Retail Channel Monthly $ Update – November Final & December Advance

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The Retail market hit bottom in April 2020 then began its recovery. The journey has been long and complex and Consumer spending behavior continues to evolve. Amazingly, we have not beaten the virus yet so we will continue to track any impact on the retail marketplace with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We begin Final Retail Report for November and then move to the Advance Report for December, giving us a first look at year-end 2021. The retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress of the retail market to a full recovery.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the November Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. $ fell in January/February but set a new $ records in March and then again in May. Sales declined through September but turned up again in October & November. Here are the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The final total is $0.6B more than the Advance report projected a month ago. 2 groups were up and 2 were down. The specifics were: Auto: +$0.8B; Gas Stations: +$0.2B; Restaurants: -$0.2B; Relevant Retail: -$0.1B. Sales vs October were down for all groups but Relevant Retail. Total Retail $ales broke $600B for the 1st time in December. November $ales beat that number and in fact, set a new all time record. Auto continues to have the strongest recovery with an annual YTD growth rate since 2019 of +11.4%. A $ dip in November is normal for all but Relevant Retail as we start the holiday season. Importantly, for the 6th consecutive month, all groups were positive in all measurements vs 2020 or 2019.

Now, let’s see how some Key Pet Relevant channels were doing in November.

  • Overall – 4 were down vs last month. Drug & Supermarket drops were minor while the Farm dip was normal. Office/Gift/Souvenir $ were down vs October & YTD vs 2019. November set a new $ record for Relevant Retail.
  • Building Material Stores – Their amazing lift has slowed as we move into winter. The surge came from pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Their Spring lift has slowed in 2021 but Building and Farm stores are still going strong. Sporting Goods stores have a similar pattern. Sales took off in May 2020, hit a record peak in December and continued strong into 2021, peaking in March. $ slowed a little through October but set a new record in November. YTD they are +47.6% vs 2019, a Growth Rate of 21.5%!
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs October but +7.3% vs November 2020. YTD $ are on par with the 2020 binge and +15.5% vs 2019. Drug Stores were +$17B (+5.7%) for 2020. They had a record March. Sales have been relatively stable since then. Their YTD $ are +7.4%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. Monthly sales by channel have been up or down since then but GM set a new non-December sales record in November. Clubs/SuprCtrs & $ Stores are leading the way with a combined annual growth rate of +8.9%. These channels promote value. Their success reinforces its consumer importance. Disc. Dept. Strs again show all positive numbers, growing at 4.9%.
  • Office, Gift & Souvenir Stores– $ are down sharply from October (normal) but were +24.3% vs November 2020. COVID hit them hard. They are still down YTD vs 2019 but getting a little better. Recovery will take more time.
  • Internet/Mail Order – Their sales were +19.3% from October as we move into the holidays. Their COVID fueled growth continues. In November 2019, their avg annual growth rate was +12.9%. Now, it is +19.6% – up 51.9%
  • A/O Miscellaneous – This is a group of specialty retailers – chains and indies. It includes Florists, Art Stores and Pet Stores (22>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 sales were up +12.1%. November 2021 was their 7th consecutive month over $10B and set a new record, $11.0B. YTD $ are +27.5% vs 2020 and +41.0% vs 2019. Avg Growth: 18.7% – 3rd Best

Relevant Retail began recovery in May and hit record $ in December. $ fell in Jan & Feb, turned up again in March and began a monthly up/down rollercoaster. November $ set a record and all channels but 1 are ahead of all 2020 & 2019 $. The big drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, the Advance numbers for December.

2020 was a memorable year. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record. April sales were down slightly but they spiked again in May to set yet another spending record. June>Sept $ fell but then came back in October>December. November & December set new records with December reaching $715B. Only Gas Stations were down vs November, but all were positive in all other measurements for the 7th straight month. 2021 is also memorable. All big groups set $ records. Total Retail broke the $7T barrier and Relevant Retail passed $4T. Other areas of the economy are still suffering and inflation has become a bigger factor in increases. However, consumers continue to spend “big bucks”, especially in Relevant Retail, and the overall Retail market continues its strong recovery.

Total Retail – In March and May Total Retail set new sales records. From June>Sept sales dipped slightly. October through year-end saw a resurgence with November & December setting all time records. December $ reached $715B and 2021 numbers totaled $7.4T, both barrier breakers. Sales finished +19.3% vs 2020 with an average annual sales growth rate since 2019 of 9.5%. The previous highest growth rate ever in records going back to 1992 was 8.23% in 1993>1994. More History: Sales fell in both 2008 & 2009. Total drop: -8.4%. Recovery took 2 years. 2010 & 2011. Total increase was +13.1%. Net increase 2007>2011: +3.6%. Avg Growth: +0.9%. Inflation Note: Retail $ were +16.9% vs December 2020. Inflation was +7.0% so up to 41% of the lift came from higher prices. The “Real” increase was +9.9%. In December 2019 (pre-pandemic), Retail $ were +5.5% over 2018. Inflation was 2.3%, 42% of the lift. The “Real” increase was +3.2%. Long term, strong inflation can slow spending but right now, Retail is far outperforming pre-COVID 2019.

Restaurants – This group has no negative measurements vs 2020 or 2019 for 7 straight months. February 2020 YTD sales were up 8.1% vs 2019. In March Restaurants started to close or cease in person dining and sales fell -$33.3B (-52.5%) vs 2019. Sales hit bottom in April at $30.1B, the lowest April $ since 2003. Sales started to slowly increase in May but never reached a level higher than 88% vs the previous year. 2021 started off slowly. Through February, YTD sales were -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and hit a record $76.5B in July. 7 of the last 8 months in 2021 exceeded $70B which produced a record year, $821B. +32.1% vs 2020 and +6.1% vs 2019. Avg Growth since 2019 = +3.0%

Auto (Motor Vehicle & Parts Dealers) – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in a record March and slowed only slightly from April>December as sales exceeded $119.8B in all 10 months – the 10 biggest months in history. Their campaign was amazingly effective in recovering the business in 2020 and generated a record $1.54T in 2021, up 23.6% vs 2020. Their Year-end Avg Annual Growth Since 2019 = +11.4% – the best performance of any big group.

Gas Stations – Gas Station $ales have been mixed. If you drive less, you need less gas. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed and continued to grow to a record level in July. They fell in Aug/Sept but reached a record $55.3B in October. Sales fell in Nov/Dec, but they have been positive in all measurements vs 2019 & 2020 since March. This produced a record $588B for 2021, +36.6%. However, inflation comes to the forefront in this channel. Gas prices can be volatile. They dipped in the first 2 months of the pandemic but returned to more normal levels for the balance of 2020. Strong inflation began in 2021. In fact, December prices were 49.6% above 2020. That means that the 41.4% year over year $ lift in December was actually a decrease in the amount of gas sold. Year-end Growth Rate Since 2019 = +7.1%

Relevant Retail – Less Auto, Gas and Restaurants – This is considered the “core” of U.S. retail and traditionally accounts for about 60+% of Total Retail Spending. In looking at the individual channels in this group, we have seen a variety of results due to many factors, like non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December. They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February 2021 but set monthly records. In March they turned sharply up and then began an up/down $ roller coaster ride. Sales turned up in October and set a record in November which was blown away by $461B in December. March>December are 10 of the 12 highest $ months of all time and helped generate a record $4.47T in 2021, +14.1%. Relevant Retail has exceeded $361B in monthly sales 12 times. 11 of those have occurred since the onset of the pandemic. It is also very important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 is +10.5%. The recovery has become widespread as all channels have been positive in all measurements vs both 2020 and 2019 for 5 consecutive months. The primary recovery drivers were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus a never ending “spring lift” from Hardware/Farm and Sporting Goods and growing help from Miscellaneous Stores (includes Pet).

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. December $ were up 13.3% from November and an increase occurred in 12 of 13 channels. Remember, the groups in the chart are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in 12 of 13 channels were up vs November but all were up vs December 2020, vs December 2019 and YE (Year-end) vs 2020 and 2019. (Relevant Retail Avg Annual Growth Rate since 2019 = +10.5%)

After hitting bottom in April 2020, Relevant Retail has beat the previous year’s $ for 20 consecutive months. They set an all-time record of $406.8B in December and finished 2020 +$260B vs 2019. 2021 was even stronger with record sales in every month and a new all-time record of $461.0B in December & YE: $4.47T. Essential channels were consistent drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ have come back but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift may be ending but consumers are still focused on their homes.
  • SuperCtrs/Club/Value/$ Strs – They kept the GM channel strongly positive. Value is still a big consumer priority.

Regarding the Individual Large Channels (Includes YE Actual increase vs 2020 & Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales increased for all channels vs November and all other numbers were also positive. Even Department Stores $ are growing increasingly positive. After dipping to +7.5% in February, the avg growth rate by Club/SuperCtr/$ stores has stabilized at about 8.9% ever since. These stores are still the key to this channel.

  • All GM: +12.1%, Avg = +7.6%; Dept Stores: 21.7%, Avg = +1.5%; Club/SuprCtr/$: +10.2%, Avg = +8.9%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In Jun>Dec they beat 2020 $. Health/Personal Care finished 2020 at +1.8% but 2021 has been better. December was up 15.1% from November and YE $ are +9.5%% vs 2020 and +11.4% vs 2019.

  • Food & Bev: +4.2%, Avg = +7.9%; Grocery: +3.7%, Avg = +7.6%; Health/Drug Stores: +9.5%, Avg = +5.6%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > Dec have been spectacular for all these channels. The increase in Clothing vs November was an incredible +41.0%. All were up vs last month, remained positive in all measurements vs 2020 or 2019 for the 10th consecutive month and ended 2021 at least 25% ahead of 2020.

  • Clothing: +48.4%, Avg = +6.2%; Electronic/Appliance: +25.2%, Avg = +3.0%; Furniture: +26.4%, Avg = +10.1%

Building Material, Farm & Garden & Hardware – The lift that began in 2020 has slowed but they have benefited from consumers focusing on their home needs. They ended 2020 +53B (+14.3%). Sales took off in March, set a record in April, but have slowed and stabilized around $39B, including the only Nov>Dec channel $ drop. 2021: +13.5%. Avg = +13.9%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +7.0% vs 2019. The growth accelerated in 2021 ending with a huge lift in December, up 30.7% from November to $13.5B, by far their biggest month ever. At year-end they were +28.6%. Avg Annual Growth = +17.3%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 +$1.2B, +0.9%. In March 2021 sales took off and reached the $14+B level in May. They have stayed there and set a record of $15.3B in October. Sales spiked spectacularly in December, setting a new monthly record of $17.1. At  year-end they were +27.3% with an Avg Growth = +13.3% (4th Best). Their recovery is very real.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance made them the largest channel and every month in 2021 has produced record $. December set a new all-time monthly record of $115.4B and Year-end 2021 $ exceeded $1 Trillion, +13.6%. Avg Annual Growth= +17.4%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest YOY sales decreases in history while December sales broke $600B for the first time. 2021 may be even more memorable. With a strong December, Total Retail and all major groups had a record year. Total Retail broke $7T for the 1st time. The Relevant Retail group began their recovery in May 2020 and kept Total Retail positive in 2020. They continued to grow in 2021 to a record $4.47T. The recovery was widespread. A few small channels are still struggling but all groups in the December chart, but Dept & Electronics Stores set sales records in 2021. FYI: Nonstore reached $1 Trillion and is the largest channel for the second consecutive year, with 23.5% of Relevant Retail $. The Holiday season also set records. It likely began early with a record October but Nov/Dec still “rule”. In 2021, Nov/Dec Relevant Retail $ were a record $868B, +14.0% from 2020. Some Services Outlets are still suffering but almost all Retail Channels have recovered. While some Consumer retail spending behaviors may have changed, the U.S. Retail Market is the strongest in history.

PET STORES – CHAINS vs INDIES

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In our 30 year history of Pet Stores, we tracked their rise to the top spot in pet products sales, which was largely due to the creation and rapid growth of chains and Pet SuperStores. They gained the #1 position in 1997 and have held it ever since. However, that journey has not been without challenges. They maintained a 40% market share in Pet Products in 1997 and 2002 but that fell to 33.1% in 2012 due to increased competition from the mass market. From 2012 to 2017, there was a new challenger – the Internet, but Pet Stores remained strong. They increased their share of Pet Products sales slightly to 33.3%. This was a small, but very significant gain as Pet Stores and $ Stores were the only 2 retail channels to gain market share in Pet Products $ in this 1st Internet Tsunami.

There is no doubt that that Pet Stores are resilient and a key consumer channel for Pet Parents. However, not all pet stores are the same. There is the key difference of Indies vs Chains. However, not all chains are created equal. They range from small local chains to regional to the national behemoths. In this report we will look at how these groups have progressed from 2002 to 2017, with an especially deep look at who stood their ground from 2012 to 2017 and how they did it.

We’ll start with the share of stores and Total $ for 2017 for independents and various sizes of chains. Remember, there were 9984 pet stores (with employees) in 2017, an increase of 1192 (+13.6%) from 2012. $ales showed even stronger growth, up $3.6B (+24.7%) to $18.4B in 2017.

Pet Store Numbers – Indies lost a little ground while the big chains are growing at a staggering rate. The small local chains (2>9 Stores) are also growing, especially the 5>9 group. The 10>24 group lost share, but they are basically in a transitional step on their way to 25+ stores. Chain Stores have more than half of all pet outlets with employees, 51.5%.

Pet Store $ales – The big chains dominate Pet Store $, 71.5%. However, $ales in the Indies and small local chains are still growing. $ales in the small chains are actually growing at a significantly higher rate than the big guys.

This shows where the pet store channel is at. Let’s see how it got there with data from 2002 to 2017. First # of Stores

Share of Pet Stores

  • The number of Pet Stores grew from 7626 in 2002 to 9984 in 2017, an increase of 2358 (+30.9%).
  • The number of Indies has slowly but steadily declined from 5285 in 2002 to 4839 in 2017, -446 (-8.4%)
  • During the same period, chain store outlets have more than doubled, from 2341 in 2002 to 5145 in 2017, +2804 (+119.8%).
  • That makes 2017 a very significant year. Independent Pet Stores were a key part of the foundation of the Pet Industry. For the 1st time they were outnumbered by chain stores.
  • The big chains, 25+ stores, have been the driving force in the growth in the number of Pet Stores in the 21st century. They went from 1512 stores in 2002 to 4287 in 2017, +2775 (+183.5%) – almost triple.
  • The 10>24 Store chains are a transitional phase, so their market share has been up and down. They are often focused on growing numbers for a stronger regional or even national presence so many move up to the 25+ group.
  • The 2>9 group is a combination of the 2>4 and 5>9 store groups and was created because their growth pattern is very similar. As you can see, their share of stores fell consistently from 2002 to 2012. Their store count fell from 646 to 554, -14.2% during this period. Then they turned it around. They added 16 more companies and 72 stores (+13.0%) between 2012 and 2017. They didn’t gain share but held their ground vs the big guys.

Now let’s look how the share of Pet Store $ have “evolved” over the same period.

Share of Pet Store $

  • Pet Store $ales grew from $7.6B in 2002 to $18.4B in 2017, a $10.8B (+142.1%) increase.
  • Independent Store $ increased from $2.4B to $3.8B, +$1.4B (+58.3%) during those years. That’s a 3.1% annual increase but it wasn’t nearly enough as they lost significant share through 2012. 2012>2017 was a different story. Their sales increased +22.1%. They lost 0.4% in share but essentially “held their ground”.
  • Chain stores have dominated the $ in this channel since 1997. Between 2002 and 2017 their total sales grew from $5.2B to $14.6B (+180.8%). As Indies lost share, they gained. From 2012 to 2017, their sales increased +$2.9B (+25.4%). However, like the Indies, their share essentially plateaued.
  • Like store count, the big chains have driven the growth in Pet Store $. Their sales grew $4.3B, +104.7% between 2002 and 2017. However, their growth from 2012 to 2017 was 25.1%, slightly below the rate of total chain $.
  • The transitional 10>24 Store chains had an up and down pattern that exactly mirrored their pattern in store count. They had a 2.1% increase in $ from 2012 to 2017 which resulted in a 27.6% drop in share, from 2.9% to 2.1%.
  • The 2>9 Store local chain group earned the only green highlight on the chart. From 2002 to 2012 their $ grew +2.7% but Their share of $ was nearly cut in half. The 2012>2017 period had a radically different story. Their $ales grew +$0.34B (+47.1%), by far the biggest percentage increase of any group. At $1.05B, they broke the “billion $ barrier” for the first time. Their share of $ grew 0.9% to 5.7%, an 18.8% increase.

This last chart on share of $ told a similar story to the store count chart up until 2012. Then some patterns changed. This suggests that we should take a closer look at what happened between 2012 and 2017. In this next chart we look at the % change in some key measurements from 2012 to 2017 for the different groups of Pet Stores.

Before we get to the specifics for each group, we’ll comment about how each measurement relates to our “deep dive”.

  • Total $ – The gap between share of $ for Chains and Independents had been growing through 2012. Then the growth flattened out in 2017. This change in pattern indicated that we should look a little deeper. There are 2 primary drivers behind a change in $ – Number of Stores and Average Sales per store.
  • # of Stores – This is often the main reason behind a change in $. If your business model remains unchanged, then your $ are connected to your store count – up or down.
  • Avg $/Store – This can reflect product trends in the industry and is also a measure of your consumer appeal. The movement to Super Premium Pet Foods began in 2014/15 and had a differing impact upon the groups.
  • # of Employees – If you don’t change your in store business model, this should be directly tied to store count.
  • Avg # Employees/Store – Employees have a variety of functions, including stocking shelves, building displays and keeping the store “cleaned and polished”. However, the most important responsibility may be interacting with customers. Pet Parents want interaction and discussion when they are shopping for products for their Pet “Children”. This has been a key reason that Pet Stores have maintained the top $ position over other channels.

Now, let’s see how the various Pet Store groups performed in these areas between 2012 and 2017.

  • All Pet Stores – This will be a key group for comparison as it reflects the progress of the entire Pet Store Channel.
    • Total $: $18.4B, +24.7%
    • # Stores: 9984, +13.6%
    • Avg $/Str: $1.84M, +9.8%
    • # Employees: 119.9K, +13.6%
    • # Employ/Str: 12.01, +0.01%

The growth in Total $ came from both increased store count and $ per store but more stores was the biggest driver. In terms of employees, the overall model was unchanged as employees/store went from 12.0 to 12.01.

  • Single Stores – They don’t have the most number of stores for the 1st time in history.
    • Total $: $3.8B, +22.2%
    • # Stores: 4839, -2.5%
    • Avg $/Str: $0.78M, +25.3%
    • # Employees: 29.3K, +8.3%
    • # Employ/Str: 6.1, +11.0%

They lost some stores but radically increased the $ per store. Specialty Super Premium foods and increased consumer connection from more employees per store were factors in holding their ground in share of $.

  • All Chains – Now, the biggest group in both $ and Stores. We’ll look for similarities and differences within the group.
    • Total $: $14.6B, +25.3%
    • # Stores: 5145, +34.3%
    • Avg $/Str: $2.83M, -6.7%
    • # Employees: 90.6K, +15.5%
    • # Employ/Str: 17.6, -14.0%

Overall, their $ growth slightly exceeded the channels growth rate, but it was entirely driven by more stores as the average store sales fell. They also added a lot of employees but the employees per store fell significantly. One factor is that some chains began adding smaller format stores to save money and have a more personal experience.

  • 2>4 Store Chains – We added this group back in to look for differences between them and the 5>9 Store group.
    • Total $: $0.55B, +37.3%
    • # Stores: 362, +7.4%
    • Avg $/Str: $1.53M, +27.8%
    • # Employees: 4.4K, +26.3
    • # Employ/Str: 12.2, +17.6%

This group represents a critical time for Pet Store owners. They have a successful store. Could they do even better if they added another location or 2.  In 2017, more companies opted in, but others continued to grow and moved up to the 5>9 group. They grew 7.4% in stores but increased the number of employees per store by twice that amount, +17.6%. This is important any time, but it was extremely important in the movement to Super Premium food. They offered the product but also had the personnel to discuss the consumers’ wants and needs. This helped drive their per store sales up 27.8%, to a level double that of Single Stores and produced a 37.3% increase in Total $.

  • 5>9 Store Chains – This group, with more stores and better coverage can become a major force in local markets.
    • Total $: $0.50B, +59.9%
    • # Stores: 264, +21.7%
    • Avg $/Str: $1.89M, +31.4%
    • # Employees: 3.1K, +34.7%
    • # Employ/Str: 11.7, +10.8%

This group had a game plan similar to the 2>4 group but with even stronger results. They added even more stores. This, in combination with increased store sales drove Total $ up 60%. They have the stores and people to be strong competition to the big chains in their local market.

  • 10>24 Store Chains – Most are committed to further growth so there is a continual influx and outflow of companies.
    • Total $: $0.39B, -7.2%
    • # Stores: 232, -15.0%
    • Avg $/Str: $1.69M, +9.2%
    • # Employees: 2.3K, -0.4%
    • # Employ/Str: 9.7, +17.2%

This is a transitional group, on their way up. They added employees per store and increased Store sales. Their Total $ fell solely because of a 15% drop in the number of stores.

  • 25+ Store Chains – This group is the dominant force in the Pet Store Channel and has been since the 90’s.
    • Total $: $13.1B, +25.1%
    • # Stores: 4287, +42.7%
    • Avg $/Str: $3.06M, -12.3%
    • # Employees: 80.8K, +14.8%
    • # Employ/Str: 18.8, -19.5%

With 42.9% of the stores and 71.5% of the $, there is no doubt this is the dominant group in the Pet Store channel. Their $2.6B (+25.1%) increase was also 72.6% of the Total $ increase for Pet Stores. They are the group that allowed Pet Stores to maintain and gain in market share of pet products against the Mass Market and an Internet Tsunami. With that being said, the group continues to evolve with many new smaller footprint stores designed to give Pet Parents an even more personal retail experience. This contributed to fewer employees per store and reduced Store volume. One thing hasn’t changed. They continue to open stores at a spectacular pace.

Observations

The movement to personalize our pets really came to the forefront of Pet $ with the strong movement to Super Premium Foods which began in the 2nd half of 2014 with Millennials and then spread to Boomers and ultimately became widespread across the consumer marketplace. The big chains remain the bulwark of the Pet Store channel. However, they provided a wall of protection which allowed small, localized chains to grow and prosper. They offer a more personal shopping experience and often were the first to stock and sell some new Super Premium pet foods. You see the results of this broadened appeal in the increase in per store sales for all pet stores with fewer than 25 outlets, including Indies. The biggest % growth in store $ occurred in the 2>4 and 5>9 groups. The 5>9 store group became especially stronger with a 60% increase in Total $. The reason is twofold. They offer a personalized experience but have enough outlets in any given local market to be a convenient option for consumers. We also shouldn’t forget the progress of the 2>4 Store group. I did a year long investigation of Pet Stores 3 years ago to validate the numbers. I found that a large number of new independents entered the market, but over the course of the year, over 8% of existing indies “closed their doors”.

The chain stores, big and small, lost virtually no outlets. There is a lesson here, that is almost as old as humanity but also applies to retail pet stores. “There is safety in numbers!” It just takes 2 or maybe 5 or you could move up to 15. After that the sky is the limit! Chain stores began in the 90’s. The big guys will remain dominant but there is room for all sizes!

There is another classification of Pet Stores that has come more to the forefront….

Pet Store Franchises

Let’s take a closer look. These stores are either owned by the Franchisee or the Franchisor.

In 2017 their share of stores was:

  • All Franchise Stores: 10.6%
  • Franchisee owned: 6%
  • Franchisor Owned: 4.0%

And their share of $ was:

  • All Franchise Stores: 7.7%
  • Franchisee Owned: 3.7%
  • Franchisor Owned: 4.0%

About 1 in every 9 Pet Stores is a Franchise outlet but they take in only 1 of every 13 dollars spent at U.S. Pet Stores. Franchisee Owned lead the way in number of stores, but Franchisor Owned stores produce more $.

This is where they were at in 2017. Let’s take a look at how they got there by viewing the changes in key measurements from 2012 to 2017.

These are the same key measurements, just for groups most relevant to franchises, including their biggest competitor.

  • Non-Franchise Chains – This is their biggest competitor and accounts for 40.9% of stores and 71.6% of Pet Store $.
    • Total $: $13.15B, +21.7%
    • # Stores: 4082, +33.2%
    • Avg $: $3.22M, -8.6%
    • # Employees: 79.8K, +10.6%
    • # Employ/Str: 19.5, -16.9%

Being on top creates a lot of pressure. They had a huge $ increase from opening more stores. Their percentage increase in $ was actually, even smaller than Indies, who closed 2.5% of their stores. They were the only group to have drops in Average Store $ and the number of employees per store.

  • Total Franchise Stores – They gained ground in share of stores and $ but 1 subgroup was a bigger driver.
    • Total $: $1.42B, +72.5%
    • # Stores: 1063, +38.8%
    • Avg $: $1.33M, +24.3%
    • # Employees: 10.8K, +70.9%
    • # Employ/Str: 10.1, +23.1%

Their growth rate in stores and Total $ was basically triple that of the whole Pet Store channel. The growth rate for Average Store $ was slightly behind the rate for Indies but it was 70% higher in actual $. They also led the way in employee increases and broke the 10 employee per store “barrier”.

  • Franchisee Owned Stores – Same name and business model, but different levels of execution from corporate stores.
    • Total $: $0.68B, +39.5%
    • # Stores: 660, +19.1%
    • Avg $: $1.04M, +17.1%
    • # Employees: 5.6K, +37.2%
    • # Employ/Str: 8.5, +15.2%

Although they lost some share to Franchisor Owned stores, they are still 62.1% of all Franchise Stores. They had significant growth in all measurements, but the store level execution of the Franchise business model can vary between stores producing a lower growth rate. In many ways the business behavior of these stores is more like that of an enhanced Independent Store. They have the 2nd lowest Store $ and number of employees per store. Both these measurements are 30+ higher than Indies and 30+% lower than Franchisor Owned stores. The growth in stores is promoted and driven by the Corporation and the increase in store $ over an independent store likely comes from the impact of the store Brand name and the Franchise business model.

  • Franchisor Owned Stores – These stores are classified as Franchises but essentially operate like a regular chain.
    • Total $: $0.73B, +120.9%
    • # Stores: 403, +90.1%
    • Avg $: $1.82M, +16.2%
    • # Employees: 5.2K, +132.2%
    • # Employ/Str: 12.9, +22.1%

Like the big regular chains, this group made a commitment to store growth. They increased the number of stores by an amazing 90%. This combined with a 16% increase in store $ produced a 121% increase in total $. Not to rain on their parade, but their average $ per store is still slightly below the $1.84M for Total Pet Stores and 43% lower than the $3.22M for Non-Franchise Chains. Their 22% growth in employees per store should also come with an (*). They have the lowest annual pay per employee for any group, even 29% below that for Indies, and it fell -6.8% between 2012 and 2017. It is likely that they have a high and growing percentage of part-time employees.

That wraps up our look at Franchised Pet Stores. We saw that Franchisee owned stores outperform Independent Stores, but Franchisor owned significantly outperformed them in store $ and growth. True performance is the share of $ divided by the share of stores. A score of 100+% means that a group is “earning their share”. Performance provides us a method to compare the subsets of Franchises to the subsets of store count. We will end our Pet Store analysis with this graph:

As expected, singles are the worst performers. If you’re considering opening a store, buying a franchise might offer more success. If you already have a successful store, should you open another? The answer appears to be yes. There is safety in numbers and greatly improved performance in the 2>4 group. Now comes the big question. Do you have the will and the resources to become a “force” in your local market? If so, then go for it. The 5>9 store group is 1 of only 2 groups performing above 100%. They even outperform the Franchisor owned group. The final step to 25+ stores is difficult and open to few. You first transition to 10>24 stores, where you learn the challenges of attaining regional success in possible anticipation of a national goal. That goal is truly “gold” as 25+ are the best performers and responsible for Pet Stores holding their ground in 2017 vs the Mass/Internet.