Video Transcript
KE: Hello everyone, and thanks for joining us for today’s discussion. I’m here with Izzie Stillwaggon, the Ecommerce Manager and SEO lead for New Media Retailer. Welcome, Izzie. Thanks for joining me.
Petco’s rebrand to The Health and Wellness Company
KE: All right. So today we are going to be talking about an article that just came out that talked about Petco’s digital sales and how they doubled in 2020. Now, specifically for us, we obviously we know that Petco’s a competitor for many of our independent pet store customers and some of our independent feed and farm customers as well. We wanted to really take a minute to dive into this article to think about what Petco is doing, what’s leading to such an increase in online sales, what that means for our independent pet stores, and what we should be learning from this, because we know many of our stores are also seeing increases in online sales. How is this impacting us? What can we learn from Petco? So Izzie, the first thing really jumped out at me in this was that Petco rebranded. Did you know they rebranded?
IS: I did not know.
KE: I didn’t either, but in the article, it said that they rebranded themselves as Petco: The Health and Wellness Company. What are your thoughts on that?
IS: They definitely have been influenced by their consumers. Most people want the healthier version. Now you don’t want to just give your pets anything. You’ll see a lot on packaging now that it’s human grade, and a lot of people are very focused on that kind of food. I think Petco took notice of that and wanted to brand themselves that way as well.
Being ahead of the health and wellness curve
KE: Yeah. Yeah. That makes total sense, and I think that we’re seeing some of the independent pet stores kind of look in a hard way at their product mix as well to ensure that the product mix in their store is meeting those consumer changes in terms of what they’re looking for. So Petco’s taken note of that. That’s going to be something that the independent pet stores will definitely need to pay attention to: What Petco’s product mix looks like and how they can differentiate going forward, too.
IS: Yeah. I also think that some of our independent retailers have gotten ahead of that curve as well, because you’ll like see that some of them have “holistic” in their title. You’ll see, like, “Healthy Pet Center.” I know that’s a popular name as well. So I think that focus was very clear to some of our independent pet retailers, and Petco knew that they needed to jump on that, but moving forward as well, other smaller stores need to move in that direction too.
KE: Yeah, that makes sense, and actually that’s great to point out. That’s an area where our stores, our customers, really have had an advantage or been ahead of the curve and attracting those kind of conscious customers who are conscious of what they’re putting into their pets every day.
The growth of ecommerce in 2020
KE: So the other piece that was interesting was they said that the e-commerce and digital sales increased 103% from 2019 to 2020. A number of factors probably have driven that, one of those obviously being the COVID environment, which we’ve all experienced. So that’s obviously had an impact on digital sales. What Petco pointed to specifically was “buy online, pickup in store,” “curbside pickup,” “ship from store,” and “same day delivery” as what they meant by online sales increasing. What do you think our pet stores can learn from kind of hearing that that is what’s driving Petco’s online sales?
IS: I think starting, especially with COVID, the need to not come into store – not touch all of the objects, just be able to order online, pull up and then somebody would put something in your car – was a huge factor for consumers, and I know that some of our stores started to learn that and wanted to jump on that as well. Shopify, a platform that we use, recognized that as well, and decided that they couldn’t just offer shipping on their platform; they needed to offer pickup as well. So that was such a huge factor for consumers and it influenced Petco and then also the our independent pet retailers as well.
The benefit of investing in pickup and delivery
KE: Yeah, yeah, for sure, and that increase is pretty drastic, too. So I know we’ve had some pet stores that we’ve encountered who were kind of hesitant about that investment in terms of, you know, should I actually spend the money to invest in a really high quality pickup and delivery site, but when you learn the Petco’s sales increased by a hundred percent, so their sales doubled online, it’s like, well, you know, there’s an opportunity here to pay for that investment. With that revenue they gain, it really is an investment into your store and into retaining and growing your customer base and your revenue from what I’m hearing from Petco’s experience.
IS: Hmm. Yeah. For an example of this, I know of a store who wasn’t doing a whole lot in sales. They very much focused on in-store people coming inside. Over the course of the COVID year – so March to March – their sales grew by 600% because she decided to allow people to just order online and pick up in store. It definitely benefitted any store that wanted to make that change.
KE: Yeah, that’s interesting. That’s a great story to hear about one of the independent stores and it kind of makes sense, too, because if you think about Petco’s footprint, their stores, they have stores all over the country – I assume in all 50 states – so they serve a lot of different markets. That success for them to double their digital sales, that’s not just like in one market or major cities, that’s in the country in all sorts of different markets, the same markets that the independent pet stores are serving, too, so they have this opportunity as well. The unfortunate thing is they grew their customer base pipe – a million customers in each of the third and fourth quarters – which puts them at 20 million customers at this point.
Committing to an omni-channel solution
KE: On that note, what jumps out to me is independent pet stores need to pay attention because they have competitors in Chewy and Amazon. We know that, and they’ve known about Petco and PetSmart as competitors, too, but now those big box stores have attracted new customers. Petco gained 2 million customers there in a couple of quarters. Those are customers coming from somewhere else, right? So how do you think a pet store that’s hesitant or has not invested in kind of an omni-channel solution should be taking away from this?
IS: I think it’s kind of an unfortunate reality that if you don’t make the changes that you see Petco is doing, those customers that used to be yours will even go to Petco. Customers want an easier way, a safer way, to get their products, so you really need to offer local delivery, curbside pickup, and in-store pickup, whatever you can do to make sure that those customers stay with you.
KE: Yeah, yeah, absolutely. It’s almost like Petco seeing the fruits of their labor and their investment, right? They’ve put this into it and now they’re seeing the customer acquisition, and they’re seeing the growth in revenue, and they’re seeing that across all these different markets. So if you’re that independent pet store, it’s really tough to make the argument that that’s not something you need to do at this point. It almost feels like that’s table stakes for having an independent retail pet store at this point is that you need to have online ordering for curbside pickup and delivery because consumers are clearly demanding it.
Independent retailers are important to their communities
IS: And I think that for the most part, at least I know in my small community, a lot of customers want to stay with their small local business. They don’t want to go to a big box store, so if you make those changes, you’ll see the fruits of your labor and see that your customers want to stay.
KE: Yeah. Yeah, definitely. Have you kind of seen that throughout your community and in that or other industries? How has your area responded?
IS: I love my town because they put in a lot of effort. We’ve made a little coupon books for the town, so you could go around and shop at all the local businesses. You’ll see that even local businesses that normally compete with one another are trying to support each other, like support their other competing businesses like small coffee shops, something like that. I know that everybody wants to stay local – they want to support their town – so if you give people the opportunity to do to do so, they will.
KE: Awesome. Yeah, and that’s something we always take great pride in, too. We’re all from and live in small towns supporting these other small town businesses, too, so we’re right there with them.
How to compete with micro distribution centers
KE: So this piece, from a high level strategy perspective, was pretty interesting to me because they mentioned in this that – let’s see the exact wording and the article to talk about this structural advantages for customer fulfillment – that’s what they were trying to leverage, whereby our pet care centers now double as micro distribution centers, turning our national footprint of physical locations into a significant competitive advantage. What do you think that means?
IS: I think everything that they have available has become such a benefit to them and the consumer, whereas they weren’t seeing that impact before COVID.
KE: Yeah. It’s almost like the advantage that Amazon and Chewy had for years was like this: We’re going to ship you things in two to three days, it’s going to arrive on your doorstep. And that was their advantage and stores were really trying to find a way to respond to that. But now, you know, these micro distribution centers, it’s almost like, “Okay, you might have this big warehouse that is far away, and it takes you two or three days to ship things, but I have my store right here and I can distribute right from my store, and kind of treat it as a mini distribution center as a mini warehouse, and I can get things that I have here in my store, too. In the same day, you can come in and pick it up with curbside pickup, or I can do same day or next day delivery if I’m an independent pet store, and I can beat Amazon right to your doorstep with the product that you want.” And it sounds like Petco is leveraging that pretty well. That sounds like a potential advantage for a lot of our independent pet stores too.
IS: I think that’s what will make everybody stay competitive with Petco and PetSmart: just being able to offer that quick turnaround. You’ll see a lot of stores now who are trying to do one hour pickup. People love that. They’re like, “Oh, I’m out of my dog food. Can I just like order it online?” You can go pick it up right away, and that’s how customers will stay with you and keep these pet stores competitive.
Use local resources to your advantage
KE: Yeah. Yeah, definitely, and I think there’s other opportunities that are being recognized, too, with like – I’m not sure if it’s DoorDash, it might be DoorDash – that is offering, you know, I think one of them has partnered with PetSmart already, but they’re willing to partner with the independent pet stores, too, to offer delivery and to do the delivery service. So if you’re a pet store or a farm store saying, “Well, I don’t have a delivery driver, I don’t have a van, and you know, we’re not equipped to do this,” there are partner companies now that you could work with to actually take care of the local delivery aspect, too, if you want to offer fast same day delivery.
IS: Yeah, and there’s also – we’ll see if this happens – but I think Uber is looking to get into that as well. And unlike DoorDash, Uber is everywhere. It’s not just in cities, right? So if that becomes the thing, that would really help the independent pet stores.
KE: Yeah, for sure.
Most orders are fulfilled from stores, not through shipping
KE: So a couple of other stats that jumped out about Petco’s growth that I thought were really relevant for the independent pet stores were that 83% of their website orders were actually fulfilled from the pet stores themselves. So, you know, when we tend to think about e-commerce, I think because historically we’ve jumped to, “Oh, e-commerce, that means buy on your site and you ship me something,” right? But they said, you know, this double-digit growth – or excuse me, this doubling their growth – was actually 83% of the sales that were actually just same-day. I mean, if they’re fulfilling from the store, that means curbside pickups and same day delivery or short-term delivery in their local market. That’s a pretty powerful statement about how consumers buy online now.
IS: And I think that just is another thing to convince these pet stores that if they make that move into pick-up and delivery, that’s really going to make them very competitive when it’s 83% for Petco, so you can just continue to take those customers back and make them stick, right?
KE: Yeah, absolutely. It’s a customer acquisition tool as well as a customer retention tool, right. When you have this tool available as your customer, you don’t want them to leave just because, “Hey, today, you know, I love coming into your store usually, but today, you know, my, my kid is sick or, you know, whatever, and I can’t get to the store. Well, I guess I’m going to order online from Petco.” You want them to just be able to order online from you, right? You don’t want those dollars to start siphoning off anywhere else.
IS: Yeah, absolutely.
Order subscriptions are growing
KE: So, and then kind of the final note here that I thought was really relevant was that repeat delivery represented 45% of their revenue, too. Repeat delivery, how should our pet stores take that? Or what should they be thinking about next, knowing that Petco’s had so much success with repeat orders on their sites?
IS: I think once you get the customers to come back to you or stick with you – with doing pickup and delivery once you put those into effect customers will continue to stick with you – but there’s also the option to do subscription orders as well. On Shopify, we can do that through an app called Bold, and I think there are some other options, too, but that’s also a huge push for consumers. Everybody wants to be able to just set it and forget it. Maybe you’ll have like 5% or 10% off for each order, so that would be a huge push to be consumer stay with you and be repeat customers.
KE: Yeah, that’s great. Especially knowing that Petco has had success with that, we can kind of use them a roadmap. Okay, it works for them. They spent the money and proved it, so now we can look at that and say, “Hey, if you’re an independent pet store, we have this tool for you where if somebody wants to buy the same bag of Blue Buffalo Chicken & Brown Rice Dog Food every three weeks, they can just go on your website, check subscribed to it for every three weeks, and if you want to offer them a discount, you can offer them a discount for doing that, and then just deliver it right to their doorstep every three weeks. It works for the consumer and it’s great for the customer as well.
IS: Yeah, I actually personally do a subscription with my local pet store, and I just do it for my two cats, and I set it and forget it each month. I know that I could just go pick it up, so it’s totally beneficial.
KE: That’s great, and it really is a great benefit.
Connecting with the consumer
KE: It’s perfect for keeping you connected to the store, too, and it’s perfect for them having that touchpoint, and it creates kind of convenience for you as the consumer, as the pet parent, and for the store, too, because they can actually start to bank on that revenue and understand that cashflow a little bit better for their business. So it works for both plans.
IS: Yeah, and I know personally if I didn’t go in and talk to somebody, I’d lose my mind. I still want to go and talk to my local pet store and say hi to everybody – maybe go see what animals they have to pretend like I’m going to go get another animal – but I definitely prefer to go into the store.
KE: Yeah, and that I think kind of touches on a pretty key point here, too, in that I think that’s why Petco’s having some success here is understanding that consumer doesn’t just want to buy online all the time, right? Like we talk about “online shoppers” or “everybody,” but it’s not like people exist in a vacuum. “Hey, are you an online shopper?” “No, I’m an in-person shopper. Not online.” That’s not the way the world works. You are, and I am. We shop in the store sometimes, and we shop online sometimes, right? We kind of do both whatever’s convenient, so the biggest success is really, of course, investing in your retail presence, investing in your local marketing, trying to drive people into the store, and then, hey, when they want to have the option to buy online, don’t let them go to one of your competitors. Give them the great solutions there as well to buy online for me when it’s more convenient in that aspect.
IS: Because like you said, people love to go into the store, but sometimes they just might not be able to make it in for whatever reason, and if you offer local delivery, it will keep that person.
KE: Yeah. Awesome.
In-store pickup and local delivery will help you in the long run
KE: Well, I really appreciate your time today. Thanks for joining me. Any last thoughts for any of the independent pet stores listening?
IS: I just have to urge you to do pick-up and delivery. You heard all of these reasons, all the examples. I will come to your store like I come to my local store. You need it, customers want it, and it will help you in the long run. You’ll definitely do maybe 123% more in online sales, but you definitely got to do it.
KE: Awesome. Awesome. All right, everybody, this has been a discussion with Izzie, our e-commerce manager and SEO lead at New Media Retailer. Izzie, thanks so much for joining us, and thanks everybody for tuning into this video, or if you’re listening, thanks for tuning in that way as well, and we will catch you soon. I wish everybody the best.
IS: Thanks everybody.