45391 pet stores in the us industry report

7/21/2019 45391 Pet Stores in the US Industry Report

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WWW.IBISWORLD.COM Pet Stores in the US December 2015 1

IBISWorld Industry Report 45391

Pet Stores in the USDecember 2015 Britanny Carter

New tricks: Pet owners will invest in premiumproducts and services as the economy improves

2 About this Industry

2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance

4 Executive Summary

4 Key External Drivers

6 Current Performance

8 Industry Outlook

10 Industry Life Cycle

12 Products & Markets

12 Supply Chains

12 Products & Services

13 Demand Determinants

14 Major Markets

15 International Trade

16 Business Locations

18 Competitive Landscape

18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

20 Basis of Competition

21 Barriers to Entry

22 Industry Globalization

23 Major Companies

23 PetSmart Inc.

24 PETCO Animal Supplies Inc.

27 Operating Conditions

27 Capital Intensity

28 Technology & Systems

28 Revenue Volatility

29 Regulation & Policy

30 Industry Assistance

31 Key Statistics

31 Industry Data

31 Annual Change

31 Key Ratios

32 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]




Pet stores sell a variety of pets, includingdogs, cats, sh and birds. Stores also sellpet foods and pet supplies, such ascollars, leashes, health and beauty aids,

shampoos, medication, toys, petcontainers, dog kennels and cat furniture.Some stores also oer pet services, suchas grooming and training.

The primary activities of this industry are

Retailing pets

Retailing pet food and supplies

Providing pet grooming and boarding services

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.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

www.americanpetproducts.orgAmerican Pet Products Association

www.petage.comPet Age Magazine

www.petbusiness.comPet Business

www.humanesociety.org The Humane Society

The major products and services in this industry areLive animals

Pet food

Pet services

Pet supplies




M i l l i o n s

210

150

160

170

180

190

200

2006 08 10 12 14 16 18Year

Number of pets (cats and dogs)

SOURCE: WWW.IBISWORLD.COM

% c h a n g e

12

-8

-4

0

4

8

2107 09 11 13 15 17 19Year

Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2015)

45.7%Pet food

40.6%Pet supplies

9.0%Pet services

4.7%Live animals


Key StatisticsSnapshot

Industry at a GlancePet Stores in 2015

Industry Structure Life Cycle Stage Growth

Revenue Volatility Low

Capital Intensity Low

Industry Assistance None

Concentration Level Medium

Regulation Level Medium

Technology Change Medium

Barriers to Entry Medium

Industry Globalization Low

Competition Level High

Revenue

$17.5bnProfit

$1.4bnWages

$2.4bnBusinesses

12,933

Annual Growth 15-20

3.1%Annual Growth 10-15

3.7%

Key External DriversNumber of pets(cats and dogs)

Per capita disposableincome

Percentage of servicesconducted online

Number of households

Market Share

PetSmart Inc.38.6%

PETCO AnimalSupplies Inc.23.3%

p. 23

p. 4

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31





Key External Drivers Number of pets (cats and dogs) As households adopt more cats, dogsand other pets, demand for industrygoods, such as pet foods, medicine andaccessories, increases. According tothe American Pet Product

Association’s (APPA) National PetOwner’s Survey, the average dog or catowner spends between $200 and $300annually on food for their pet. Thenumber of pets is expected to increaseduring 2015, creating a potentialopportunity for the industry.

Per capita disposable incomeConsumers increasingly perceive pets asfamily members, so products for pets can

be considered nondiscretionary. Adecrease in disposable income has littleeect on demand because householdstypically reduce spending on otherhousehold and leisure products beforecutting down on pet food and toys.However, a rise in per capita disposableincome increases the propensity forhouseholds to purchase a greaterquantity of goods and premium items

ExecutiveSummaryThe Pet Stores industry has purred alongover the past ve years as cats, dogs, shand birds have remained popular homecompanions. Pet parents, or pet owners

who treat their four-legged friends asfamily members, have grown increasinglycommon and facilitated demand for petstores. Accelerated by economic recovery,the industry has expanded strongly overthe ve-year period despite increasedcompetition from supermarkets, massmerchandisers and online retailers that

typically oer consumers greaterconvenience and competitive prices.Revenue is consequently expected toincrease at an annualized rate of 3.7% to$17.5 billion in the ve years to 2015.Continuing its strong growth, revenue isexpected to grow an annualized 3.2% in

2015 thanks to rising disposable income.The emerging trend of pet parents has

bolstered demand for price premium petproducts and services. Since pets aretreated as family members, pet ownersfrequently lavish them with all-natural

and organic pet foods and treats, inaddition to high-end services. Examplesof pet services go beyond the traditionalgrooming, dog walking and training;today, premium services, such as pettherapy sessions and pet-only ights, areavailable for four-legged family members.This is the case particularly for dog andcat owners. These positive trends,combined with a rising disposableincome, are expected to increase protmargins from 5.5% of revenue in 2010 to8.2% in 2015.

Over the five years to 2020, the PetStores industry is projected to maintainstrong growth. As the economycontinues its upward trajectory andconsumers have more discretionaryincome, revenue from premiumproducts and services is projected toincrease. Moreover, the number ofpet-owning households is expected tocontinue rising, yielding greaterdemand for industry products.However, for basic pet supplies,competition from supermarkets,

discount department stores and online-only retailers is expected to accelerateand limit demand. Overall, over the five

years to 2020, industry revenue isforecast to rise at an annualized rate of3.1% to total $20.4 billion.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage

The emerging trend of pet parents has bolstered demand for price premium petproducts and services




Industry Performance

Key External Driverscontinuedthat are more expensive. Per capitadisposable income is expected to increasein 2015.

Percentage of services conducted onlineOnline shopping represents a directthreat to traditional industry retailers.Many online retailers are able to oerproducts similar to those oered by petstores, but with lower prices, widerinventories and the ease of direct homeshipping. An increase in the percentage ofservices conducted online will likely

decrease demand for traditional brick-

and-mortar stores, suppressing industryrevenue. The percentage of servicesconducted online is expected to rise in2015, posing a threat to the industry.

Number of households According to the APPA’s most recentNational Pet Owners Survey, 68.0% of UShouseholds own a pet. Consequently, anincrease in the number of households willlikely increase the number of pet ownersin the United States, supporting industrydemand. The number of households is

expected to increase during 2015.

% c h a n g e

3

-3

-2

-1

0

1

2

2008 10 12 14 16 18Year

Per capita disposable income


M i l l i o n s

210

150

160

170

180

190

200

2006 08 10 12 14 16 18Year

Number of pets (cats and dogs)





Pets and products Higher pet ownership andaccompanying demand for pet productshave supported industry growth over thepast ve years. According to the 2015-2016 National Pet Owners Surveypublished by the American Pet Products

Association (APPA), about 65.0% of UShouseholds own a pet. Over the ve

years to 2015, the number of pet catsand dogs is projected to rise anannualized 2.4%. Such growth rateshave translated to rising demand for petsupplies during the ve-year period.

Operators have been actively addingpet services to capture more of theconsumer dollar. According to PetBusiness, 22.0% of retailers addedpet-related services, such as grooming

and pet boarding, to improve sales andprofit margins over 2010. According tothe APPA industry spending figuresand future outlook, spending on petservices is expected to increase from$3.5 billion in 2010 to $5.2 billion in2015. IBISWorld expects that in 2015,the continued emphasis on pet services

will be a primary driver for sales. Thisis particularly important as pet storesopt to differentiate from supermarketsand other retail outlets that sell petfood and supplies. As theunemployment rate slowly subsidesand households gain more disposableincome, consumers will continue toincrease their spending ondiscretionary pet services.

The Pet Stores industry is anticipated topost strong gains over the ve years to2015, driven by the growing number ofpet owners who treat their pets likefamily members. By oering a widerarray of innovative, specialized andpremium products and services, petstores have been able to cash in on petowners’ desires to pamper their pets. Inaddition, rising pet ownership in theUnited States has led to overall higherdemand for pet food and supplies.Revenue for the Pet Stores industry is

consequently estimated to increase at anannualized rate of 3.7% to $17.5 billion inthe ve years to 2015. Moreover, industryrevenue is expected to jump 3.2% in 2015as higher disposable incomes encouragegreater spending on pets.

With strong demand and risingsales, pet store profit margins areexpected to grow over the five-yearperiod. Sales of premium pet food,supplies and services in particularhave driven up profitability becausethey typically have higher markups.

Furthermore, revenue growth has

outpaced rising employment and wagehikes, translating to a drop in wages asa share of revenue; wages are estimatedto increase at an annualized rate of3.2% over the five years to 2015,totaling $2.4 billion. Rising price-premium product and service sales,coupled with a slight decline in wagecosts, are expected to boost averageindustry profit margins to 8.2% of total

revenue in 2015, up from 5.5% in 2010.

CurrentPerformance

% c

h a n g e

8

0

2

4

6

2107 09 11 13 15 17 19Year

Industry revenue






Pet stores are traditionally small andindependently owned operations; 59.2%of industry players are nonemployers(stores without paid employees). Evenamong businesses that have employees,most employ fewer than four workers.Due to their predominantly small size,external competition from supermarketsand mass merchandisers has pressuredindustry demand. Moreover, smalloperators within the industry havesimultaneously experienced heightenedcompetition from big-box specialty stores

within the industry; stores such as Petco benet from strong buyer power andshared operational resources througheconomies of scale. Such competition hascontributed to overall consolidation ofthe industry and placed dicult pricepressures on small specialty stores. As aresult, the number of industry operatorsis expected to decrease a slightannualized 0.6% to 12,933 companies.

In recent years, supermarkets havelured customers away from smallerspecialty stores, oering the convenience

of one-stop shopping. Grocery storesallow consumers to shop for a wide rangeof household products, including petsupplies, in one location. Time-poorconsumers have turned to these types ofstores to streamline and simplify errands.Meanwhile, mass merchandisers haveemerged as major retailers of petproducts, oering lower prices for frugalconsumers. Due to their sizes, stores suchas Walmart and Costco exert higher

buying power and are able to purchase in bulk from wholesalers. Such cost savings

have lured in price-conscious consumers,allowing larger stores to capture a highershare of the market. Moreover, manyconsumers have gravitated online topurchase competitively priced products;e-commerce stores can sell products atlower prices while maintaining prot

margins because they do not maintain aretail storefront and, therefore, avoid thecostly rental rates associated withhigh-trac retail space.

High-end goods are primarily soldthrough specialty pet stores and otherniche retailers, providing a degree ofguaranteed sales for operators, shieldingthem from direct competition. This is

because manufacturers typically placerestrictions on ultra-premium petproducts, selling them only to specialtypet stores. Such restrictions have aided

niche retailers targeting the high-endmarket over the past ve years.

Big-box specialty stores, such asPetSmart and Petco, combine the best of

both worlds; these stores oer a broadselection of pet products and operate on ascale large enough to pass cost savingsdown to consumers. Furthermore, manylarge stores also provide premiumproducts, a factor that has augmentedcompetition for small specialty stores. Asa result, big-box stores have postedhealthy gains over the ve-year period.

Competition frombigger stores Supermarkets have luredcustomers away fromsmaller specialty stores





Premium products willremain popular

IBISWorld expects that natural andorganic foods and treats will continue togain popularity over the ve years to2020 as households continue to viewtheir animals’ diets as a means ofimproving their pets’ overall health.

According to the research company,Mintel, nutritional value and avor are

two of the top reasons owners cite forchoosing food for their pets, just afterprice and value. Natural and organicfoods were once a niche segment;however, major food manufacturers, suchas Nestle’s Purina, Mars’s Pedigree andDel Monte Foods all now market naturalproducts that are sold at major retailers.

The number of pets owned by householdsin the United States is the primary driver

of demand for the industry. Since theindustry sells pets, including cats, dogs,

birds, hamsters and guinea pigs, anincrease in pet ownership rates translatesto higher revenue for the industry. Inaddition, a rise in pet ownership leads tohigher demand for discretionary andnondiscretionary products, such as food,treats and toys. To the industry’s benet,demand for pets, especially cats anddogs, is expected to rise over the ve

years to 2020, primarily driven by moresingle-person households and the aging

population, two demographics thatincreasingly own pets. IBISWorldprojects that the number of pet cats anddogs will increase at an annualized rateof 1.9% during the ve-year period,

which will contribute to the industry’sgrowing revenue.

Moreover, an increased trend towardhigher-margin premium pet productsand services is expected to favorablyaect industry prot margins over the

next ve years. Wages are expected toincrease at a slower speed than revenue,at an annualized rate of 2.7% to $2.7

billion, assisting the average industryprot margin. However, price-basedcompetition from online retailers andsupercenters will limit returns.

Nonetheless, rising demand and industryconsolidation are projected to increaseprot over the next ve years. Risingprotability and expanding petownership levels will also continue to

bring new entrants to the industry.Consequently, the number of companiesis projected to increase at an annualizedrate of 0.5% to 13,269 in the ve years to2020, with industry consolidationstemming such gures.

Pet ownership to grow

The Pet Stores industry will continue tofetch a growing share of the consumerdollar over the next ve years as petowners opt to spoil their pets. In additionto rising pet ownership, improvingeconomic conditions will boost consumerspending and encourage customers topurchase price-premium pet products and

services. As a result, industry revenue isprojected to increase at an annualized rateof 3.1% to $20.4 billion over the ve yearsto 2020. Despite this growth, the PetStores industry will continue to combatstrong competition from grocery stores,mass merchandisers and a growingnumber of online-only retailers.

IndustryOutlook

A rise in pet ownership

leads to higher demandfor discretionary andnondiscretionary products





During the recession and its aftermath,mass merchandisers and supermarkets

attracted many budget-consciousconsumers by oering a limited selection oflow- to medium-quality goods at discountedprices. However, as disposable income levelsincrease in line with the economic recoveryin coming years, customers are expected toloosen their budgets and splurge on higher-quality items for their pets. As a result,consumers will seek options based onfactors other than low prices and return tosmaller operators that oer higher-qualityservices at higher prices. Despite thesefavorable conditions, however, competition

from supermarkets and mass merchandisersis expected to remain strong for basic petsupplies, such as dry pet food and cat litter.Since these products show littledierentiation among brands, consumers

will likely continue to shop at large retailersto take advantage of discounted prices andthe convenience of one-stop shops.

Since much of the industry consists of ahigh number of smaller stores, niche

product marketing will becomeincreasingly important as each operatorattempts to set itself apart from otherstores. For example, personalized diets forpets are expected to serve as a potentialniche market for industry operators,including special food catered to obese

animals Since many pet owners have become concerned with their pets’ health,the creation of options to improve pethealth presents a potential opportunity forindustry operators. Several pet foodmanufacturers have identied potentialgrowth in customized food options, takinginto consideration pet breeds, life stages,daily activities, amount of time indoorsand specic medical conditions.

Changingcompetition

These high-margin products will belucrative sources of revenue and profitfor pet store operators over the nextfive years.

With improving economic conditions,demand for specialized pet services isexpected to continue. During the past ve

years, pet services have served as primary

drivers of growth within the industry, atrend that will likely continue as percapita disposable income is expected togrow at an annualized rate of 2.5% in theve years to 2020. As unemploymentdeclines, more consumers will use theirextra income to pamper their pets withservices such as grooming and boarding.

Premium products willremain popularcontinued

With improving economic

conditions, demand forspecialized pet services isexpected to continue




Industry PerformanceThe industry’s contribution to the economy isexpected to grow over the 10 years to 2020

Product innovation and services are improving

Pet ownership is continuing to rise steadily,expanding the industry’s target market

Life Cycle Stage

SOURCE: WWW.IBISWORLD.COM.AU

20

15

10

5

0

-5

-10

% G r o w t h i n s h a r e o f e c o n o m y

% Growth in number of establishments

-10 -5 0 5 10 15 20

DeclineShrinking economic

importance

Quality GrowthHigh growth in economicimportance; weaker companiesclose down; developedtechnology and markets

MaturityCompanyconsolidation;level of economicimportance stable

Quantity GrowthMany new companies;minor growth in economicimportance; substantialtechnology change

Key Features of a Growth Industry

Revenue grows faster than the economy

Many new companies enter the market

Rapid technology & process change

Growing customer acceptance of product

Rapid introduction of products & brands

E-Commerce & Online Auctions

Animal Food Production

Mail Order

Toy, Doll & Game Manufacturing

Veterinary Services

Pet Stores





Industry Life Cycle The Pet Stores industry is in the growingstage of its life cycle. While productintroductions and new service oeringsare taking place within the industry, suchgrowth is predominantly attributable tochanging consumer sentiment towardspet care and expenditure. Industry

valued added (IVA), which measures theindustry’s contribution to the USeconomy, is expected to increase at anannualized rate of 4.5% in the 10 years to2020. In comparison, US GDP isprojected to grow at an annualized rate of

2.2% during the same period. Thisindicates that the industry is growing at afaster rate than the economy, a clearindicator that this industry is in itsgrowing life cycle stage.

During the ve years to 2015, theindustry has posted strong sales driven

by pet owners increasingly humanizingtheir pets. To this point, American PetProducts Association indicated that atipping point was reached in the mid-2000s, prior to the recession, whenpeople began rewarding pets in human

terms. Consequently, new products andservices have emerged in this industry tocater to this trend. For example, an

increasing number of pet stores havestarted to oer premium pet food andtreats as well as services such asgrooming, training, walking and full-service boarding. This trend of rapidproduct introductions indicates that thePet Stores industry further establishesthe industry as growing.

As an industry made up of retailersthat specialize in pet supplies, theindustry’s main threat comes from largegeneral-line retailers such assupermarkets and mass merchandisers

and discount retailers such as Walmartthat stock a wide variety of products atcompetitive prices. Online pet storeretailers also pose an increasing threat asimproved web interfaces and deliverysystems make shopping online easierand less costly. Over the long term, boththese forces threaten the industry’sgrowth prospects as many specializedretailers will not be able to compete withthe economies of scale and extensivedistribution networks these retailerscommand. Specialty pet stores will likely

further diversity into services, awayfrom their traditional product lines, tostay competitive.

This industryis Growing




Products & Services

Pet foodBecause food is a necessity for all pets, itis not surprising that pet foods make upthe largest product segment for theindustry. This segment covers a widerange of products such as dry and wetfood for dogs and cats, bird feed, cricketsand worms for reptiles, and other treatsand supplements for a number ofdierent household pets. In the past ve

years, retailers have increasinglyprovided all-natural and organic foodproducts. These premium pet foods tendto be higher priced with larger markups,a factor which has beneted industry

revenue. Today, a variety of premium petfoods are available to pets. Examplesinclude the raw diet for dog and catfoods, weight control food for obeseanimals, specialized formulas forsensitive stomachs, and freshly bakedcakes and cookies as treats. However, thesegment faces a high degree ofcompetition from supermarkets andmass merchandisers, which sellcompetitively priced pet food products.Consequently, the segment’s share ofrevenue has declined slightly over thepast ve years, accounting for 45.7% ofthe total.

Products & MarketsSupply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES99 Consumers in the US

The Pet Stores industry relies on consumers to purchase pet products and to utilize industryservices.

KEY SELLING INDUSTRIES

31111 Animal Food Production in the USThis industry supplies pet stores with a vast array of pet food.

33993 Toy, Doll & Game Manufacturing in the USThis industry supplies pet toys and accessories to industry operators.

54194 Veterinary Services in the USThis industry provides veterinary care services such as vaccinations to industry operators.

Supply Chain

Products and services segmentation (2015)

Total $17.5bn

45.7%Pet food

40.6%Pet supplies

9.0%Pet services

4.7%Live animals





Products & Markets

DemandDeterminants

Demand for pets and pet supplies isaected by the rate of pet ownership,food and supply prices, householdincome and demographics.

Pet ownershipPet ownership is a main driver for industrydemand by denition, as industry operatorsare retailers of pets. Thus, as pet ownershipincreases, the number of pets purchasedalso rises, leading to higher demand andsales. A rise in this number also leads tohigher demand for products such as food,treats and toys because these goods are

needed every day for the well-being of pets.Pet ownership has been on the rise,facilitating industry growth.

IncomeHouseholds with higher incomes are able tospend more on discretionary items andservices sold at pet stores, leading to higherdemand. Over the past ve years, pet-owning households with high disposableincome have been the main customers forluxury and trendy pet products, includingpremium pet food and designer pet toys. Inaddition, those with higher incomes tend to

Products & ServicescontinuedPet suppliesProducts in this segment include over-the-counter medicines, food bowls, collars andleashes, pet clothing, brushes and combs,shovels and scoopers, cat litter, cages

birds and reptiles, travel carriers and anyother various accessories for pets. Duringthe past ve years, this segment’s share ofrevenue has increased largely due to risingspending on over-the-counter medicineproducts, totaling at 40.6% of industryrevenue. Spending on pet medicine hasincreased due to the soaring cost of

pharmaceuticals, as well as higherstandards of routine care. Other petsupplies and accessories sold by industryretailers also face competition fromsupermarkets and grocery stores,namely because there are no regulationsthat limit their sale. To this point, petsupplies are being increasingly sold at a

variety of retail outlets such as homeimprovements stores.

ServicesPet services have been the fastest-growing

product segment for the industry over thepast ve years, reaching an estimated9.0% of the total during the year. Pet

services include full service grooming,haircuts, baths, toenail trimming andtooth brushing. This excludes veterinaryservices. Other services may includeactivities such as training, boarding andday camps. Much of the rise of thissegment has been driven by a greaterinterest in pet pampering. As more petowners consider animals as members oftheir families, demand for specialty petservices has also increased.

Live animal purchases

The live animal segment of the industry isthe industry’s smallest segment at 4.7% ofthe total. This product segment is small

because a pet is normally a one-opurchase, while products in othersegments, such as pet supplies and petfoods, need to be purchased throughoutthe life of the pet, thus, requiringrepetitive spending. Furthermore,major players in the industry only sellsmall animals and fish, and partner

with local pet programs for cat and dogadoptions. Conversely, smaller

operations often sell all types ofanimals: cats, dogs, fish, rabbits, birds,small animals and even reptiles.




Products & Markets

Major Markets

The largest market for the Pet Storesindustry includes consumers between theages of 45 to 54, who account for anestimated 24.6% of total revenue. Manymembers of this age group look for petcompanions to ll the empty space in theirhouseholds after their children leave home.

A large proportion of this segment can beconsidered pet enthusiasts, who considerpets family members, according toPetSmart. Furthermore, consumers in thisproduct market are typically employed andhave steady income streams, allowing themto spend freely on pet supplies. Consumers

between the ages of 55 and 64 are expectedto represent 21.6% of the market; however,this gure is forecast to increase during thenext ve years as consumers aged 45 to 54increasingly enter this age range.

The third-largest market consists ofconsumers between the ages of 35 to 44,

who represent about 16.6% of revenue.Consumers in this market typically havechildren, and they often consider the healthand behavioral benets a pet can have ontheir kids. According to the American PetProducts Association, about 38.0% ofhouseholds with children under 18 yearsold own at least one pet.

Consumers between the ages of 25 and34 are estimated to account for 15.7% of themarket. This demographic group accountsfor a lower share as they are often subjectto busy schedules, making it dicult forthem to own pets.

The two smallest markets are made ofconsumers under the age of 25 (accountingfor 5.5% of the market) and consumers

DemandDeterminantscontinued

travel frequently, so they are more likelyto utilize pet boarding services orpurchase products that allow their pet totravel with them.

Demographics and lifestyleThe change in demographics and lifestyle ofhouseholds is an important determinant ofdemand. If households are frequentlyrelocating or working longer hours, then

these factors may reduce a household’s willingness to purchase a pet. Inaddition, households living inapartments are less likely to have petssince many apartments do not allowpets. However, the aging population mayincrease demand for pets, since olderdemographics often purchase pets forcompanionship after their children andgrandchildren leave home.

Major market segmentation (2015)

Total $17.5bn

24.6%Consumers aged 45 to 54

5.5%Consumers aged under 25


4.6%Consumers aged

75 and older








Products & Markets

International Trade International trade activity is accountedat the manufacturing level by convention;this retail industry does not technicallyhave imports or exports. However,products and supplies in the Pet Storesindustry are imported and exported at

the manufacturing level and then sold inthe domestic market. Precise export andimport data on pet products and supplies

is not readily available, as they arecategorized into broad segments thatcontain a large number of other non-petrelated products. However, trends in petfood trade provide some insight intotrends regarding overall pet-product

trade levels, and these are included in the Animal Food Production industry(IBISWorld report 31111).

Major Marketscontinuedover the age of 75 (4.6%). Consumers inthese categories have limited income, thus,decreasing their ability to own or spend onpets. In addition, these two demographics

tend to rent apartments or live inretirement homes, and many of thesedwellings do not allow pets, hindering theability of these demographics to own pets.




Products & Markets

Business Locations 2015

MO1.8

VT0.3

MA2.2

RI0.5

NJ3.5

DE0.5

NH0.8

CT1.5

MD1.9

DC0.1

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ2.3

CA13.0

NV0.7

OR1.9

WA3.0

MT0.3

NE0.5

MN1.7

IA0.8

OH3.9

VA2.7

FL8.1

KS1.0

CO2.5UT0.6

ID0.5

TX5.5

OK0.8

NC2.6

AK0.2

WY0.3

TN1.5

KY0.8

GA2.2

IL4.1

ME0.5

ND0.2

WI1.8 MI

3.6PA4.5

WV0.3

SD0.2

NM0.6

AR0.5

MS0.4

AL0.9

SC1.2

LA0.9

HI0.4

IN1.8

NY7.6 5

6

78

321

4

9


Establishments (%)

Less than 3%

3% to less than 10%

10% to less than 20%

20% or more




Products & Markets

Business Locations Pet stores are primarily located in theSoutheast, the West, the Mid-Atlanticand the Great Lakes regions of the UnitedStates. Industry locations are basedprimarily on the number of households ineach region, as well as the medianincome level of households.

SoutheastThe Southeast holds the highest numberof industry establishments; 22.1% of petstores are estimated to be in the region.The Southeast is the most populated

region of the United States with onequarter of the nation’s population. Giventhe higher proportion of households,there is a greater demand for industryretailers. Within the Southeast, Floridahas the highest number of pet stores, at8.1% of the nation’s total.

WestThe West has the second-highestproportion of pet stores in the country;the region is estimated to have 19.2% ofindustry stores. California has the highest

number of pet stores in the country at13.2%. The primary reasons for thehigher-than-average number of pet storesin the West are population density andincome levels. The West has 17.1% of thenation’s total population; furthermore,

both California and Nevada have higher-than-average median incomes by state.

Mid-AtlanticThe Mid-Atlantic region has an estimated18.1% of pet stores. The most popularstates include New York andPennsylvania, which account for arespective 7.6% and 4.5% of theindustry’s locations. These states havesome of the highest populations in theUnited States due to their largemetropolitan centers. The region also has

higher-than-average income levels.Given that households within the regionhave a larger amount of disposableincome, they are more able to aord toown a pet.

Great LakesThe Great Lakes region is the fourth-most popular location for industryestablishments. 15.2% of pet stores areestimated to be located in the GreatLakes region. Illinois is the fth-highestpopulated state in the nation; therefore itis a popular center for industryoperators. The state holds an estimated4.1% of pet stores.

Other small participating regions inthe industry include: the Southwest, NewEngland, the Plains and the RockyMountains. Among the aforementionedregions, the Southwest commands thelargest share of industry establishmentsat 9.2% of the total. These regions havesmaller consumer markets, thereforelimiting demand for pet stores.

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w e s t

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M i d - A t l a n t i c

N e w E n g

l a n d

P

l a i n s

R o c k y M o u n

t a i n s

S o u t h e a s t

Establishments

Population

Distribution of establishments vs. population





Cost StructureBenchmarks

ProfitIndustry prot, as measured by earnings

before interest and taxes, is expected togrow to 8.2% of revenue in 2015, up from5.5% in 2010. A growing pet population andan increasing willingness of pet owners tospend on their pets, particularly onpremium or high-margin products, hasdriven this increase in protability.Furthermore pet stores are increasinglyoering pet services, which typically havehigher margins. It is important to note,however, that the actual level of margins

may vary considerably between industryparticipants. For instance, larger playerssuch as PETCO and PetSmart typicallypurchase in large quantities, which enablesthem to spend less per item and improvemargins. In addition, their large scale allowsthem to sell in high volumes at discountedprices. This enables them to aord lowermarkups and to prot from larger sales

volumes. On the contrary, smaller players inthis industry do not have such purchasingpower; therefore, the cost of goods perunit tends to be higher for these

Key Success Factors Attractive product presentationTo appeal to customers and encouragepurchases, eye-catching promotions anddisplays are essential for pet stores.

Experienced work forceIt is important to employ a highly capable

sta with clear knowledge of the petindustry to better assist customers and

boost sales.

Proximity to key marketsOperators need to be located in high-trac and high-visibility locations, such

as major shopping precincts, to maximizestore trac and sales.

Economies of scopeSuccessful operators need a range of themost popular pets and pet supplies atdierent levels of price and quality.

Oering a wider variety of products willattract a larger customer base.

Effective quality controlOperators must ensure that pet servicesare up to standards for each specicanimal and breed.

Market ShareConcentrationMore than half of the Pet Storesindustry’s revenue comes from twospecialty supply retailers: PetSmart andPETCO. The other portion of the industryconsists of family-owned stores, smallfranchises and small chains of pet stores.Despite the moderate degree ofconcentration, small operators are stillable to nd niche markets in theirgeographical locations, and they rarelyexpand beyond those areas.

IBISWorld estimates that by the end of2015, the industry will consist of 13,556

companies. According to the latestavailable data provided by the USCensus, about 59.2% of pet stores are

operated by a small business with noemployees. About 83.0% of companieshave fewer than ve employees, whileonly 7.8% have more than 10 workers.

In the ve years to 2020, major playersPetSmart and PETCO are expected togrow their share of the industry. This is

because these big-box retailers are able tooer customers a “best of both worlds”scenario, which includes providing broadand industry-specic product selections

while operating on such a scale that theycan purchase in bulk and pass savings on

to consumers. Consequently, these storesare expected to grow at the expense ofsmall stores in the industry.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization

Level

Concentration in thisindustry is Medium

IBISWorld identifies250 Key SuccessFactors for abusiness. The mostimportant for thisindustry are:




Competitive Landscape

Cost StructureBenchmarkscontinued

players, causing margins to be lower forsmaller companies.

PurchasesPurchase costs will remain the single-largest expense for the industry in 2015,accounting for an estimated 62.9% ofrevenue. Purchases include a range of petfood and pet supplies including collars,leashes, medication, shampoos, dogkennels and pet toys, and a range of petsincluding dogs, cats, birds, sh, smallanimals and reptiles. Purchase expenses

have increased slightly during the ve yearsto 2015. According to Pet Business, apublication for the pet and pet suppliesretailing industry, much of this growth has

been due to higher prices from upstreamindustries (i.e. manufacturing and

wholesaling industries) passed down thesupply chain.

WagesDue to the labor-intensive nature of theretail sector, wages are estimated to makeup the second-highest expense item for petstore operators, accounting for 13.6% of therevenue in 2015. In pet stores, employeesare needed to provide care for pets,maintain stock levels and provide customerservice. Furthermore, added focus has beenplaced on labor in the ve years to 2015, aspet services have become one of thefastest-growing sources of industry revenue.Nonetheless, industry revenue has been

growing at a faster rate than the number ofemployees or wages; wages as a share ofrevenue have declined slightly from 13.9%in 2010.

DepreciationDepreciation expenses are expected toaccount for about 1.1% of revenue in 2015.

Sector vs. Industry Costs

n Profit

n Wages

n Purchases

n Depreciation

n Marketing

n Rent & Utilities

n Other

Average Costs of

all Industries in

sector (2015)

Industry Costs

(2015)

0

20

40

60

P e r c e n t a g e

o f r e v e n u e

80

100


3.2 8.2

4.87.8

1.61.1

62.9

13.6

9.24.7

1.80.8

71.5

8.8





Basis of Competition Due to medium barriers to entry and

growing protability from premiumproducts and services, there are a largenumber of pet store operations that givethe industry a medium level of competition.This industry has been growing stronglyduring the past decade because of favorabledemographic trends and the growingtendency of pet owners to treat their pets asmembers of the family. In recent years,industry participants have taken advantageof these trends and cashed in on highermargin products and services, such aspremium pet food and high-quality

grooming services.The players in this industry are

protected from external competition in thepremium pet food product segment

because there are often manufacturer’srestrictions on the distribution of premiumproducts to supermarkets. Industryparticipants are also protected fromexternal competition from supermarkets,grocery stores and discount retailers in thegrowing area of value-added pet servicessuch as grooming and obedience training.

InternalPet stores compete with each other basedon price, product variety, customer service,

brand awareness, variety of pet servicesand store location. Since product purchasesmake up the majority of sales for pet stores,their main basis of competition is productrange, quality and price. Large players like

PETCO and PetSmart benet from

economies of scope and are able to provide broad ranges of pets, pet foods, pet suppliesand pet services with dierent levels ofquality across a range of prices. This allowsthese stores to appeal to individualconsumer preferences. In addition, they arecapable of oering products through theirprivate label brands at a lower price. Bothof these players benet from being able to

buy products in bulk and producing theirown products at lower cost, allowing themto oer products at a low price and stillattain a prot. As a result, smaller stores

feel pressure to provide more products at alower price, which results in lower mark-ups by and ultimately lower prot margins.However, smaller stores benet from theirability to oer personalized customerservices and mold themselves to thespecic needs of niche markets in theirlocal areas.

ExternalHistorically, supermarkets have been theprimary sellers of pet food products.Large supermarkets stock a wide varietyof pet food and supplies. Bulk purchases

by supermarkets generally enable them tooer lower prices than specialty retailers.In recent years, additional competitionhas come from mass merchandisers anddiscount retailers such as Walmart andCostco that stock a wide variety ofproducts at competitive prices.

Cost StructureBenchmarkscontinued

This low level of depreciation is typical forretailing industries, which are verylabor intensive and require minimalcapital costs in operations. However,this figure is high compared with otherretailing industries because pet storesmust acquire special cages and tanksfor animals in addition to shelving andcash registers for stores.

Other costsIn 2015, rental and utilities costs areexpected to represent 7.8% of revenuerespectively. Operators incur other expensesincluding administrative, insurance, securityand advertising costs. Both large and smalloperators invest 1.6% of revenue towardmarketing and advertising to generatetrac and boost sales.

Level & Trend

Competition inthis industry isHigh and the trendis Increasing





Barriers to Entry High levels of competition and

regulations associated with entering thisindustry may deter some from enteringthe industry. Nevertheless, there are

various niche markets available for newplayers to occupy, specically those thatspecialize in premium and innovativefood, products and services.

A signicant factor that can hinder anoperator from entering this industry isgovernment regulations. There arefederal and state laws regulating petshops and the sale of animals. Forexample, the Pet Animals Act 1951

requires pet shops to get a license inaccordance with the act before they canopen. In addition, the Animal Welfare

Act of 1966 dictates how pets sold in petstores must be maintained. Pet shopsneed to address a range of issues andreceive licenses based on federal andstate requirements before permission tooperate is granted.

The industry’s concentration can beanother barrier to potential entrants.There are only two national retail chainsin this industry and together they accountfor more than one half of industryrevenue; smaller stores and franchisesaccount for the remaining portion.

Although this industry is highlyfragmented, there is intense pricecompetition from mass merchandisers,online operators and catalog retailers,

which may provide a barrier for new,independent retailers.

Opening a new pet store and meetinglicensing standards is expensive. Inaddition, a signicant share of fundingmay be directed toward marketing to

build consumer interest and recognition.The initial cost of establishing orpurchasing a retail outlet, in addition topurchasing and maintaining inventorylevels, may be a barrier for newentrants. Barriers are greater for new,smaller retailers because formingreliable supply relationships with

wholesalers and manufacturers mayprove to be difficult. Existing and

well-established distributionrelationships may deter potentialoperators from entering this industry

because they provide an advantage toexisting retailers, granting them accessto low-priced, high-quality goods.

Basis of CompetitioncontinuedHowever, mass merchandisers anddiscount retailers do not sell ultra-premium pet products because they arelimited by manufacturers’ restrictions.

Further competition comes from theE-commerce and Online Auctionsindustry (IBISWorld report 45411a) andthe Mail-Order industry (IBISWorldreport 45411b). These competing

industries include companies such asPetstore.com through which consumerscan purchase products without physicallyhaving to visit a store; however, theseoperators are not classied as part of thisindustry. In addition, some competitioncomes from veterinary services as theyalso sell customized pet food and somepet products.

Barriers to Entry checklistCompetition High

Concentration Medium

Life Cycle Stage Growth

Capital Intensity Low

Technology Change Medium

Regulation & Policy Medium

Industry Assistance None


Level & Trend

Barriers to Entryin this industry areMedium and Steady





IndustryGlobalizationThis industry is composed of a largenumber of small players. Many of thesmaller, independent pet supplyretailers are family-owned businessesthat operate within a local or regionalscope. In addition, the industry’s majorcompanies are domestically owned;

therefore, this industry has a low level ofglobalization. The industry’s largestplayer, PetSmart has a network of storesin Canada and Petco has expanded toMexico and Puerto Rico, however,international sales are still low relativeto the United States.

Level & Trend

Globalization in thisindustry is Low andthe trend is Steady




Player Performance Since its establishment in 1987, Phoenix- based PetSmart has become the topspecialty retailer of pet food and supplies.

PetSmart operates 1,333 stores, typicallylocated in regional shopping centers nearother superstores and warehouse stores.The company employs about 53,000people in the United States and Canada.By oering more than 11,000 petproducts and providing various petservices, PetSmart aims to provide aone-stop shopping experience. In March2015, the company went private throughan $8.3 billion buyout by BC Partners.

PetSmart categorizes its merchandiseinto three main categories: consumables,

hard goods and pets. Consumablesinclude pet foods, treats and litter, as wellas premium products, many of which arenot found in supermarkets or massmerchandisers. Pet supplies, such ascollars, leashes, health and beauty aids,shampoos, medication, toys, pet carriers,

dog kennels, cat furniture, equestriansupplies, birdcages, aquariums andfilters, make up the hard-goods

category. Pets sold by the companyinclude fish, birds, reptiles and smallpets. Larger animals, such as cats anddogs, are not sold in PetSmart;however, they are available for adoptionthrough the PetSmart Charities’

Adoption Program, which wasdeveloped with humane organizations.

In addition to selling products,PetSmart has expanded its serviceoerings to include in-store boardingfacilities, grooming services, obediencetraining and full-service veterinary

services. PetSmart oers complete pet boarding and day-care service calledPetsHotel with 24-hour supervision, anon-site veterinarian, air-conditionedrooms and daily specialty treats. About200 PetSmart stores include PetsHotel

boarding facilities and Doggie Day

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

38.1%Other

PetSmart Inc. 38.6%

PETCO Animal Supplies Inc. 23.3%


Major players(Market share)

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

Year**Revenue

($ million) (% change)Operating Income

($ million) (% change)

2010-11 5,400.0 5.9 406.6 15.3

2011-12 5,800.0 7.4 475.8 17.0

2012-13 6,400.0 10.3 616.7 29.6

2013-14 6,543.1 2.2 655.9 6.4

2014-15 6,653.7 1.7 668.2 1.9

2015-16 6,962.6 4.6 755.5 13.1

*Estimates; **Year-end JanuarySOURCE: ANNUAL REPORT AND IBISWORLD

PetSmart Inc.Market share: 38.6%




Major Companies

Player Performance Established in 1965, Petco AnimalSupplies is the second-largest pet supplyspecialty retailer in the United States. Thecompany is headquartered in San Diego,and has about 1,409 stores, 130 Unleashed

by Petco and 10 Pooch Hotel locationsthroughout the United States, Mexico andPuerto Rico. The company has alsosignicantly expanded its e-commerce

oerings in recent years, most notablythrough the acquisition of Dr. Foster andSmith in 2015. The company generated$4.0 billion in total company revenueduring scal 2014. In August 2015, thecompany led for an initial public oering.

Petco stores carry up to 10,000dierent pet-related items, including petfood, collars, leashes, grooming products,toys, health and beauty aids, kennels andpet houses. Like other industryparticipants, Petco oers a variety ofgrooming, veterinary and obedienceservices for animals, but it does not sellcats or dogs. Rather, an adoption program

(the Think Adoption First program) isused in partnership with local animal

welfare organizations.In 2011, Petco acquired Complete

Petmart, an Ohio-based pet specialtychain. The acquisition, consisting of 29

Player PerformancecontinuedCamps. PetSmart also oers full-service veterinary hospitals in 844 of its stores.Pet services are a growth segment for thecompany and currently account for morethan 10.0% of revenue. PetSmart has alsocontinued to expand its nationwidepresence through store expansions.

Financial performanceIn the ve years to scal 2016, revenuefrom PetSmart’s US operations isexpected to increase at an annualized rateof 5.2% to $7.0 billion, outpacing

industry-wide growth. Company growth

has been aided by store expansions andrising sales of premium and natural foodproducts. In addition, its pet services linehas experienced strong demand, whichhas allowed this category to consistentlyexpand faster than its merchandise-products category. The company’s protmargin has also increased and currentlyrepresents about 10.6% of companyrevenue, which is healthier than theindustry average. This has been primarilydue to higher margins from its pet-service oerings and the rising sales of

premium food products.

PETCO Animal Supplies Inc. - (US industry-specific) financialperformance*

Year**Revenue

($ million) (% change)Operating Income

($ million) (% change)

2010-11 2,840.4 N/C 175.2 N/C

2011-12 3,070.8 8.1 223.8 27.7

2012-13 3,457.5 12.6 281.5 25.8

2013-14 3,720.4 7.6 293.2 4.1

2014-15 3,927.1 5.6 275.7 -6.0

2015-16 4,208.3 7.2 306.2 11.1

*Estimates; **Year-end JanuarySOURCE: US SECURITIES AND EXCHANGE COMMISSION

PETCO AnimalSupplies Inc.Market share: 23.3%




Major Companies

Other Companies PetSmart and PETCO are the top dogsin the Pet Stores industry, accountingfor more than one half of the industry’srevenue. While the industry isconcentrated at the top, the rest of theindustry is composed of a large numberof small and privately owned pet stores.In fact, 59.2% of companies arenonemployers. Furthermore, about83.0% of companies employ fewer thanfive workers, while only 7.8% have

more than 10 workers. Due to thefragmented nature of the industry, themajority of players do not individuallyaccount for a considerable share of theindustry’s revenue.

Pet Supplies Plus Estimated market share: 4.7%Founded in 1988 in Redford, MI, PetSupplies Plus is a franchise business with315 stores throughout more than 20states. Pet Supplies Plus oers franchisesin selected states to single store owner-operators and also to area developers

who own all stores in a designatedmarket region. According to companyinformation, the purchase of a PetSupplies Plus franchise costs between$623,300 and $1.4 million. Pet Supplieshas 173 company-owned locations and147 franchise locations.

Pet Supplies dierentiates itself byproviding all-natural food products. Inaddition, it oers a range of dierentservices, such as grooming, self-servicepet wash stations and adoptions. PetSupplies Plus stores are generally locatedin high-trac areas and are limited toabout 5,000 to 6,000 square feet in sizefor smaller markets and 7,000 to 9,000square feet in larger metropolitan areas.The smaller store concept is designed to

keep operating costs to a minimum in aneort to oer pet food and supplies atcompetitive prices. IBISWorld estimatesthat Pet Supplies Plus will generate about$815.4 million in 2015, accounting forabout 4.7% of the market.

Pet Supermarket Inc. Estimated market share: 1.5%Pet Supermarket Inc. is a small, family-owned retailer of pet supplies andmedicines that was founded in 1973 inFort Lauderdale, FL. Roark CapitalGroup acquired the company in May2015. Pet Supermarket operates about139 stores primarily in Florida but also in

Alabama, California, Georgia, Kentucky,Nevada and North Carolina. Thecompany employs about 1,400 associates.Pet Supermarket sells more than 8,000pet care products, including food, toys,

Player Performancecontinuedstores, expanded the company’s reach intoOhio and the Southeast region. Petco hasalso signicantly expanded its smaller-storeconcept, Unleashed. The stores specialize innatural, organic and higher-end petproducts, which are a growth segment forthe industry. The company expanded toPuerto Rico and Mexico in 2012 and 2013,respectively. Its recent acquisition of Dr.Foster and Smith, a mail order ande-commerce company, is anticipated toincrease its online presence considerably.

Financial performanceIBISWorld estimates that in the ve yearsto 2015, the company’s US revenuegenerated from brick and mortar stores willrise at an annualized rate of 8.2% to $4.2

billion. Strong sales of premium productshave been one of the company’s maindrivers of growth. PETCO invested heavilyin this product segment amid the recession

when it launched Unleashed, a specialtystore for premium, natural, organic and rawpet foods.




Major Companies

Other Companiescontinuedmedicine and clothing, as well as smallanimals, such as hamsters, guinea pigs,rabbits and tropical fish. The companyoffers a range of high-value petproducts and luxury pet items.

According to company information, it

has experienced strong growth duringthe past five years, increasing from$184.0 million in 2010 to $213.0million in 2011. IBISWorld estimatesthat Pet Supermarket will generateabout $270.8 million in 2015.




Capital Intensity The Pet Stores industry, similar to mostother retail industries, has a low level ofcapital intensity. For every dollar spenton wages, about $0.08 is invested in thestore and equipment. Most capital costsare related to shelving, store, computers,cashier equipment and other equipmentsuch as caging for animals, which do notneed to be constantly replaced. On theother hand, this industry is laborintensive because employees are neededto operate and manage the stores,provide customer service and support,

restock the merchandise and provide carefor pets.

The level of capital intensity hasremained steady in the past ve years,reecting the labor-intensive nature ofthe retail industry. To this point, the cost

of labor within this industry is relativelyhigh compared with that experienced bycompetitors such as supermarkets, mass

Operating ConditionsCapital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


L a b o r I n t e n s i v e

C a pi t al I n t en s i v e

Change in Share of the Economy

New Age Economy

Recreation, Personal Services,Health and Education. Firmsbenefit from personal wealth sostable macroeconomic conditionsare imperative. Brand awarenessand niche labor skills are key toproduct differentiation.

Traditional Service Economy

Wholesale and Retail. Relianton labor rather than capital tosell goods. Functions cannotbe outsourced therefore firmsmust use new technologyor improve staff training toincrease revenue growth.

Old Economy

Agriculture and Manufacturing.Traded goods can be producedusing cheap labor abroad.To expand firms must mergeor acquire others to exploiteconomies of scale, or specializein niche, high-value products.

Investment Economy

Information, Communications,Mining, Finance and RealEstate. To increase revenuefirms need superior debtmanagement, a stablemacroeconomic environmentand a sound investment plan.

E-Commerce & Online Auctions

Animal Food Production

Mail Order

Toy, Doll & Game Manufacturing

Veterinary Services

Pet Stores

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4


Dotted line shows a high level of capital intensity

Capital units per labor unit

Pet StoresRetail TradeEconomy

Level

The level of capitalintensity is Low




Operating Conditions

Revenue Volatility Pet stores sell discretionary (e.g. petsand toys) and nondiscretionary products(e.g. pet food). While purchasing a pet isgenerally discretionary, a largeproportion of expenditure on a pet isnondiscretionary; these include food

and medicine. As such, thenondiscretionary component of industrymerchandise accounts for the majorityof industry revenue. This high level ofnondiscretionary demand keeps the

volatility of this industry low.

Technology & Systems During the past ve years, there have been few technological advances relevantto the Pet Stores industry. Technological

advances in this industry are generallylimited to those occurring in similar retailindustries, such as computer scanningcash registers and automated inventoryequipment. The introduction of thistechnology has enabled retailers to bettermanage eciency of operations andinventory. Technology at checkout hasled to computerized point-of-saleequipment, which controls and recordsmerchandising, distribution, sales andstock markdowns. Furthermore, bar codescanning has oered the advantages of

higher labor productivity that increasesthe speed at which information ispassed, greater control over the

distribution of goods and reduced errorsalong the supply chain. Newimprovements will boost revenue for thelarger stores that can aord to invest inthe technologies. For example, largerretailers benet from Radio FrequencyIdentication (RFID), which providesreal time information on inventory andhelp to reduce shrinkage problems as

well as improve eciency. Manyoperators are small in size and do nothave the nancial resources to purchaseexpensive electronic equipment.

Capital Intensitycontinuedmerchandisers and online pet supplyretailers. This is because the otherstores do not retail pets directly whichinherently requires a smaller staff. Inaddition, these stores do not incurcosts associated with employeetraining, since workers at these

retailers do not require industry-specific knowledge. For onlineretailers, labor costs are exceptionallylow as they are not required to outlayexpenditure on customer service, norare they required to have shelving,displays or cash registers.

Level

The level ofTechnology Changeis Medium

Level

The level ofVolatility is Low





Regulation & Policy There are industry specic and generalcompetitive regulations that apply to thisindustry. The transportation, handlingand sale of small pets are governed by

various federal, state and localregulations. In addition, industryparticipants are subject to environmental

regulations imposed by federal, state andlocal authorities in relation to thegeneration, handling, storage,transportation and disposal of waste and

biohazardous materials, and the sale anddistribution of products.

The Pet Animals Act 1951 deems it anoense to open a pet shop unless it isgranted a license in accordance with the

Act. When deciding to grant a license,district councils need to consider whetherthere is suitable accommodation andenough food and water, whether theanimals are sold at too young an age and

whether reasonable precautions have been taken to curb the spread of disease.The Animal Welfare Act (AWA) protectscertain animals from inhumanetreatment and neglect. The AWA requiresthat minimum standards of care andtreatment be provided for certain animals

that are bred for commercial sale, used inresearch, transported commercially orexhibited to the public. Retail pet shopsare not covered under the Act unless theshop sells exotic or zoo animals or sellsanimals to regulated businesses. Petsowned by private citizens are not

regulated. Regulated businesses arerequired to keep accurate records ofacquisition and disposition and adescription of animals that come intotheir possession.

Many state and local governmentshave passed additional animal welfarelegislation. About 20 states haveregulations governing the sale of dogsand 15 states govern the sale of cats.These regulations stipulate theinformation that sellers must provide atthe time of purchase and variousoptions buyers have if the purchasedpet is sick. These states haveregulations that allow consumers toobtain a reimbursement when a sickanimal is purchased from a pet store.This is known as a “lemon law” which isdesigned to protect consumers that buyanimals from pet shops.

Revenue Volatilitycontinued

Level & Trend

The level ofRegulation isMedium and thetrend is Steady


Volatility vs Growth

R e v e n u e v o l a t i l i t y * ( % )

1000

100

10

1

0.1

Five year annualized revenue growth (%)

–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

A higher level of revenuevolatility implies greaterindustry risk. Volatility cannegatively affect long-termstrategic decisions, such asthe time frame for capitalinvestment.

When a firm makes poorinvestment decisions itmay face underutilizedcapacity if demandsuddenly falls, or capacityconstraints if it risesquickly.

Pet Stores





The Pet Stores industry does not receiveany specic government support, in theform of subsidies or otherwise.However, there are several tradeassociations that represent the industry.

Most notable among them is the American Pet Association, whichpromotes pet ownership anddisseminates industry-relatedinformation to members.

Level & Trend

The level ofIndustry Assistanceis None and thetrend is Steady

Industry Assistance




Key StatisticsRevenue

($m)

IndustryValue Added

($m)Establish-

ments Enterprises Employment Exports ImportsWages($m)

DomesticDemand

Number of pets- cats and dogs

(Mils)

2006 13,468.9 2,420.6 17,130 14,558 101,235 -- -- 1,869.9 N/A 154.0

2007 13,710.0 2,711.0 17,644 14,804 109,802 -- -- 1,931.8 N/A 163.0

2008 14,212.6 3,131.7 17,110 14,115 106,912 -- -- 2,015.0 N/A 165.0

2009 14,309.3 2,786.9 16,650 13,632 109,595 -- -- 2,008.5 N/A 171.0

2010 14,643.4 2,993.2 16,502 13,305 106,103 -- -- 2,034.8 N/A 164.6

2011 15,152.9 3,189.8 16,345 13,064 107,454 -- -- 2,084.6 N/A 168.7

2012 16,157.3 3,593.7 16,810 13,212 110,294 -- -- 2,228.5 N/A 173.1

2013 16,647.1 3,662.6 16,715 12,924 112,982 -- -- 2,233.0 N/A 177.3

2014 16,979.6 3,716.0 16,775 12,830 114,356 -- -- 2,325.1 N/A 181.3

2015 17,518.5 4,016.8 17,154 12,933 118,945 -- -- 2,387.6 N/A 185.1

2016 18,056.4 4,135.1 17,507 13,027 122,928 -- -- 2,448.5 N/A 188.6

2017 18,476.5 4,231.2 17,635 12,945 127,414 -- -- 2,497.7 N/A 192.1

2018 19,221.6 4,402.7 18,072 13,071 130,944 -- -- 2,591.4 N/A 195.8

2019 19,820.7 4,535.2 18,444 13,168 135,160 -- -- 2,659.2 N/A 199.5

2020 20,423.2 4,670.1 18,839 13,269 137,089 -- -- 2,728.4 N/A 203.3

Sector Rank 40/63 35/63 39/63 37/63 37/63 N/A N/A 38/63 N/A N/A

Economy Rank 479/1373 556/1373 315/1373 320/1373 332/1373 N/A N/A 545/1373 N/A N/A

IVA/Revenue(%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue perEmployee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of theEconomy

(%)

2006 17.97 N/A N/A 133.05 13.88 5.91 18,470.88 0.02

2007 19.77 N/A N/A 124.86 14.09 6.22 17,593.49 0.02

2008 22.03 N/A N/A 132.94 14.18 6.25 18,847.28 0.022009 19.48 N/A N/A 130.57 14.04 6.58 18,326.57 0.02

2010 20.44 N/A N/A 138.01 13.90 6.43 19,177.59 0.02

2011 21.05 N/A N/A 141.02 13.76 6.57 19,399.93 0.02

2012 22.24 N/A N/A 146.49 13.79 6.56 20,205.09 0.02

2013 22.00 N/A N/A 147.34 13.41 6.76 19,764.21 0.02

2014 21.89 N/A N/A 148.48 13.69 6.82 20,332.12 0.02

2015 22.93 N/A N/A 147.28 13.63 6.93 20,073.14 0.02

2016 22.90 N/A N/A 146.89 13.56 7.02 19,918.16 0.02

2017 22.90 N/A N/A 145.01 13.52 7.23 19,603.03 0.02

2018 22.90 N/A N/A 146.79 13.48 7.25 19,790.14 0.02

2019 22.88 N/A N/A 146.65 13.42 7.33 19,674.46 0.02

2020 22.87 N/A N/A 148.98 13.36 7.28 19,902.40 0.02

Sector Rank 11/63 N/A N/A 44/63 20/63 19/63 39/63 35/63Economy Rank 958/1373 N/A N/A 970/1373 897/1373 888/1373 1209/1373 556/1373

Revenue(%)

IndustryValue Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

DomesticDemand

(%)

Number of pets- cats and dogs

(%)

2007 1.8 12.0 3.0 1.7 8.5 N/A N/A 3.3 N/A 5.8

2008 3.7 15.5 -3.0 -4.7 -2.6 N/A N/A 4.3 N/A 1.2

2009 0.7 -11.0 -2.7 -3.4 2.5 N/A N/A -0.3 N/A 3.6

2010 2.3 7.4 -0.9 -2.4 -3.2 N/A N/A 1.3 N/A -3.7

2011 3.5 6.6 -1.0 -1.8 1.3 N/A N/A 2.4 N/A 2.5

2012 6.6 12.7 2.8 1.1 2.6 N/A N/A 6.9 N/A 2.6

2013 3.0 1.9 -0.6 -2.2 2.4 N/A N/A 0.2 N/A 2.4

2014 2.0 1.5 0.4 -0.7 1.2 N/A N/A 4.1 N/A 2.3

2015 3.2 8.1 2.3 0.8 4.0 N/A N/A 2.7 N/A 2.1

2016 3.1 2.9 2.1 0.7 3.3 N/A N/A 2.6 N/A 1.9

2017 2.3 2.3 0.7 -0.6 3.6 N/A N/A 2.0 N/A 1.9

2018 4.0 4.1 2.5 1.0 2.8 N/A N/A 3.8 N/A 1.9

2019 3.1 3.0 2.1 0.7 3.2 N/A N/A 2.6 N/A 1.9

2020 3.0 3.0 2.1 0.8 1.4 N/A N/A 2.6 N/A 1.9

Sector Rank 13/63 5/63 11/63 26/63 3/63 N/A N/A 13/63 N/A N/A

Economy Rank 542/1373 158/1373 463/1373 742/1373 262/1373 N/A N/A 536/1373 N/A N/A

Annual Change

Key Ratios

Industry Data




Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean thatnew companies struggle to enter an industry, while lowbarriers mean it is easy for new companies to enter anindustry.

CAPITAL INTENSITY Compares the amount of money

spent on capital (plant, machinery and equipment) withthat spent on labor. IBISWorld uses the ratio ofdepreciation to wages as a proxy for capital intensity.High capital intensity is more than $0.333 of capital to$1 of labor; medium is $0.125 to $0.333 of capital to $1of labor; low is less than $0.125 of capital for every $1 oflabor.

CONSTANT PRICES The dollar figures in the KeyStatistics table, including forecasts, are adjusted forinflation using the current year (i.e. year published) asthe base year. This removes the impact of changes inthe purchasing power of the dollar, leaving only the“real” growth or decline in industry metrics. The inflationadjustments in IBISWorld’s reports are made using theUS Bureau of Economic Analysis’ implicit GDP price

deflator.

DOMESTIC DEMAND Spending on industry goods andservices within the United States, regardless of theircountry of origin. It is derived by adding imports toindustry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time,temporary and seasonal employees, working proprietors,partners, managers and executives within the industry.

ENTERPRISE A division that is separately managedand keeps management accounts. Each enterpriseconsists of one or more establishments that are undercommon ownership or control.

ESTABLISHMENT The smallest type of accounting unitwithin an enterprise, an establishment is a single

physical location where business is conducted or whereservices or industrial operations are performed. Multipleestablishments under common control make up anenterprise.

EXPORTS Total value of industry goods and services soldby US companies to customers abroad.

IMPORTS Total value of industry goods and servicesbrought in from foreign countries to be sold in theUnited States.

INDUSTRY CONCENTRATION An indicator of thedominance of the top four players in an industry.Concentration is considered high if the top playersaccount for more than 70% of industry revenue.Medium is 40% to 70% of industry revenue. Low is less

than 40%.INDUSTRY REVENUE The total sales of industry goodsand services (exclusive of excise and sales tax); subsidieson production; all other operating income from outsidethe firm (such as commission income, repair and serviceincome, and rent, leasing and hiring income); andcapital work done by rental or lease. Receipts frominterest royalties, dividends and the sale of fixedtangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value ofgoods and services produced by the industry minus thecost of goods and services used in production. IVA isalso described as the industry’s contribution to GDP, orprofit plus wages and depreciation.

INTERNATIONAL TRADE The level of internationaltrade is determined by ratios of exports to revenue andimports to domestic demand. For exports/revenue: low isless than 5%, medium is 5% to 20%, and high is morethan 20%. Imports/domestic demand: low is less than5%, medium is 5% to 35%, and high is more than35%.

LIFE CYCLE All industries go through periods of growth,maturity and decline. IBISWorld determines anindustry’s life cycle by considering its growth rate(measured by IVA) compared with GDP; the growth rateof the number of establishments; the amount of changethe industry’s products are undergoing; the rate oftechnological change; and the level of customeracceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses withno paid employment or payroll, also known asnonemployers. These are mostly set up by self-employedindividuals.

PROFIT IBISWorld uses earnings before interest and tax(EBIT) as an indicator of a company’s profitability. It iscalculated as revenue minus expenses, excludinginterest and tax.

Industry Jargon

IBISWorld Glossary

HUMANIZATIONA trend where pet owners treat petsas humans, providing them with services such as pethotels and grief counseling.

PET BOARDING AND DAY-CARE Long- and short-termoptions for owners who need assistance looking aftertheir pets. Services include feeding, walking, groomingand lodging.

PET PARENTS Pet owners who are enthusiastic abouttheir pets and treat them as members of their family.




Jargon & Glossary

VOLATILITY The level of volatility is determined byaveraging the absolute change in revenue in each of thepast five years. Volatility levels: very high is more than±20%; high volatility is ±10% to ±20%; moderatevolatility is ±3% to ±10%; and low volatility is less than±3%.

WAGES The gross total wages and salaries of allemployees in the industry. The cost of benefits is alsoincluded in this figure.

IBISWorld Glossarycontinued



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45391 pet stores in the us industry report

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