retailers. This is
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   27

Operating Conditions

Capital Intensity because the other stores do not retail knowledge. For online retailers, labor
continued pets directly, inherently requiring a costs are exceptionally low as they are
smaller staff. In addition, these stores not required to outlay expenditure
do not incur costs associated with on customer service, nor are they
employee training, since workers at these required to have shelving, displays or
retailers do not require industry-specific cash registers.

Technology & Systems Over the past five years, there have Furthermore, barcode scanning offered
been few technological advances the advantages of higher labor productivity
Level relevant to the Pet Stores industry. increasing the speed at which information
Technological advances in this industry is passed, greater control over the
The level
of are generally limited to those occurring distribution of goods and reduced errors
Technology Change in similar retail industries, such as along the supply chain. New improvements
is M
 edium computer scanning cash registers and will boost revenue for larger stores that can
automated inventory equipment. The afford to invest in the technologies. For
introduction of this technology has example, larger retailers benefit from Radio
enabled retailers to better manage Frequency Identification (RFID), which
efficiency of operations and inventory. provides real-time information on
Technology at checkout led to inventory and help to reduce shrinkage
computerized point-of-sale equipment, problems as well as improve efficiency.
which controls and records Many operators are small in size and do
merchandising, distribution, sales and not have the financial resources to
stock markdowns. purchase expensive electronic equipment.

Revenue Volatility Pet stores sell discretionary (e.g. pets, offer discretionary services such as day
toys and accessories) and camp and training courses to boost
nondiscretionary products (e.g. pet food). revenue. The nondiscretionary
Level
While purchasing a pet is generally component of industry merchandise,
The level of discretionary, a large proportion of however, accounts for the majority of
Volatility is L ow expenditure on a pet is typically industry revenue. This high level of
nondiscretionary; these include staples nondiscretionary demand keeps the
such as food and medicine. Pet stores can volatility of this industry low.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   28

Operating Conditions

Revenue Volatility
continued

Regulation & Policy There are industry-specific and general animals that are bred for commercial
competitive regulations that apply to this sale, used in research, transported
industry. The transportation, handling commercially or exhibited to the public.
Level & Trend and sale of small pets are governed by Retail pet shops are not covered under
 he level of
T various federal, state and local the Act unless the shop sells exotic or
Regulation is regulations. In addition, industry zoo animals or sells animals to regulated
Mediumand the participants are subject to environmental businesses. Pets owned by private
regulations imposed by federal, state citizens are not regulated. Regulated
trend is S
 teady
and local authorities in relation to the businesses are required to keep accurate
generation, handling, storage, records of acquisition and disposition
transportation and disposal of waste and a description of animals that come
and biohazardous materials, and the into their possession.
sale and distribution of products. Many state and local governments
The Pet Animals Act 1951 deems it an have passed additional animal welfare
offense to open a pet shop unless it is legislation. Over 20 states have
granted a license in accordance with the regulations governing the sale of dogs
Act. When deciding to grant a license, and 15 states govern the sale of cats.
district councils need to consider These regulations stipulate the
whether there is suitable accommodation information that sellers must provide
and enough food and water, whether the at the time of purchase and various
animals are sold at too young an age and options buyers have if the purchased pet
whether reasonable precautions have is sick. These states have regulations that
been taken to curb the spread of disease. enable consumers to obtain a
The Animal Welfare Act (AWA) protects reimbursement when a sick animal is
certain animals from inhumane purchased from a pet store. This is
treatment and neglect. The AWA known as a “lemon law” that is designed
requires that minimum standards of care to protect consumers that buy animals
and treatment be provided for certain from pet shops.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   29

Operating Conditions

Industry Assistance The Pet Stores industry does not receive which promotes pet ownership and
any specific government support, in the disseminates industry-related
form of subsidies, tax breaks or information to members. Another
Level & Trend otherwise. In lieu of government notable trade association is the
 he level of
T assistance, the industry relies on trade American Pet Products Association
Industry Assistance associations to represent the industry as (APPA). Many veterinary associations
is N
 oneand the well as the latest products and trends for also support the industry by reporting
pet owners. The most notable among on best practices and products
trend is S
 teady
them is the American Pet Association, recommended for various pets.
WWW.IBISWORLD.COM Pet Stores in the US July 2018   30

Key Statistics
Industry Data Industry Number of pets
Revenue Value Added Establish- Wages Domestic - cats and dogs
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand (Mil)
2009 15,078.9 2,595.9 16,650 13,632 109,167 -- -- 2,068.1 N/A 171.0
2010 15,645.3 2,845.4 16,502 13,305 105,327 -- -- 2,094.5 N/A 164.6
2011 16,116.3 2,968.0 16,345 13,064 106,581 -- -- 2,146.0 N/A 164.4
2012 16,655.4 3,478.9 16,810 13,212 109,478 -- -- 2,296.4 N/A 171.7
2013 16,938.0 3,142.5 16,715 12,938 111,847 -- -- 2,295.6 N/A 178.9
2014 17,361.6 3,121.9 17,067 13,025 116,598 -- -- 2,305.9 N/A 171.3
2015 18,297.2 3,448.7 17,240 12,948 118,462 -- -- 2,460.7 N/A 163.6
2016 19,071.4 3,340.2 17,670 13,235 125,134 -- -- 2,558.3 N/A 173.8
2017 18,991.2 3,656.6 18,370 13,223 130,007 -- -- 2,734.5 N/A 183.9
2018 19,576.0 3,779.6 18,696 13,428 133,255 -- -- 2,814.5 N/A 186.9
2019 20,096.6 3,865.7 18,891 13,540 136,544 -- -- 2,892.5 N/A 192.7
2020 20,530.0 3,953.3 19,154 13,707 139,077 -- -- 2,954.1 N/A 197.5
2021 20,994.7 4,036.7 19,285 13,775 141,799 -- -- 3,020.4 N/A 202.7
2022 21,423.1 4,121.5 19,630 14,007 144,677 -- -- 3,088.0 N/A 207.2
2023 21,939.2 4,236.2 19,843 14,136 147,722 -- -- 3,162.3 N/A 210.6
Sector Rank 50/150 51/150 61/150 61/150 50/150 N/A N/A 50/150 N/A N/A
Economy Rank 959/2598 643/1601 651/2598 705/2598 697/2598 N/A N/A 1076/2598 N/A N/A

Annual Change Industry Establish- Domestic Number of pets


Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand - cats and dogs
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2010 3.8 9.6 -0.9 -2.4 -3.5 N/A N/A 1.3 N/A -3.7
2011 3.0 4.3 -1.0 -1.8 1.2 N/A N/A 2.5 N/A -0.1
2012 3.3 17.2 2.8 1.1 2.7 N/A N/A 7.0 N/A 4.4
2013 1.7 -9.7 -0.6 -2.1 2.2 N/A N/A 0.0 N/A 4.2
2014 2.5 -0.7 2.1 0.7 4.2 N/A N/A 0.4 N/A -4.3
2015 5.4 10.5 1.0 -0.6 1.6 N/A N/A 6.7 N/A -4.5
2016 4.2 -3.1 2.5 2.2 5.6 N/A N/A 4.0 N/A 6.2
2017 -0.4 9.5 4.0 -0.1 3.9 N/A N/A 6.9 N/A 5.8
2018 3.1 3.4 1.8 1.6 2.5 N/A N/A 2.9 N/A 1.6
2019 2.7 2.3 1.0 0.8 2.5 N/A N/A 2.8 N/A 3.1
2020 2.2 2.3 1.4 1.2 1.9 N/A N/A 2.1 N/A 2.5
2021 2.3 2.1 0.7 0.5 2.0 N/A N/A 2.2 N/A 2.6
2022 2.0 2.1 1.8 1.7 2.0 N/A N/A 2.2 N/A 2.2
2023 2.4 2.8 1.1 0.9 2.1 N/A N/A 2.4 N/A 1.6
Sector Rank 44/150 44/150 58/150 62/150 50/150 N/A N/A 49/150 N/A N/A
Economy Rank 793/2598 495/1601 1122/2598 1202/2598 887/2598 N/A N/A 869/2598 N/A N/A

Key Ratios Imports/ Exports/ Revenue per Share of the


IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2009 17.22 N/A N/A 138.13 13.72 6.56 18,944.37 0.02
2010 18.19 N/A N/A 148.54 13.39 6.38 19,885.69 0.02
2011 18.42 N/A N/A 151.21 13.32 6.52 20,134.92 0.02
2012 20.89 N/A N/A 152.13 13.79 6.51 20,975.90 0.02
2013 18.55 N/A N/A 151.44 13.55 6.69 20,524.47 0.02
2014 17.98 N/A N/A 148.90 13.28 6.83 19,776.50 0.02
2015 18.85 N/A N/A 154.46 13.45 6.87 20,772.06 0.02
2016 17.51 N/A N/A 152.41 13.41 7.08 20,444.48 0.02
2017 19.25 N/A N/A 146.08 14.40 7.08 21,033.48 0.02
2018 19.31 N/A N/A 146.91 14.38 7.13 21,121.16 0.02
2019 19.24 N/A N/A 147.18 14.39 7.23 21,183.65 0.02
2020 19.26 N/A N/A 147.62 14.39 7.26 21,240.75 0.02
2021 19.23 N/A N/A 148.06 14.39 7.35 21,300.57 0.02
2022 19.24 N/A N/A 148.08 14.41 7.37 21,344.10 0.02
2023 19.31 N/A N/A 148.52 14.41 7.44 21,407.10 0.02
Sector Rank 66/150 N/A N/A 99/150 56/150 40/150 95/150 51/150
Economy Rank 1255/1601 N/A N/A 1895/2598 1668/2598 1612/2598 2288/2598 643/1601

Figures are in inflation-adjusted 2018 dollars. Rank refers to 2018 data. SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Pet Stores in the US July 2018   31

Industry Financial Ratios


Apr 2016 - Mar 2017 by company revenue
Apr 2013 - Apr 2014 - Apr 2015 - Apr 2016 - Small Medium Large
Mar 2014 Mar 2015 Mar 2016 Mar 2017 (<$10m) ($10-50m) (>$50m)

Liquidity Ratios
Current Ratio 1.7 2.0 1.6 1.5 1.9 1.6 1.3
Quick Ratio 0.4 0.5 0.4 0.4 0.6 0.5 0.2
Sales / Receivables (Trade Receivables
Turnover) 277.2 141.0 269.1 172.4 210.7 111.1 106.9
Days’ Receivables 1.3 2.6 1.4 2.1 1.7 3.3 3.4
Cost of Sales / Inventory (Inventory Turnover) 5.9 6.3 5.5 6.0 6.0 6.2 5.0
Days’ Inventory 61.9 57.9 66.4 60.8 60.8 58.9 73.0
Cost of Sales / Payables (Payables Turnover) 19.5 16.0 17.0 17.1 21.4 17.6 10.5
Days’ Payables 18.7 22.8 21.5 21.3 17.1 20.7 34.8
Sales / Working Capital 17.3 15.5 17.3 17.5 10.5 17.4 25.2

Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 7.0 5.9 9.7 7.0 5.6 22.5 n/a
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt n/a n/a n/a n/a n/a n/a n/a

Leverage Ratios
Fixed Assets / Net Worth 0.7 0.5 0.6 0.6 0.4 0.6 1.2
Debt / Net Worth 2.2 1.7 1.7 1.9 1.7 2.3 2.1
Tangible Net Worth 24.5 25.9 24.5 32.4 32.6 40.1 21.1

Operating Ratios
Profit before Taxes / Net Worth, % 40.9 34.0 33.8 28.3 38.2 38.4 n/a
Profit before Taxes / Total Assets, % 10.8 8.5 11.4 8.6 9.1 13.0 5.2
Sales / Net Fixed Assets 26.0 43.5 24.7 27.8 34.7 29.2 13.5
Sales / Total Assets (Asset Turnover) 3.9 4.3 4.1 3.7 3.8 3.6 3.6

Cash Flow & Debt Service Ratios (% of sales)


Cash from Trading 36.4 39.4 37.2 36.8 39.6 28.0 n/a
Cash after Operations 3.3 4.9 3.6 4.1 5.3 4.3 n/a
Net Cash after Operations 3.7 5.1 4.1 4.2 5.3 4.2 n/a
Cash after Debt Amortization 1.6 1.8 1.8 1.0 1.0 1.8 n/a
Debt Service P&I Coverage 3.8 5.8 8.7 6.7 8.4 7.6 n/a
Interest Coverage (Operating Cash) 8.3 15.5 15.1 7.1 3.4 21.0 n/a

Assets, %
Cash & Equivalents 13.3 12.0 14.2 11.9 15.2 10.3 4.0
Trade Receivables (net) 6.5 9.2 7.4 6.5 4.9 9.7 6.9
Inventory 44.9 47.9 43.1 47.1 48.2 43.2 49.2
All Other Current Assets 0.7 4.6 2.9 2.2 1.7 3.8 1.6
Total Current Assets 65.4 73.7 67.6 67.7 70.0 67.0 61.7
Fixed Assets (net) 22.7 16.3 20.8 22.8 20.1 22.9 30.9
Intangibles (net) 5.2 4.1 5.0 4.9 5.1 4.6 4.8
All Other Non-Current Assets 6.6 5.9 6.6 4.5 4.7 5.5 2.7
Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total Assets ($m) 362.6 936.1 729.3 574.6 33.5 159.5 381.6

Liabilities, %
Notes Payable-Short Term 10.8 12.5 14.9 9.5 7.2 10.8 14.9
Current Maturities L/T/D 1.5 1.3 4.4 3.6 5.2 2.0 1.0
Trade Payables 17.1 24.5 19.6 17.3 14.4 19.9 22.5
Income Taxes Payable 0.1 0.2 0.1 0.4 0.3 0.4 0.6
All Other Current Liabilities 14.9 9.6 8.4 9.7 10.6 5.8 12.4
Total Current Liabilities 44.3 48.2 47.4 40.5 37.7 38.9 51.4
Long Term Debt 20.0 14.3 16.2 12.2 13.3 13.1 7.8
Deferred Taxes 0.1 0.2 0.1 0.2 n/a 0.1 1.1
All Other Non-Current Liabilities 5.8 7.4 6.8 9.8 11.4 3.3 13.8
Net Worth 29.7 30.0 29.5 37.3 37.7 44.7 25.9
Total Liabilities & Net Worth ($m) 362.6 936.1 729.3 574.6 33.5 159.5 381.6

Maximum Number of Statements Used 77 85 80 55 31 14 10

Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.
WWW.IBISWORLD.COM Pet Stores in the USJuly 2018   32

Jargon & Glossary

Industry Jargon INITIAL PUBLIC OFFERINGA type of public offering PET PARENTSPet owners who are enthusiastic about
in which shares of a company are usually sold to their pets and treat them as members of their family.
institutional investors who, in turn, sell to the general
public on a securities exchange for the first time.
PET BOARDING AND DAY-CARELong- and short-term
options for owners who need assistance looking after
their pets. Services include feeding, walking, grooming
and lodging.

IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY REVENUEThe total sales of industry goods
new companies struggle to enter an industry, while low and services (exclusive of excise and sales tax); subsidies on
barriers mean it is easy for new companies to enter an production; all other operating income from outside the
industry. firm (such as commission income, repair and service
CAPITAL INTENSITYCompares the amount of money income, and rent, leasing and hiring income); and capital
spent on capital (plant, machinery and equipment) with work done by rental or lease. Receipts from interest
that spent on labor. IBISWorld uses the ratio of royalties, dividends and the sale of fixed tangible assets are
depreciation to wages as a proxy for capital intensity. High excluded.
capital intensity is more than $0.333 of capital to $1 of INDUSTRY VALUE ADDED (IVA)The market value of
labor; medium is $0.125 to $0.333 of capital to $1 of labor; goods and services produced by the industry minus the
low is less than $0.125 of capital for every $1 of labor. cost of goods and services used in production. IVA is also
CONSTANT PRICESThe dollar figures in the Key Statistics described as the industry’s contribution to GDP, or profit
table, including forecasts, are adjusted for inflation using plus wages and depreciation.
the current year (i.e. year published) as the base year. This INTERNATIONAL TRADEThe level of international trade
removes the impact of changes in the purchasing power of is determined by ratios of exports to revenue and imports
the dollar, leaving only the “real” growth or decline in to domestic demand. For exports/revenue: low is less than
industry metrics. The inflation adjustments in IBISWorld’s 5%, medium is 5% to 20%, and high is more than 20%.
reports are made using the US Bureau of Economic Imports/domestic demand: low is less than 5%, medium is
Analysis’ implicit GDP price deflator. 5% to 35%, and high is more than 35%.
DOMESTIC DEMANDSpending on industry goods and LIFE CYCLEAll industries go through periods of growth,
services within the United States, regardless of their maturity and decline. IBISWorld determines an industry’s
country of origin. It is derived by adding imports to industry life cycle by considering its growth rate (measured by IVA)
revenue, and then subtracting exports. compared with GDP; the growth rate of the number of
EMPLOYMENTThe number of permanent, part-time, establishments; the amount of change the industry’s
temporary and seasonal employees, working proprietors, products are undergoing; the rate of technological change;
partners, managers and executives within the industry. and the level of customer acceptance of industry products
and services.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists of NONEMPLOYING ESTABLISHMENTBusinesses with no
one or more establishments that are under common paid employment or payroll, also known as nonemployers.
ownership or control. These are mostly set up by self-employed individuals.
ESTABLISHMENTThe smallest type of accounting unit PROFITIBISWorld uses earnings before interest and tax
within an enterprise, an establishment is a single physical (EBIT) as an indicator of a company’s profitability. It is
location where business is conducted or where services or calculated as revenue minus expenses, excluding interest
industrial operations are performed. Multiple and tax.
establishments under common control make up an VOLATILITYThe level of volatility is determined by
enterprise. averaging the absolute change in revenue in each of the
EXPORTSTotal value of industry goods and services sold past five years. Volatility levels: very high is more than
by US companies to customers abroad. ±20%; high volatility is ±10% to ±20%; moderate volatility
is ±3% to ±10%; and low volatility is less than ±3%.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in the United WAGESThe gross total wages and salaries of all
States. employees in the industry. The cost of benefits is also
included in this figure.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players account
for more than 70% of industry revenue. Medium is 40% to
70% of industry revenue. Low is less than 40%.
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