The COVID-19 pandemic reshaped consumer behavior across numerous industries, with the pet sector witnessing unprecedented growth as approximately 23 million U.S. households adopted a new pet during pandemic times. Not only did it mean a period of rapid growth for the industry but also a flurry of investments from private equity funds to capitalize on the growth trend. As the pandemic has subsided, however, the tide has turned sharply in the last twelve months, with Pet experiencing slowing growth, declining profitability and plunging stock prices.

In this article, we focus on Pet Specialty Retailers who have been the hardest hit by the downturn and provide actionable strategies to navigate these turbulent waters and foster long-term success.

Strong Headwinds for Pet Specialty

The $147 billion pet market is primarily serviced by three types of retailers – Pet Specialty, Mass retailers and e-commerce Pure Plays (Discount and Club are the remaining retailer types). All three types of retailers are experiencing impact of industry slowdown, but the impact on Pet Specialty is significantly more than the other two driven by the following headwinds:

  1. Market Slowdown: The post-pandemic era sees a decrease in pet adoption rates and inflation-driven trade-downs, particularly in consumables. This sluggish growth trajectory, coupled with escalating costs, erodes profitability.
  2. E-commerce Dominance: E-commerce giants like Amazon1 and Chewy2 continue to seize market share, leveraging vast assortments, competitive pricing and seamless customer experiences.
  3. Mass Market Investments: Mass retailers like Walmart and Target are ramping up their pet offerings, investing billions to fortify their brick-and-mortar and online presence.
  4. Health and Wellness Competition: The lucrative pet health and wellness segment faces encroachment from both mass market players and e-commerce behemoths like Chewy, challenging Pet Specialty Retailers' stronghold.

What Should Pet Specialty Do?

With the slowdown in the market, changing customer preferences, continued growth of e-commerce and intense competition in all segments from competitors with deep pockets, Pet Specialty and investors find themselves at a crossroad with tough choices to make. The magnitude of the challenge requires a holistic review of the business strategy that sets in motion a transformational program for long-term success.

More specifically, Pet Specialty should focus the holistic review and transformation program in the following three areas:

  1. Rapid actions to address growth decline in short-term
  2. Envision the desired future state and invest in it
  3. Fund the investment in future state

Read the full report for comprehensive insights on effectively navigating the dynamic landscape of pet retail.

READ THE FULL REPORT

Footnotes

1. Home and pet care: leading e-tailers by sales 2022-2027 | Statista

2. PowerPoint Presentation (q4cdn.com)

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