Pet Stores in The US Industry Report

Pet Stores in the US July 2012 1
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Lucky dog: Pet owners will invest in premium

products as disposable income rises
IBISWorld Industry Report 45391
Pet Stores in the US

July 2012
Caitlin Moldvay
2 About this Industry
16 International Trade
Industry Definition
17 Business Locations
Main Activities
Similar Industries
19 Competitive Landscape
32 Industry Data
Additional Resources
19 Market Share Concentration
32 Annual Change
19 Key Success Factors
32 Key Ratios
3 Industry at a Glance
30 Industry Assistance
32 Key Statistics
20 Cost Structure Benchmarks

21 Basis of Competition
4 Industry Performance
22 Barriers to Entry
Executive Summary
23 Industry Globalization
Key External Drivers
Current Performance
24 Major Companies
Industry Outlook
24 PetSmart Inc.
11 Industry Life Cycle
25 PETCO Animal Supplies Inc.
13 Products & Markets
28 Operating Conditions
13 Supply Chain
28 Capital Intensity
13 Products & Services
29 Technology & Systems
14 Demand Determinants
29 Revenue Volatility
15 Major Markets
30 Regulation & Policy
33 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
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About this Industry

Industry Definition
Pet stores sell a variety of pets, including

dogs, cats, fish and birds. Stores also sell
pet foods and pet supplies, such as
collars, leashes, health and beauty aids,
Main Activities
The primary activities of this industry are
shampoos, medication, toys, pet

containers, dog kennels and cat furniture.
Some stores offer pet services, such as
grooming and training.
Retailing pets
Retailing pet food and supplies
Providing pet grooming and boarding services
The major products and services in this industry are

Live animals
Pet food
Pet services
Pet supplies
Similar Industries
54194 Veterinary Services in the US

Establishments 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
Businesses in this industry retail pet foods and pet supplies via the internet.
45411b Mail Order in the US
Establishments in this industry retail pet foods and pet supplies via mail order or catalogs.
Additional Resources
For additional information on this industry

www.americanpetproducts.org
American Pet Products Association
www.petage.com
Pet Age Magazine
www.petbusiness.com
Pet Business
www.hsus.org
The Humane Society
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Pet Stores in the US July 2012
Industry at a Glance
Pet Stores in 2012
Key Statistics
Snapshot
Revenue
Annual Growth 07-12
Annual Growth 12-17
Profit
Wages
Businesses
$14.7bn 2.8%
3.8%
13,853
$634.1m $2.0bn
Number of pets (cats and dogs)
Revenue vs. employment growth
Market Share
PetSmart Inc.
43.1%
PETCO Animal
Supplies Inc.
20.7%
10
200
190
180
Millions
% change
2
0
160
150
Year 04
170
06
08
Revenue
10
12
14
16
18
140
Year 03
05
07
09
11
13
15
17
Employment
SOURCE: WWW.IBISWORLD.COM
p. 24
Products and services segmentation (2012)
10.2%
Number of pets
(cats and dogs)
4.5%
Live animals
Pet services
Per capita disposable

income
External competition
Number of households
27.3%
58%
Pet supplies
Pet food
p. 4
SOURCE:
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SOURCE:
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Industry Structure
Life Cycle Stage

Revenue Volatility
Capital Intensity
Growth
Regulation Level
Medium
Low
Technology Change
Medium
Low
Barriers to Entry
Medium
Industry Assistance
None
Concentration Level
Medium
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32
Industry Globalization
Competition Level
Low
Medium
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Industry Performance
Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage
Executive
Summary
The Pet Stores industry is ahead of the

pack when it comes to sales. Even during
the Great Recession, which slowed
demand throughout most of the retail
sector, the industry continued to yield
revenue growth. This trend was mainly
driven by an increasing number of pet
parents pet owners who treat their
four-legged friends as family members.
During the economic downturn, when
Indulgent
pet parents will drive up demand for

premium pet food and services like grooming
consumers of all income levels tightened
their belts, pet parents cut back on their
personal discretionary spending first
before spending less on their pets.
Consequently, revenue growth slowed
during the recession but maintained its
overall positive trend. Revenue is
expected to increase at an average annual
rate of 2.8% to $14.7 billion in the five
years to 2012. From 2011 to 2012,
revenue is projected to grow 4.1%.

As households adopt more cats and dogs,
demand for industry goods such as pet
foods, medicine and accessories
increases. The average dog or cat owner
spends about $250 annually just on food,
according to the American Pet Product
Associations (APPA) National Pet
Owners Survey. This driver is expected
to increase during 2012, creating a
potential opportunity for the industry.
Per capita disposable income
Consumers increasingly perceive pets as
members of the family, so products for
pets can be considered nondiscretionary.
A decrease in disposable income has little
effect on demand, since households
typically reduce spending on other
The emerging trend of pet parents has

also brought about high demand for
premium pet products and services. Since
pets are often considered family
members, pet owners frequently indulge
them with all-natural and organic pet
foods and treats, in addition to services
such as grooming and day care. These
positive trends, combined with rising
sales, have increased profit margins for
industry players in the five years to 2012;
IBISWorld estimates that margins have
increased from about 3.7% of revenue in
2007 to about 4.3% in 2012.
Over the five years to 2017, industry
revenue is projected to maintain strong
growth. As the economic recovery gains
traction and consumers are equipped
with heavier wallets, revenue from
premium products and services is
projected to increase. Moreover, the
number of pet-owning households is
expected to continue increasing, yielding
greater demand for industry products.
From 2012 to 2017, revenue is forecast to
rise at an average annual rate of 3.8% to
total $17.8 billion.
household and leisure products before

cutting down on pet food and toys. A rise
in per capita disposable income, though,
increases the propensity for households
to purchase a greater quantity of goods
and more premium items that are higher
in price. This driver is expected to
increase slowly during 2012.
External competition
Pet food, toys and accessories supplied
by this industry compete with
comparable products offered by
supermarkets and grocery stores.
Supermarkets and grocery stores often
sell the same products or very similar
products as pet stores, providing
consumers with added convenience.
This driver is expected to remain flat but
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continued
high over 2012, posing a potential threat

to the industry.
Number of households
According to the APPAs most recent
National Pet Owners Survey, 62.0% of US
households own a pet. Consequently, an

increase in the number of households will
likely lead to growth in pet ownership
levels in the United States, supporting
industry demand. This driver is expected
to increase slowly during 2012.
Per capita disposable income

200
4
3
190
% change
Millions
180
170
160
Year 03
0
1
2
150
140
3
05
07
09
11
13
15
17
Year
06
08
10
12
14
16
18
Current
Performance
Despite the economic downturn that

undermined most of the retail sector,
sales for the Pet Stores industry have
remained positive in the five years to
2012. Financial resilience in this industry
has been powered by owners tendencies
to treat their pets like family members;
by offering more innovative, specialized
and premium products and services, pet
stores have been able to cash in on pet
owners desires to pamper their pets. In
addition, growth in pet ownership in the
United States has led to higher demand
for pet food and supplies overall.
Consequently, revenue for the Pet Stores
industry is estimated to increase at an
average annual rate of 2.8% to $14.7

billion over the five years to 2012.
Furthermore, the industry is expected to
post 4.1% sales growth from 2011 to 2012
as higher disposable income encourages
greater spending on pets.
With strong demand and rising sales,
pet stores have experienced increasing
profit margins over the five-year period.
Sales of premium pet food and supplies
in particular have driven up profitability
because they typically have higher
markups. IBISWorld estimates that in
2012, the industry will reach margins of
4.3% of total revenue, up from 3.7%
in 2007.
Growth during the

recession
Industry growth over the past five years

is largely attributable to higher pet
ownership and accompanying demand
for pet products. According to the
2011/2012 National Pet Owners Survey
published by the American Pet Products

Association (APPA), about 62.0% of US
households own a pet, which equates to
72.9 million homes. Pet ownership has
been growing slowly but steadily over
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Growth during the

recession
continued
the past two decades. The APPA reports

that in 1998, about 51 million homes
owned at least one pet; by 2005, the
number had risen to 69 million. Such
growth rates have translated into rising
demand for pet supplies in the five years
to 2012, even during recessionary
economic conditions.
Because supplies such as food and
treats are required for the well being of
pets regardless of household income,
demand for the Pet Stores industry has
proved resilient against the headwinds of
low consumer confidence in the economy
and decreased disposable income. To this
end, pet food, which accounts for about
58.0% of industry sales, has been the
leading contributor to positive sales
during the recession. According to APPA
data, sales for pet food increased 3.7% in
2008, 4.5% in 2009 and 6.8% in 2010.
Nonetheless, the recessions
stubbornness has adversely affected the
industry to some extent. Between 2008
and 2010, revenue growth slowed as
consumers were forced to cut back on
Part of the family
In the five years to 2012, the pet

humanization trend has benefited the
Pet Stores industry. A tipping point was
reached in 2005 and 2006 when people
began rewarding their pets in human
terms, according to the APPA. As such,
the name pet parents was coined to
describe enthusiastic pet owners
(especially of dogs and cats) who treat
their pets as members of the family.
With this trend, the interest in pet
pampering has gained popularity over
the five-year period, leading to thriving
demand for industry pet services. In
fact, about $4.6 billion is expected to be
spent on nonmedical pet services in
2012. Examples of pet services go
beyond the traditional grooming, dog
walking and training; today, premium
services like pet therapy sessions and
specialty products. According to a 2010

survey of pet owners conducted by Pet
Business, a publication dedicated to the
pet supplies retailing industry, the
majority of respondents (68.0%)
indicated that they had reduced their
spending on pet supplies compared with
the previous year.
With such declines in overall
spending, operators have been actively
adding pet services to capture more of
the consumer dollar. Pet Business
reported in another survey that in 2010,
22.0% of retailers added pet-related
services, such as grooming and pet
boarding, to improve sales and margins.
IBISWorld expects that in 2012, the
continued emphasis on pet services will
be a primary driver for sales. As the
unemployment rate slowly subsides and
households gain more disposable
income, consumers will likely increase
their spending on these discretionary pet
services. Pet food sales are expected to
increase steadily as well with 3.1%
growth during 2012.
High-margin
pampering
services and premium
products have led to profit
growth
pet-only flights are available for fourlegged family members. Additionally,
doggy hotel services have emerged,
equipped with heated beds and flatscreen TVs that show high-definition
DVDs in private suites. The rise in
demand for pet services has positively
affected the industry over the years.
Since there are few variable costs
associated with these services, any
increase in revenue directly improves
stores bottom lines.
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Product innovation
In 2007, melamine-contaminated dog

and cat food reportedly caused the death
of more than 3,500 animals, prompting a
nationwide recall and hurting the
industrys reputation and sales. This
incident accelerated the trend toward
premium pet foods with natural and
organic ingredients. Natural and holistic
pet food sales reached $15.0 billion in
2008 and have been growing an average
of 20.0% annually since, according to Pet
Business. The rising popularity of this
food segment has brought in additional
sales while providing pet stores with an
advantage over external competitors.
With the ongoing humanization of
Competition from
bigger stores
Pet stores are traditionally small and

independently owned operations; about
48.0% of industry players are nonemployers (stores without paid
employees). Even among businesses that
have employees, most employ fewer than
four workers. Just 19.4% of total
operators have more than 20. Because of
their predominantly small size, industry
enterprises have faced external
competition from supermarkets and
mass merchandisers, while fending off
big-box specialty stores from within the
industry. This pressure has contributed
to overall consolidation of the industry
and has placed incredible price pressures
on small specialty stores, some of which
were forced to exit or find niche markets
to remain competitive. Over the five years
to 2012, the number of industry
operators contracted at an average
annual rate of 1.3% to an estimated
13,853 companies. This decline is partly
due to increased external competition
coupled with continuing merger and
acquisition activity in the industry.
In recent years, supermarkets have
lured customers from smaller specialty
stores by offering the convenience of
one-stop shopping. Grocery stores allow
pets, a strong push toward innovating

higher-quality and personalized pet
products has occurred in the industry.
Examples of such products include
monogrammed sweaters, digitized collar
tags, handmade treats and designer pet
clothes and accessories. To further
support this trend, big companies such as
Paul Mitchell, Omaha Steaks, Harley
Davidson and Old Navy have also
invested in pet supplies, now offering
products such as dog shampoo, pet attire
and name-brand toys. Over the five years
to 2012, the trend toward pet indulgence
has been a significant contributor to the
growth of industry revenue.
Smaller
operators compete
with big-box retailers
and pet stores alike, from
Walmart to PetSmart
consumers to shop for a wide range of
household products in one location,
including pet supplies. Time-poor
consumers have turned to this type of
store to streamline and simplify errands.
Meanwhile, mass merchandisers have
emerged as major retailers of pet
products, offering cheaper prices for
frugal consumers. Due to their significant
sizes, stores such as Walmart and Costco
exert higher buying power and purchase
in bulk from wholesalers. The cost
savings achieved become bargain prices
for consumers and allowed larger stores
to increasingly draw in customers during
the recession. As such, grocery stores and
mass merchandisers have become
leading retailers of pet supplies over the
five years to 2012. These external
retailers represented 57.0% of the
pet-care market and 61.0% of the pet
food market in 2010, whereas specialty
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stores accounted for 17.0% and 14.0% of

the markets, respectively, according to
Pet Business.
Smaller operators even face
competition in selling premium products,
which are often a boon for small retailers.
High-end goods are primarily sold
through specialty pet stores and other
niche retailers, providing a degree of
guaranteed sales for operators and
shielding them from direct competition.
Yet big-box specialty stores such as
PetSmart and PETCO offer customers the
Industry
Outlook
The five years to 2017 look promising for

the Pet Stores industry. Rising pet
ownership is expected to serve as a
strong driver for demand and boost sales
for pet stores. In addition, slowly
improving economic conditions will
likely boost consumer spending, allowing
customers to splurge even more on
premium pet products and services. As
such, revenue is projected to increase at
an average annual rate of 3.8% to $17.8
billion over the five-year period,
beginning with 4.6% growth from 2012
to 2013. However, the Pet Stores industry
will continue to face strong competition
from grocery stores and mass
merchandisers, which to some extent will
place a cap on the industrys growth.
The number of pets owned by
households in the United States is the
primary driver for pet store demand.
Because the industry sells pets, including
cats, dogs, birds, hamsters and guinea
pigs, an increase in ownership generally
translates to higher revenue. In addition,
a rise in pet ownership leads to higher
demand for products such as food, treats
and toys, since these goods are needed
every day for pets general well-being.
To the industrys benefit, demand
for pets, especially cats and dogs, is
best of both worlds by providing a broad

selection of pet products while operating
on a scale large enough to pass cost
savings down to consumers in the form of
lower prices. Furthermore, these large
stores have also provided premium
products, a factor that had protected small
specialty stores from external competition.
As a result, the big-box strategy has been a
sweeping success in the Pet Stores
industry. PetSmart, in particular, has
increased its market share from 39.3% in
2007 to an expected 43.1% in 2012.
Industry revenue
10
8
% change
Competition from
bigger stores
continued
6
4
2
0
Year 04
06
08
10
12
14
16
18
expected to rise over the five years to

2017, primarily driven by more
common single-person households
and the aging population,
demographic segments seeking
companionship. IBISWorld projects
that the number of pets will increase at
an average annual rate of 3.7% over
the five-year period, contributing to
the industrys growing revenue.
With rising sales volumes, the
industrys profitability is expected to
grow during the five years to 2017.
IBISWorld forecasts profit margins to
increase from 4.3% of revenue in 2012 to
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Industry Outlook
continued
4.5% in 2017. Rising profitability will also

continue to bring new entrants into the
industry. The number of enterprises is
Premium products will Since a devastating pet food recall of

2007, which is suspected to have caused
remain popular
Changing
competition
projected to increase at an average

annual rate of 2.0% to about 15,280
companies in 2017.
The
market for premium

pet food and supplies
will grow as economic
conditions improve
more than 3,500 animal deaths, pet

owners have become increasingly
conscious of the food that they give their
four-legged companions. As a result,
many natural and organic foods and
treats have gained popularity, proving to
be lucrative sources of revenue over the
past five years. IBISWorld projects that
the 20.0% growth rates of previous years
will continue over the five years to 2017.
As households continue to review their
animals diet as a means of improving
pets overall health, demand for natural
pet food will likely remain strong.
With improving economic conditions,
demand for specialized pet services is
expected to continue. Over the past five
years, pet services have served as

primary drivers of growth within the
industry, a trend that will likely continue
as per capita disposable income is
expected to grow an average of 2.3%
annually from 2012 to 2017. As
unemployment declines over the later
part of the five-year period, more
consumers will use their extra income to
pamper their pets with services such as
grooming and boarding.
Over the five years to 2017, competition

from external operators such as
supermarkets and mass merchandisers
is expected to decline slightly but
remain strong. As consumers find
themselves armed with additional
spending capital, they will likely pursue
higher-quality pet supplies like
premium food.
During the recession and its
aftermath, external retailers attracted
many budget-constrained consumers by
offering a limited selection of low- to
medium-quality goods at discounted
prices. However, as disposable income
levels increase in line with the economic
recovery in coming years, customers are
expected to loosen their budgets and
splurge on higher-quality items. As a
result, consumers will seek options
based on factors other than low prices
and thereby return to patronizing

smaller operators that offer higher
quality and services at higher prices.
Despite these favorable conditions,
however, competition from
supermarkets and mass merchandisers
is expected to remain strong for basic
pet supplies like dry pet food and cat
litter. Because these products show little
product differentiation, consumers will
likely continue to shop at large retailers
to take advantage of discounted prices
and the convenience of one-stop shops.
Since much of the industry consists of
a high number of smaller stores, niche
product marketing will become
increasingly important as each operator
attempts to set itself apart from other
stores. For example, personalized diets
for pets are expected to serve as a
potential niche market for industry
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Changing
competition
continued
operators, including special food catered

to obese animals. According to the
American Pet Products Associations
2009/2010 National Pet Owners
Survey, 13.0% of dogs and 21.0% of cats
are considered overweight. Since many
pet owners have become concerned with
their pets health, the creation of options
to improve pet health presents a

potential opportunity for industry
operators. Several pet food
manufacturers have identified potential
growth in customized food options,
taking into consideration pet breeds, life
stages, daily activities, amount of time
indoors and specific medical conditions.
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Life Cycle Stage
The industrys contribution to the economy is

expected to grow over the 10 years to 2017
New products, such as premium pet food
and services, are being introduced
%Growthofprofit/GDP
Pet ownership is continuing to rise steadily,

expanding the industrys target market
Maturity
30
QualityGrowth
Company
consolidation;
level of economic
importance stable
25
High growth in economic

importance; weaker companies
close down; developed
technology and markets
KeyFeaturesofaGrowthIndustry
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
20
15
QuantityGrowth
10
Many new companies;

minor growth in economic
importance; substantial
technology change
E-Commerce&OnlineAuctions
PetStores
MailOrder
VeterinaryServices
AnimalFoodProduction
Shake-out
Decline
Crash or Grow?
10
10
Shake-out
Toy,Doll&GameManufacturing
PotentialHiddenGems
TimeWasters
Future Industries
5
10
Hobby Industries
15
20
25
30
%Growthofestablishments
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Industry Life Cycle

This
industry
is Growing
The Pet Stores industry is in a growth

stage of its life cycle, typified by new
product introductions and rising number
of enterprises. In fact, industry valued
added, which measures the industrys
contribution to the US economy, is
expected to increase 3.3% per year in the
10 years to 2017. In comparison, US GDP
is projected to grow by 1.9% annually
over the same period. This indicates that
the industry is growing at a faster rate
than the economy, a sign that it is in the
growth phase of its cycle.
Over the five years to 2012, the
industry has posted strong sales driven
by pet owners increasingly humanizing
their pets. To this point, American Pet
Products Association indicated that a

tipping point was reached in
2005/2006, whereby people began
rewarding pets in human terms.
Consequently, new products and services
have emerged in this industry to cater to
this trend; increasing number of pet
stores began to offer premium pet food
and treats, in addition to services such as
grooming, training, walking and fullservice boarding. This trend of rapid
product introductions indicates that the
Pet Store industry is in the developing
stage. However, new products
introductions are expected to slow down
in the five years to 2017, as product
saturation is reached.
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Products & Markets
Supply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES

99
Consumers in the US

The Pet Stores industry relies on consumers to purchase pet products and to utilize industry
services.
KEY SELLING INDUSTRIES
Products & Services
31111
Animal Food Production in the US

This industry supplies pet stores with a vast array of pet food.
33993
Toy, Doll & Game Manufacturing in the US

This industry supplies pet toys and accessories to industry operators.
54194
Veterinary Services in the US

This industry provides veterinary care services such as vaccinations to industry operators.
Products and services segmentation (2012)
10.2%
4.5%
Live animals
Pet services
27.3%
Pet supplies
Total $14.7bn
Pet food
Obviously food is a necessity for all pets,
so it is not surprising that pet foods
make up the largest product segment for
the industry. This segment covers a wide
range of products such as dry and wet
food for dogs and cats, bird feed,
crickets and worms for reptiles and
other treats and supplements for
household pets. In 2007, however, this
segment was hurt by a nationwide recall
of melamine-contaminated dog and cat
food, which reportedly caused the death
of more than 3,500 animals. This
incident, however, has contributed to
58%
Pet food
the trend toward premium pet foods

with natural and organic ingredients.
These premium pet foods tend to be
higher priced with larger markups; as a
result, this segments share of revenue
has been rising since 2007. Today, a
variety of premium pet foods are
available to consumers. Examples
include the raw diet for dog and cat
foods, weight control food for obese
animals, specialized formulas for
sensitive stomachs and freshly baked
cakes and cookies as treats. In 2012, this
segment is expected to account for
58.0% of industry revenue.
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Products & Markets
Products & Services

continued
Pet supplies
Products in this segment include food
bowls, collars and leashes, pet clothing,
brushes and combs, shovels and
scoopers, cat litter, cages birds and
reptiles, travel carriers and any other
various accessories for pets. Although
this segment makes up the second-largest
product market for the Pet Stores
industry, this segments share of revenue
has been declining in the five years to
2012 primarily due to competition;
because this segment encompasses a
wide variety of goods and there are no
regulations that limit their sale,
competition is quite high. To this point,
pet supplies are being increasingly sold at
a variety of retail outlets (e.g. home
improvement stores now retail doggie
doors and yellow lawn spot removers). In
2012, pet supplies are estimated to
account for 27.3% of total sales.
Services
Pet services have been the fastestgrowing product segment for the
industry. It includes full service
grooming, haircuts, baths, toenail
trimming and tooth brushing, but
excludes veterinary services. Other
services may include such activities as
training, boarding and day camp. Much
of the rise of this segment has been
driven by a greater interest in pet
pampering. As more pet owners adopted
them as members of their family,
demand for indulging animals also
increased. In 2012, this segment is
Demand
Determinants
Demands for pets and pet supplies are

affected by the rate of pet ownership, food
and supply prices, household income,
demographics, and health awareness.
Pet ownership
Pet ownership is a main driver for
industry demand by definition, as
PetownershipsegmentationintheUS
(2011)
Animal
Share of total pets (%)
Birds
Cats
Dogs
Horse
Freshwater Fish
Saltwater Fish
Reptiles
Small Animals
4.3
22.9
20.7
2.1
40.0
2.3
3.4
4.2
SOURCE: AMERICAN PET PRODUCTS ASSOCIATION
expected to account for about 10.2%

of revenue.
Live animal purchases
The live animal segment of the industry
is expected to represent 4.5% of total
industry sales, and this share has
remained stable over the past five years.
This product segment is small because a
pet is normally a one-off purchase, while
products in other segments, such as pet
supplies and pet foods, need to be
purchased throughout the life of the pet
thus requiring repetitive spending.
Furthermore, major players in the
industry only sell small animals and fish,
and partner with local pet programs for
cat and dog adoptions. On the other
hand, smaller operations often sell all
types of animals: cats, dogs, fish, rabbits,
birds, small animals and even reptiles.
Further breakdown of live animal
purchases can be seen in the chart below.
industry operators are primary retailers

of pets. Thus, as pet ownership increases,
the number of pets purchased also rises,
leading to higher demand and sales for
the industry. In addition, a rise this
number also leads to higher demand for
products such as food, treats and toys,
since these goods are needed every day
WWW.IBISWORLD.COM
Products & Markets
Demand
Determinants
continued
for the well-being of pets. Pet ownership

has been on the rise over the last fourteen
years. In 1998, 56% of US households
owned a pet. Comparatively, in 2012,
about 62% of households are estimated
to own a pet.
Income
Households with higher incomes are
able to spend more on discretionary
items and services sold at pet stores,
leading to higher demand. As such, pet
owning households with high disposable
income have been the main customers
for luxury and trendy pet products,
including premium pet food and
designer pet toys, in the five years to
2012. In addition, those with a higher
income tend to travel more. In turn, they
are more likely to utilize pet boarding
Major Markets
services or purchase products that allow

more comfort for both them and their
pet to travel together.
Demographics and lifestyle
The change in demographics and
lifestyle of households is also an
important determinant of demand. If
households are frequently relocating or
working longer hours, then these factors
may reduce a households willingness to
purchase a pet. In addition, households
living in apartments are less likely to
have pets since many apartments do
not allow pets. On a positive note,
aging population may increase demand
for pets, since older demographics
often purchase pets for companionship
after their children and grandchildren
leave home.
Major market segmentation (2012)
7%
10%
Consumers aged 65 and older
Consumers aged 25 and younger
28%
Consumers aged 45 to 54
13%
18%
Total $14.7bn
The largest market for the Pet Stores
industry is consumers between the ages
of 45 to 54, who account for 28.0% of
total revenue. Many members of this age
group look for pet companions to fill the
empty space in their households after
their children leave home. As such, a
large proportion of this segment can be
considered pet enthusiasts, who consider
24%
pets family members, according to

PetSmart, a major player in this
industry. Furthermore, consumers in
this product market are typically
employed and have steady income
streams, allowing them to spend freely
on pet supplies.
The second-largest market consists of
consumers between the ages of 35 to 44,
WWW.IBISWORLD.COM
Products & Markets
Major Markets
continued
who represent about 24.0% of revenue.

Consumers in this market typically have
children, and they consider the health
and behavioral benefits a pet can have on
their kids. According to the American Pet
Products Association, about 38.0% of
households with children under 18 years
old own at least one pet.
Consumers between the ages of 25
and 34 are estimated to account for
18.0% of the market. This demographic
group accounts for a lower share as they
are often subject to busy schedules,
making it difficult for them to own pets.
Consumers between the ages of 55 and
64 are expected to represent 13.0% of
the market in 2012. However, this
figure is forecast to increase over the

next five years as consumers aged 45 to
54 grow older and increasingly enter
this category.
The two smallest markets are made of
consumers under the age of 25
(accounting for 10.0% of the market) and
consumers over the age of 65 (7.0%).
Consumers in these categories have
limited income, thus decreasing their
ability to own or spend on pets. In
addition, these two demographics often
do not live in houses; rather, they rent
apartments or live in retirement homes.
Many such dwellings do not allow pets,
further hindering this segments ability
to own pets.
International Trade
International trade activity is accounted

at the manufacturing level by convention;
as such, this retail industry does not
technically have imports or exports.
However, products and supplies in the
Pet Stores industry are imported and
exported at the manufacturing level and
then sold in the domestic market. Precise
export and import data on pet products
and supplies is not readily available as
they are categorized into broad segments
that contain a large number of other
non-pet related products. However,

trends in pet food trade provide some
insight into trends regarding overall
pet-product trade levels (IBISWorld
report 31111). According to the latest
official data provided by the
International Trade Commission,
imports for all kinds of pet food
amounted to $883.1 million in 2011,
while exports reached $2.4 billion.
Canada is the leading partner in trade for
both imports and exports.
WWW.IBISWORLD.COM
Products & Markets

Business Locations 2012
West
New
England
AK
0.2
Great
Lakes
WA
ND
MT
3.1
Rocky
Mountains
ID
OR
2.0
West NV
0.9
1.7
SD
0.2
WY
0.5
MN
0.2
0.3
Plains
0.9
UT
CO
0.7
KY
0.9
OK
0.9
NC
2.5
TN
AZ
NM
2.2
0.6
Southwest
TX
5.6
HI
0.4
AdditionalStates(as marked on map)

1 VT
2 NH
3 MA
4 RI
5 CT
6 NJ
7 DE
8 MD
0.3
1.5
0.7
3.3
2.0
0.5
SC
Southeast
0.5
MS
AL
1.0
1.3
GA
2.2
0.4
LA
1.0
FL
7.7
Establishments(%)
0.5
1.9
AR
0.3
1.5
13.2
WV VA
2.7
0.7
1.9
CA
West
3.9
MO
KS
2.6
OH
2.0
4.4
IN
4.1
0.5
PA
3.5
IL
0.6
1 2
3
NY
7.4
5 4
MI
1.9
IA
NE
0.3
WI
ME
MidAtlantic
9 DC
0.1
Lessthan3%
3%tolessthan10%
10%tolessthan20%
20%ormore
WWW.IBISWORLD.COM
Products & Markets
Pet Stores are primarily located in the

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

30
20
West
The West has the second-highest
proportion of industry establishments; in
2012, the region had 19.8% of pet stores.
California has the highest number of pet
stores in the country at 13.2%. The
primary reasons for the higher-thanaverage number of pet stores in the West
region are population density and
income levels. The West has 17.0% of the
nations total population. Furthermore,
both California and Nevada have a
higher-than-average median income by
state. Additionally, within California
more than 26% of households have
incomes within the top three quadrants.
Mid-Atlantic
The Mid-Atlantic region has 17.6% of
industry establishments. The most
popular states include: New York and
Pennsylvania which account for a
respective 7.4% and 4.4% of the
industrys locations. These states have
some of the highest populations in the
10
Southwest
Southeast
Rocky Mountains
Plains
New England
Mid-Atlantic
0
Great Lakes
Southeast
The Southeast holds the highest number
of industry establishments; in 2012,
21.8% of industry establishments were
located in the region. The Southeast is
the most populated region of the United
States with a quarter of the nations
population. Therefore given the higher
proportion of households there is a
greater demand for industry retailers.
Within the Southeast, Florida has the
highest proportion of industry
establishments, estimated at 7.7% of the
nations total.
West
Business Locations
Establishments
Population
United States due to their large

metropolitan centers. The region also
has higher-than-average income levels.
Given that households within the region
have a larger amount of disposable
income, they are more able to afford to
own a pet.
Great Lakes
The Great Lakes region is the fourthmost popular location for industry
establishments. In 2012, 15.4% of pet
stores were located in the Great Lakes
region. Illinois is the fifth-highest
populated state in the nation and
therefore a popular center for industry
operators. The state holds an estimated
4.1% of pet stores.
Other small participating regions in
the industry include: the Southwest, New
England, the Plains and the Rocky
Mountains. Among the aforementioned
regions, the Southwest commands the
largest share of industry establishments
at 9.3% of the total. These regions have
smaller consumer markets, which
reduces demand for pet stores.
WWW.IBISWORLD.COM
19
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration in this
industry is Medium
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
More than half (63.8%) of the Pet Stores

industrys revenue comes from two
specialty supply retailers: PetSmart and
PETCO. The other portion of the industry
consists of family-owned stores, small
franchises and small chains of pet stores.
The industry has a moderate level of
concentration with the top four
companies generating an estimated
68.8% of the industrys revenue.
Although there is a moderate degree of
market share concentration, small
operators are still able to find niche
markets in their geographical locations,
and rarely expand beyond those areas.
IBISWorld estimates that by the end of
2012, the industry will have about 13,853
firms, of which about 48.0% of those
firms will be operated by a small business
with no employees. Of businesses that
have employees, about 57.4% enterprises
have fewer than 5 employees, while only
19.4% have more than 10 workers.
In the five years to 2017, major
players PetSmart and PETCO are
Attractive product presentation

In order to draw customers and
encourage purchases, eye-catching
promotions and displays are essential for
pet stores.
Experienced work force
It is important to employ a highly capable
staff with clear knowledge of the pet
industry to better assist customers and
boost sales.
Proximity to key markets
Operators need to be located in hightraffic and high-visibility locations, such
Companiesbyemploymentsize
Number of employees Percentage of Companies (%)
0-4
5-9
10-19
20-99
100-499
500+
82.4
9.6
5.3
2.3
0.3
0.1
SOURCE: US CENSUS BUREAU
expected to grow their share of the

industry, with a steady stream of
customers patronizing their stores. This
is because these big-box retailers are
able to offer customers a best of both
worlds scenario, where they provide
broad and industry-specific product
selections, while operating on a scale
such that they can purchase in bulk and
pass on savings to the consumers.
Consequently, these stores are expected
to grow at the expense of small stores in
the industry.
as major shopping precincts, in order to

maximize store traffic and sales.
Economies of scope
Successful operators need a range of the
most popular pets and pet supplies at
different levels of price and quality.
Offering a wider variety of products will
attract a larger customer base.
Effective quality control
Operators must ensure that pet services
are up to standard for the specific type of
animal and breed.
WWW.IBISWORLD.COM
20
Profit
The Pet Stores industry is expected to
obtain average profit margins equivalent
to 4.3% of revenue in 2012, up from 3.7%
in 2007. This increase in profitability has
been driven by a growing pet population
and an increasing willingness of pet
owners to spend on their pets,
particularly on premium or high-margin
products. However, it is important to
note that the actual level of margins may
vary considerably between industry
participants. For instance, larger players
such as PETCO and PetSmart typically
purchase in large quantities, which
enable them to spend less per item and
improve margins. In addition, their
large scale allows major players to sell
in high volume at discounted prices,
which enables them to afford lower
markups but to profit from larger sales
volumes. On the contrary, smaller

players in this industry do not have such
purchasing power. Therefore, cost of
goods per unit tends to be higher for
these players, causing margins to be
lower for smaller firms.
Purchases
Purchase costs will remain the single
largest expense for the industry in 2012,
accounting for an estimated 70.3% of
total revenue. Purchases include a wide
range of pet food and pet supplies such
as collars, leashes, medication,
shampoos, dog kennels and pet toys, and
a range of pets including dogs, cats,
birds, fish, small animals and reptiles.
Purchase expenses have increased
slightly over the five years to 2012.
According to Pet Business, a publication
for the pet and pet supplies retailing
Sectorvs.IndustryCosts
AverageCostsof
allIndustriesin
sector(2012)
IndustryCosts
(2012)
3.7
13.7
4.3
13.1
65.8
70.3
100
80
Percentage of revenue
Cost Structure
Benchmarks
60
Profit
Wages
Purchases
Depreciation
Marketing
Rent&Utilities
Other
40
20
1.6
4.6
9.2
1.5
1.6 4.0
6.7
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21
Cost Structure
Benchmarks
continued
industry, much of this growth has been

due to higher prices from upstream
industries (i.e. manufacturing and
wholesaling industries) passed down the
supply chain.
Wages
Due to the labor-intensive nature of the
retail sector, wages are estimated to
make up the second-highest expense
item for pet store operators, accounting
for 13.4% of the revenue in 2012. In pet
stores, labor is needed to provide care for
pets, maintain stock levels and provide
customer service. Furthermore, added
focus has been placed on labor over the
five years to 2012, as pet services have
become one of the fastest-growing
sources of revenue for the industry.
Nonetheless, industry revenue has been
growing at a faster rate than the number
of employees or wages; as such, wages as
a share of revenue has slightly declined
in turn.
Basis of Competition
Level & Trend
ompetition
C
in
this industry is
Medium and the
trend is Increasing
Due to medium barriers to entry and

growing profitability from premium
products and services, there are a large
number of pet store operations, giving
the industry a medium level of
competition. This industry has been
growing strongly over the past decade as
a result of favorable demographic trends
and the growing tendency of pet owners
to treat their pets as members of the
family. In recent years, industry
participants have taken advantage of
these trends and cashed in on higher
margin products and services, such as
premium pet food and high-quality
grooming services.
The players in this industry are
protected from external competition in
the premium pet food product segment,
because there are often manufacturers
restrictions on the distribution of
Depreciation
Depreciation expenses are expected to
account for about 1.6% of industry
revenue in 2012. This low level of
depreciation is typical for retailing
industries, which are very labor intensive
and require minimal capital costs in
operations. However, this figure is high
compared with other retailing industries
because pet stores must acquire special
cages and tanks for animals, in addition
to shelving and cash registers for stores.
Rent costs and utilities costs are expected
to represent 2.5% and 1.5% of total sales,
respectively, in 2012.
Other costs
Operators in this industry also incur a
variety of other expenses, including
administrative, insurance, security and
advertising costs. In particular, both
large and small operators invest much of
their income in advertising to generate
store traffic and boost sales.
premium products to supermarkets.

Industry participants are also protected
from external competition from
supermarkets, grocery stores and
discount retailers in the growing area of
value added pet services such as
grooming and obedience training.
Internal
Pet stores are constantly competing with
each other in price, product variety,
customer service, brand awareness,
variety of pet services, and store location.
Since product purchases make up the
majority of sales for pet stores, their main
basis of competition is product range and
quality, along with some influence by
price. Large players like PETCO and
PetSmart benefit from economies of
scope and are able to provide broad
ranges of pets, pet foods, pet supplies and
WWW.IBISWORLD.COM
22
Basis of Competition
continued
pet services with different levels of

quality across a range of prices to appeal
to individual consumer preferences. In
addition, they are capable of offering
products through their private label
brands at a lower price. Both of these
players benefit from being able to buy
products in bulk and producing their own
products at lower cost, which allows them
to offer products at a low price and still
attain a profit. As a result, smaller stores
feel the pressure to provide more
products at a lower price, which results in
lower mark-ups by these stores and
ultimately lower profit margins.
However, smaller stores benefit from
their ability to offer personalized
customer services and mold to the
specific needs of the niche market in their
local area.
The two major players in this industry
also invest considerable resources toward
brand awareness and loyalty. For
example, PETCO is now the major
sponsor of PETCO Park, the new home of
the San Diego Padres. In addition, both
PETCO and PetSmart are heavily
involved in pet charities and animal
welfare organizations. In 2004, PetSmart
introduced a new customer loyalty
program in order to improve repeat
customer traffic.
External
Historically, the sale of pet food
products has been primarily through the
supermarket channel. Large
supermarkets stock a wide variety of pet
food and supplies. Bulk purchases by
supermarkets generally enable them to
offer lower prices than specialty
retailers. In recent years, additional
competition has come from mass
merchandisers and discount retailers
such as Walmart and Costco that stock a
wide variety of products at competitive
prices. However, mass merchandisers
and discount retailers do not sell ultrapremium pet products as they are
limited by manufacturers restrictions.
Further competition comes from the
E-commerce and Online Auctions
industry (IBISWorld Industry Report
45411a) and the Mail-Order industry
(IBISWorld Industry Report 45411b).
These competing industries include
companies such as Petstore.com
through which consumers can purchase
products without physically having to
visit a store; however, these operators
are not classified as part of this
industry. In addition, some
competition comes from veterinary
services as they also sell customized pet
food and some products.
Barriers to Entry
High levels of competition and stringent

regulations associated with entering this
industry may deter some from entering
the industry. Nevertheless, there are
various niche markets available for new
players to occupy, specifically those that
specialize in premium and innovative
food, products and services.
A significant factor that can hinder an
operator from entering this industry is
government regulations. There are
federal and state laws regulating pet
shops and the sale of animals. For
example, the Pet Animals Act 1951
requires pet shops to get a license in

accordance with the Act before they can
open. In addition, the Animal Welfare
Act of 1966 dictates how pets sold in pet
stores must be maintained. Pet shops
need to address a range of issues and
receive licenses based on federal and
state requirements before permission to
operate is granted.
The industrys concentration can be
another barrier to potential entrants.
There are only two national retail chains
in this industry and together they account
for over half of industry revenue; smaller
Level & Trend

arriers to Entry
B
in this industry are

Medium and Steady
WWW.IBISWORLD.COM
23
Barriers to Entry
continued
Industry
Globalization
Level & Trend
lobalization
G
in this
industry is Low and
the trend is Steady
stores and franchises account for the

remaining portion. Although this
industry is highly fragmented, there is
also intense price competition from mass
merchandisers, online operators and
catalog retailers, which may provide a
barrier for new, independent retailers.
Opening a new pet store and meeting
licensing standards is expensive. In
addition, a significant share of funding
may be directed toward marketing to
build consumer interest and recognition.
The initial cost of establishing or
purchasing a retail outlet, in addition to
purchasing and maintaining inventory
levels, may be a barrier for new entrants.
Barriers are greater for new smaller
retailers because forming reliable supply
relationships with wholesalers and
This industry is characterized by a large

number of small players. Many of the
smaller, independent pet supply retailers
are family-owned businesses that operate
BarrierstoEntrychecklist
Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
Level
Medium
Medium
Growth
Low
Medium
Medium
None
manufacturers may prove to be difficult.

Existing and well established distribution
relationships may deter potential
operators from entering this industry, as
it provides an advantage to existing
retailers by giving access to low priced
high quality goods.
within a local or regional scope. In

addition, the industrys major companies
are domestically owned. Therefore, this
industry has a low level of globalization.
WWW.IBISWORLD.COM
Major Companies
PetSmart Inc. | PETCO Animal Supplies Inc. | Other Companies
Major players
(Market share)
PETCO Animal Supplies Inc.

20.7%
36.2%
Other
PetSmart Inc. 43.1%
Player Performance
PetSmart Inc.
Market share: 43.1%
Since its establishment in 1987, Phoenixbased PetSmart has become the top
specialty retailer of pet food and supplies.
PetSmart operates 1,519 stores, typically
located in regional shopping centers near
other superstores and warehouse stores,
and employs about 50,000 people in the
United States and Canada. By offering
more than 10,000 pet products and
providing various pet services, the
retailer aims to provide a one-stop
shopping experience with low prices.
PetSmart categorizes its products into
three main categories: consumables, hard
goods and pets. Consumables include pet
foods, treats and litter, in addition to
premium products, many of which are
not found in supermarkets or mass
merchandisers. Pet supplies such as
collars, leashes, health and beauty aids,
shampoos, medication, toys, pet carriers,
dog kennels, cat furniture, equestrian
supplies, birdcages, aquariums and filters
make up the hard goods category. Pets
sold by the company include fish, birds,
reptiles and small pets. Larger animals
such as cats and dogs are not sold in
PetSmart; however, they are available for
adoption through the PetSmart Charities
Adoption Program developed with
humane organizations.
In addition to selling products,
PetSmart has expanded its service
offering to include in-store boarding
facilities, grooming services, obedience
training and full-service veterinary
services (offered in 799 PetSmart stores).
In 2002, PetSmart launched a complete
pet boarding and day-care service called
PetsHotel with 24-hour supervision, an

on-site veterinarian, air-conditioned
rooms and daily specialty treats. About
192 PetSmart stores include PetsHotel
boarding facilities and Doggie Day
Camps. Pet services currently account for
11.0% of revenue for the company, up
from 9.8% in 2007.
PetSmart has continued to expand its
nationwide presence through
acquisitions and store expansions,
growing by 511 stores over the past five
years. In 2011, the company opened 45
more stores. However, two events have
damaged the companys reputation
during the past five years. In 2008,
PetSmart suspended the sale of birds in
its stores nationwide after discovering
that a high number of birds carried a
bacterial infection that had the
potential to spread to humans. In
addition, the company was damaged by
a large recall of pet foods
(manufactured by Menu Foods) that
was contaminated by melamine and
melamine-related compounds.
Financial performance
Over the five years to 2012, PetSmarts
revenue from its US operations is
expected to increase an average annual
rate of 7.1% to $6.4 billion. As the
economy gains traction and consumers
gain additional disposable income to
spend on their pets, IBISWorld
anticipates that company sales will grow
9.5% in 2012, following a 7.4% increase
in 2011 and strong growth in 2010. In
fiscal 2009 and 2008, PetSmart posted
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
strong sales, with revenue rising 4.1%

and 5.9%, respectively. Such growth rates
during the recession were aided by
resilient industry demand; consumers
barely scaled back spending on their
four-legged companions even when
incomes fell. To this end, average samestore sales increased 1.9% and 5.8% in
2009 and 2008, while service sales
increased 9.2% and 15.8% in 2009 and
2008, respectively.
Before the recession, the company
performance was even stronger, with
10.4% revenue growth in 2007. Some of
the growth was driven by 112 new store
openings, as well as a 2.4% increase in
comparable store sales. In addition,
higher demand for pet services became
an increasingly important sales avenue.
After PetSmart added 35 new PetsHotels
PetSmartInc.(USoperations)
financialperformance
Year
Revenue
($ million)
(% change)
2007
4,500
N/C
2008
4,900
8.9
2009
5,100
4.1
2010
5,400
5.9
2011
5,800
7.4
2012*
6,350
9.5
*Estimate
SOURCE: ANNUAL REPORT
that offered grooming, training, boarding

and day camp, service sales rose 22.0%
during the year.
PetSmartInc.financialperformance
Year*
Revenue
($ million)
(% change)
OperatingIncome
($ million)
(% change)
2007
4,672.7
10.4
351.5
39.8
2008
5,065.3
8.4
369.9
5.2
2009
5,336.4
5.4
369.1
-0.2
2010
5,693.8
6.7
428.7
16.1
2011
6,113.3
7.4
503.1
17.4
2012*
6,706.3
9.7
553.4
10.0
*Estimate
Player Performance
PETCO Animal
Supplies Inc.
Market share: 20.7%
Established in 1965, PETCO Animal

Supplies is the second-largest pet supply
specialty retailer in the United States.
The company is headquartered in San
Diego, CA, and boasts about 1,150 stores
across the country with locations in all 50
states, making it the only pet store to
serve the entire nation. Its stores carry up
to 10,000 different pet-related items at
any time, including pet food, collars,
leashes, grooming products, toys, health
SOURCE: ANNUAL REPORT AND IBISWORLD
and beauty aids, kennels and pet houses.

Like other industry participants, PETCO
offers a variety of veterinary and
obedience services for animals, but does
not sell cats or dogs. Rather, an adoption
program (the Think Adoption First
program) is used in partnership with
local animal welfare organizations.
Over the past decade, PETCO has been
subject to several major changes in its
business. In 2011, PETCO acquired
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
Complete Petmart, an Ohio-based pet

specialty chain. The acquisition,
consisting of 29 stores, expanded the
companys reach into Ohio and the
Southeast region. In 2006, Texas Pacific
Group and Leonard Green & Partners
took the company private for the second
time; the deal was valued at $1.8 billion,
including assumed debt. The same group
took PETCO private for $600.0 million in
2000, but PETCO returned to the public
domain in 2002.
Financial performance
Because the company went private in
2006, PETCOs financials are no longer
available to the public, limiting the ability
to provide year-by-year analysis of
financial performance. However,

IBISWorld projects that, like the industry
as a whole, the firm has experienced
positive growth in the five years to 2012.
IBISWorld estimates that PETCOs
revenue will total $3.1 billion in 2012,
marking an average 4.9% annual growth
over the five-year period.
Strong sales of premium products are
expected to be the main driver for the
growth. The company invested heavily in
this product segment in 2009 by
launching Unleashed, a specialty store for
only premium, natural, organic and raw
pet foods. PETCO operates 37 Unleashed
stores in California, Maryland,
Massachusetts, New York, Virginia and
the District of Columbia.
PetcoAnimalSuppliesInc.financialperformance*
Year
Revenue
($ million)
(% change)
Employees
(% change)
2007
2,400
9.1
20,100
2.7
2008
2,550
6.3
22,000
9.5
2009
2,700
5.9
23,200
5.5
2010
2,800
3.7
23,500
1.3
2011
2,855
2.0
24,400
3.8
2012
3,050
6.8
25,500
4.5
*Estimates
Other Companies
PetSmart and PETCO are the top dogs in

the Pet Stores industry, accounting for
more than half of total industry revenue
in 2012. While the industry is
concentrated at the top, the rest of the
industry is characterized by a large
number of small and privately owned
pet stores. In fact, about 48.0% of total
industry operators are estimated to be
non-employers, which are stores without
any paid employees. Furthermore, even
among businesses that have employees,
about 57.4% of companies employ fewer
SOURCE: FORBES.COM
than five workers, while only 19.4% have

more than 10 workers. Due to this
fragmented nature, the vast majority of
industry players do not individually
contribute a considerable share of the
industrys revenue.
Pet Supplies Plus
Estimated market share: 3.6%

Pet Supplies Plus is a franchise business
operating about 240 stores across 23
states. Pet Supplies Plus offers
franchises in selected states to single
WWW.IBISWORLD.COM
Major Companies
Other Companies
continued
store owner-operators and also to area

developers who own all stores in a
designated market region. According to
company information, the purchase of a
Pet Supplies Plus franchise costs
between $500,000 and $750,000.
Pet Supplies Plus stores are
generally located in high-traffic areas
and are limited to about 5,000 to
6,000 square feet in size for smaller
markets and 7,000 to 9,000 square
feet in larger metropolitan areas. The
smaller store concept was designed to
keep operating costs to a minimum in a
bid to offer pet food and supplies at
competitive prices. The company also
uses a just-in-time delivery system to
offer a wide variety of products without
extensive store space to stock
inventory. IBISWorld estimates that
Pet Supplies Plus will generate about
$540.0 million in 2012, accounting for

about 3.6% of the market.
Pet Supermarket Inc.
Estimated market share: 1.4%

With a market share of less than 2.0%,
Pet Supermarket Inc. is a small, familyowned retailer of pet supplies and
medicines. Pet Supermarket operates
about 124 stores primarily in Florida but
also in Alabama, California, Georgia,
Kentucky, Nevada and North Carolina.
The company employs about 1,400
associates. Pet Supermarket sells more
than 8,000 pet care products, including
food, toys, medicine and clothing, as
well as small animals such as hamsters,
guinea pigs, rabbits and tropical fish.
IBISWorld estimates that Pet
Supermarket will generate about $213.0
million in 2012.
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is Low
The Pet Stores industry, similar to most

other retail industries, has a low level of
capital intensity. For every dollar spent
on wages, about $0.12 is invested in the
store and equipment. Most capital costs
are related to shelving, store, cashier
equipment and other equipment such as
caging for animals, which do not need to
be constantly replaced. On the other
hand, this industry is labor intensive
because employees are needed to operate
and manage the stores, provide customer
service and support, restock the
merchandise and to provide care for pets.
The level of capital intensity has
remained steady in the last five years,
reflecting the labor-intensive nature of
the retail industry. To this point, the cost
of labor within this industry is relatively
Capital intensity
Capital units per labor unit

0.5
0.4
0.3
0.2
0.1
0.0
Economy
Retail Trade
Pet Stores
Dotted line shows a high level of capital intensity

high compared to that experienced by

competitors such as supermarkets, mass
merchandisers and online pet supply
ToolsoftheTrade:GrowthStrategiesforSuccess
InvestmentEconomy
Recreation,PersonalServices,
HealthandEducation. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
Information,Communications,
Mining,FinanceandReal
Estate.To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
TraditionalServiceEconomy
WholesaleandRetail. Reliant
on laborrather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
E-Commerce&OnlineAuctions
MailOrder
AnimalFoodProduction
CapitalIntensive
LaborIntensive
NewAgeEconomy
PetStores
Veterinary
Services
Toy,Doll&GameManufacturing
ChangeinShareoftheEconomy
OldEconomy
AgricultureandManufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
WWW.IBISWORLD.COM
Capital Intensity
continued
retailers. This is because the other stores

do not retail pets directly which
inherently requires a smaller staff. In
addition, these stores do not incur costs
associated with employee training, since
workers at these retailers do not require
industry-specific knowledge. For online

retailers, labor costs are exceptionally low
as they are not required to outlay
expenditure on customer service, nor are
they required to have shelving, displays
or cash registers.
Technology
& Systems
Technological advances in this industry

have included computer scanning cash
registers and automated inventory
equipment. The introduction of this
technology has enabled retailers to
better manage efficiency of operations
and inventory. Technology at checkout
has led to computerized point-of-sale
equipment, which controls and records
merchandising, distribution, sales and
stock markdowns. Furthermore, bar
code scanning has offered the
advantages of higher labor productivity
that increases the speed at which

information is passed, greater control
over the distribution of goods and
reduced errors along the supply chain.
New improvements will boost revenue
for the larger stores who can afford to
invest in the technologies. For
example, larger retailers will benefit
from Radio Frequency Identification
(RFID), which provides real time
information on inventory and help to
reduce shrinkage problems as well as
improve efficiency.
Pet stores sell discretionary (e.g. pets and

toys) and non-discretionary products
(e.g. pet food). While purchasing a pet is
generally discretionary, a large
proportion of expenditure on a pet is
non-discretionary because the animal
needs food, medicine and certain
supplies in order to survive. To provide a

breakdown, pet food makes up about
58.0% of industry revenue, pet supplies
and medicine account for 27.3%, while
new pet purchases represent for only
4.5%. As such, the non-discretionary
component of industry merchandise
of
Technology Change
is Medium
Revenue Volatility
Level
The level
of
Volatility is Low
A higher level of revenue

volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
VolatilityvsGrowth
1000
Revenuevolatility*(%)
Level
The level
Hazardous
Rollercoaster
100
10
PetStores
1
0.1
Stagnant
30
10
BlueChip
10
30
50
70
Fiveyearannualizedrevenuegrowth(%)
* Axis is in logarithmic scale
WWW.IBISWORLD.COM
Revenue Volatility
continued
accounts for the majority of industry

revenue. This high level of nondiscretionary demand keeps the volatility
of this industry low. To this point,

year-on-year revenue fluctuations
averaged 2.1% over the five years to 2012.
Regulation & Policy
There are industry specific and general

competitive regulations that apply to this
industry. The transportation, handling
and sale of small pets are governed by
various federal, state and local
regulations. In addition, industry
participants are subject to
environmental regulations imposed by
federal, state and local authorities in
relation to the generation, handling,
storage, transportation and disposal of
waste and biohazardous materials, and
the sale and distribution of products.
The Pet Animals Act 1951 deems it an
offense to open a pet shop unless it is
granted a license in accordance with the
Act. When deciding to grant a license,
district councils need to consider
whether there is suitable
accommodation and enough food and
water, whether the animals 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) protects
certain animals from inhumane
treatment and neglect. The AWA
requires that minimum standards of care
and treatment be provided for certain

animals that are bred for commercial
sale, used in research, transported
commercially or exhibited to the public.
Retail pet shops are not covered under
the Act unless the shop sells exotic or
zoo animals or sells animals to regulated
businesses. Pets owned by private
citizens are not regulated. Regulated
businesses are required to keep accurate
records of acquisition and disposition
and a description of animals that come
into their possession.
Many state and local governments
have passed additional animal welfare
legislation. About 17 states have
regulations governing the sale of dogs
and 14 states govern the sale of cats.
These regulations stipulate the
information that sellers must provide at
the time of purchase and various options
buyers have if the purchased pet is sick.
These states have regulations that allow
consumers to obtain a reimbursement
when a sick animal is purchased from a
pet store. This is known as a lemon law
which is designed to protect consumers
that buy animals from pet shops.
The Pet Stores industry does not receive

any specific government support, in the
form of subsidies or otherwise.

However, there are several trade
Level & Trend

he level of
T
Regulation is
Medium and the
trend is Steady
Industry Assistance
Level & Trend
he level of
T
Industry Assistance
is None and the
trend is Steady
Keytariffs
Goods
Saddlery and harness for any animal (excluding Dogs see above)
Dog leashes, collars, muzzles, harnesses and similar
Pet Food
Lowrate
Highrate
2.8
2.4
0
2.8
2.4
0
SOURCE: USITC
WWW.IBISWORLD.COM
Industry Assistance
continued
associations which represent the

industry. Most notable among them is
the American Pet Association which
promotes pet ownership and

disseminates industry-related
information to members.
WWW.IBISWORLD.COM
Key Statistics
Industry Data
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Sector Rank
Economy Rank
Revenue
($m)
10,234.7
11,064.5
11,486.7
11,925.2
12,872.9
13,246.2
13,338.9
13,712.4
14,164.9
14,745.7
15,424.0
16,102.7
16,730.7
17,098.7
17,799.8
42/63
410/706
Annual Change
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Sector Rank
Economy Rank
Revenue
(%)
8.1
3.8
3.8
7.9
2.9
0.7
2.8
3.3
4.1
4.6
4.4
3.9
2.2
4.1
13/63
178/706
Key Ratios
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Sector Rank
Economy Rank
IVA/Revenue
(%)
19.42
19.00
18.10
19.54
18.65
18.44
18.87
18.99
19.07
19.01
18.93
18.88
18.75
19.02
18.65
27/63
563/706
Industry
Value Added
($m)
1,987.3
2,102.1
2,078.9
2,330.0
2,400.4
2,442.9
2,516.9
2,604.2
2,701.9
2,803.5
2,920.2
3,040.9
3,137.3
3,252.0
3,319.5
39/63
503/706
Establishments
15,835
16,541
16,813
17,130
17,638
17,110
16,411
16,608
16,757
16,975
17,247
17,592
17,961
18,374
18,870
41/63
218/705
Enterprises Employment
13,790
88,620
14,213
90,933
14,483
98,384
14,558
101,237
14,804
109,870
14,115
106,460
13,393
108,928
13,540
105,007
13,649
107,422
13,853
110,107
14,061
113,521
14,342
118,629
14,601
123,379
14,922
126,957
15,280
131,522
37/63
38/63
209/705
265/706
Exports
---------------N/A
N/A
Industry
Value Added
(%)
5.8
-1.1
12.1
3.0
1.8
3.0
3.5
3.8
3.8
4.2
4.1
3.2
3.7
2.1
19/63
253/706
Establishments
(%)
4.5
1.6
1.9
3.0
-3.0
-4.1
1.2
0.9
1.3
1.6
2.0
2.1
2.3
2.7
23/63
280/705
Enterprises Employment
(%)
(%)
3.1
2.6
1.9
8.2
0.5
2.9
1.7
8.5
-4.7
-3.1
-5.1
2.3
1.1
-3.6
0.8
2.3
1.5
2.5
1.5
3.1
2.0
4.5
1.8
4.0
2.2
2.9
2.4
3.6
20/63
14/63
216/705
185/706
Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Exports/Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Figures are inflation-adjusted 2012 dollars. Rank refers to 2012 data.
Revenue per
Employee
($000)
115.49
121.68
116.75
117.79
117.16
124.42
122.46
130.59
131.86
133.92
135.87
135.74
135.60
134.68
135.34
44/63
515/706
Wages/Revenue
(%)
14.08
13.67
12.80
14.17
14.09
13.73
13.62
13.60
13.52
13.40
13.28
13.29
13.30
13.35
13.32
35/63
460/706
Imports
---------------N/A
N/A
Wages
($m)
1,441.3
1,512.5
1,469.9
1,690.0
1,813.8
1,818.9
1,816.3
1,865.3
1,915.7
1,975.9
2,049.0
2,140.4
2,225.2
2,283.5
2,370.2
44/63
448/706
Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Number
of Pets
(Millions )
143
153
163
154
163
165
171
165
169
173
177
181
185
189
193
N/A
N/A
Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Wages
(%)
4.9
-2.8
15.0
7.3
0.3
-0.1
2.7
2.7
3.1
3.7
4.5
4.0
2.6
3.8
18/63
225/706
Domestic
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Number
of Pets
(%)
7.0
6.5
-5.5
5.8
1.2
3.6
-3.5
2.4
2.4
2.3
2.3
2.2
2.2
2.1
N/A
N/A
Employees
per Est.
5.60
5.50
5.85
5.91
6.23
6.22
6.64
6.32
6.41
6.49
6.58
6.74
6.87
6.91
6.97
25/63
476/705
Average Wage
($)
16,263.82
16,633.13
14,940.44
16,693.50
16,508.60
17,085.29
16,674.32
17,763.58
17,833.40
17,945.27
18,049.52
18,042.81
18,035.48
17,986.40
18,021.32
51/63
653/706
Share of the
Economy
(%)
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
N/A
39/63
503/706
WWW.IBISWORLD.COM
Jargon & Glossary
Industry Jargon
HUMANIZATION A trend where pet owners treat pets

as humans, providing them with services such as pet
hotels and grief counseling.
JUST-IN-TIME (JIT) A strategy implemented to
improve profitability by reducing inventory and
purchasing the raw materials that are needed for the
immediate term only.
IBISWorld Glossary
BARRIERS TO ENTRY Barriers to entry can be High,

Medium or Low. High means new companies struggle to
enter an industry, while Low means it is easy for a firm
to enter an industry.
CAPITAL/LABOR INTENSITY An indicator of how much
capital is used in production as opposed to labor. Level is
stated as High, Medium or Low. High is a ratio of less
than $3 of wage costs for every $1 of depreciation;
Medium is $3 $8 of wage costs to $1 of depreciation;
Low is greater than $8 of wage costs for every $1 of
depreciation.
CONSTANT PRICES The dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using 2012 as the base year. This removes the
impact of changes in the purchasing power of the dollar,
leaving only the real growth or decline in industry
metrics. The inflation adjustments in IBISWorlds
reports are made using the US Bureau of Economic
Analysis implicit GDP price deflator.
DOMESTIC DEMAND The use of goods and services
within the US; the sum of imports and domestic
production minus exports.
EARNINGS BEFORE INTEREST AND TAX (EBIT)
IBISWorld uses EBIT as an indicator of a companys
profitability. It is calculated as revenue minus expenses,
excluding tax and interest.
EMPLOYMENT The number of working proprietors,
partners, permanent, part-time, temporary and casual
employees, and managerial and executive employees.
ENTERPRISE A division that is separately managed and
keeps management accounts. The most relevant
measure of the number of firms in an industry.
ESTABLISHMENT The smallest type of accounting unit
within an Enterprise; usually consists of one or more
locations in a state or territory of the country in which it
operates.
EXPORTS The total sales and transfers of goods
produced by an industry that are exported.
IMPORTS The value of goods and services imported
with the amount payable to non-residents.
PET BOARDING AND DAY-CARE Long- and short-term

options for owners who need assistance looking after
their pets. Services include feeding, walking, grooming
and lodging.
PET PARENTS Pet owners who are enthusiastic about
their pets and treat them as members of their family.
INDUSTRY CONCENTRATION IBISWorld bases

concentration on the top four firms. Concentration is
identified as High, Medium or Low. High means the top
four players account for over 70% of revenue; Medium
is 4070% of revenue; Low is less than 40%.
INDUSTRY REVENUE The total sales revenue of the
industry, including sales (exclusive of excise and sales
tax) of goods and services; plus transfers to other firms
of the same business; plus subsidies on production; plus
all other operating income from outside the firm (such
as commission income, repair and service income, and
rent, leasing and hiring income); plus capital work done
by rental or lease. Receipts from interest royalties,
dividends and the sale of fixed tangible assets are
excluded.
INDUSTRY VALUE ADDED The market value of goods
and services produced by an industry minus the cost of
goods and services used in the production process,
which leaves the gross product of the industry (also
called its Value Added).
INTERNATIONAL TRADE The level is determined by:
Exports/Revenue: Low is 05%; Medium is 520%;
High is over 20%. Imports/Domestic Demand: Low is
05%; Medium is 535%; and High is over 35%.
LIFE CYCLE All industries go through periods of Growth,
Maturity and Decline. An average life cycle lasts 70
years. Maturity is the longest stage at 40 years with
Growth and Decline at 15 years each.
NON-EMPLOYING ESTABLISHMENT Businesses with
no paid employment and payroll are known as
non-employing establishments. These are mostly set-up
by self employed individuals.
VOLATILITY The level of volatility is determined by the
percentage change in revenue over the past five years.
Volatility levels: Very High is greater than 20%; High
Volatility is between 10% and 20%; Moderate
Volatility is between 3% and 10%; and Low Volatility
is less than 3%.
WAGES The gross total wages and salaries of all
employees of the establishment.
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Pet Stores in the US July 2012 1

Lucky dog: Pet owners will invest in premium

IBISWorld Industry Report 45391

Pet Stores in the US

2 About this Industry

19 Market Share Concentration

19 Key Success Factors

20 Cost Structure Benchmarks

Key External Drivers

11 Industry Life Cycle

25 PETCO Animal Supplies Inc.

13 Products & Markets

13 Products & Services

29 Technology & Systems

30 Regulation & Policy

33 Jargon & Glossary

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

Pet Stores in the US July 2012 2

About this Industry

Pet stores sell a variety of pets, including

The primary activities of this industry are

shampoos, medication, toys, pet

The major products and services in this industry are

54194 Veterinary Services in the US

For additional information on this industry

Pet Stores in the US July 2012

Annual Growth 07-12

Annual Growth 12-17

Number of pets (cats and dogs)

Revenue vs. employment growth

Products and services segmentation (2012)

Key External Drivers

Per capita disposable

Life Cycle Stage

Pet Stores in the US July 2012 4

Executive Summary | Key External Drivers | Current Performance

The Pet Stores industry is ahead of the

pet parents will drive up demand for

Key External Drivers

Number of pets (cats and dogs)

The emerging trend of pet parents has

household and leisure products before

Pet Stores in the US July 2012 5

Key External Drivers

high over 2012, posing a potential threat

households own a pet. Consequently, an

Number of pets (cats and dogs)

Despite the economic downturn that

average annual rate of 2.8% to $14.7

Growth during the

Industry growth over the past five years

published by the American Pet Products

Pet Stores in the US July 2012 6

Growth during the

the past two decades. The APPA reports

Part of the family

In the five years to 2012, the pet

specialty products. According to a 2010

Pet Stores in the US July 2012 7

In 2007, melamine-contaminated dog

Pet stores are traditionally small and

pets, a strong push toward innovating

Pet Stores in the US July 2012 8

Consumers in the US

Animal Food Production in the US

Toy, Doll & Game Manufacturing in the US

Veterinary Services in the US

AdditionalStates(as marked on map)