Livonia-based pet retailer Pet Supplies Plus is ramping up ambitious expansion plans as it passes $1 billion in annual sales.
Pet Supplies Plus, whose pedigree goes back to 1988 and is approaching 500 stores, sees local ownership and serving community as its tandem tickets to more than $1 billion in sales this year. It is benefiting from a booming industry as pet parents dole out more and more cash for their furry, feathered and scaly companions.
It's also a retail success story in a region that has few headquarters for major chain retailers and a data point for the notion that brick-and-mortar is far from dead.
The chain plans to open 50-70 more stores a year for the next several years. The current pipeline is 150. Right now 55 percent of its stores are franchised, but for new locations moving forward, CEO Chris Rowland sees that ratio tipping to about 90 percent franchised.
Part of its expansion strategy tested over the last couple of years is converting small businesses into franchisees. The first test case, an 8-year-old store in Pennsylvania, saw sales rise 25 percent after the conversion. Another agreement is in-process with a yet-to-be-named six-store chain in upstate New York.
"It became very obvious to us that with our systems ... we have a lot of really good behind-the-scenes processes that make it easy to run a pet store," Rowland said. "If we can help a local independent that's been in the local market in 10-20 years but is struggling because of e-commerce and a more competitive market, can't keep up with tech ... it became almost a no-brainer for us."
Pet Supplies Plus gets another store, while the local owners can be the face in the neighborhood — a quality of brick-and-mortar retail that shoppers seek, Rowland said. The chain is increasingly focusing on providing services such as pet washes, grooming, vaccination clinics and offering community space. He said none of these store conversions have taken place yet in Michigan, but he is in talks.
Local owners can keep a trace of their branding: The chain generally allows them to keep their name at the top left corner of the Pet Supplies Plus sign. Prices are generally 5-15 percent cheaper for consumers at a Pet Supplies store than an independent, locally owned store, according to Rowland.
Another enterprise whose calling card is locally branded stores under its umbrella is True Value Co. But True Value's model differs from a typical franchise.
Rowland told Crain's he sees Pet Supplies' niche as more of a dash-in-dash-out shop than big-box competitors Petco Animal Supplies Inc. and PetSmart Inc., each with approxmiately 1,500 stores. Rowland himself previously worked at PetSmart. Petco does have a small-format model it calls Unleashed By Petco.
As in other industries, mom-and-pop pet stores battle chains and the increasing normalcy of online shopping for a share of the market.
However, the sector has seen recent growth in smaller, regional chains that serve their demographic area well, said Steve King, CEO of the American Pet Products Association. As an example he mentioned Mud Bay, a more than 40-store retailer in Washington and Oregon that he would still consider an independent "but they're getting to be a sizeable chain in their area." Smaller chains and independents use strategies such as focusing on all-natural products or adding grooming and other services to compete with e-commerce — like Pet Supplies Plus is.
"The one- and two-store independent is not growing as much, probably, as these regional chains," King said.
He added that Pet Supplies differentiates itself by selling a variety of small starter pets such as fish, birds and reptiles, and the products they need. He also mentioned the chain's Pets in the Classroom Grant Program as an example of its purported community bent.
Pet Supplies Plus has been expanding its footprint more rapidly in recent years.
New York City-based private equity firm Sentinel Capital Partners acquired Pet Supplies Plus in late 2018. Rowland previously told Pet Product News that the new ownership "understands franchising more than our previous equity company ..."
Pet Supplies Plus is tapping into a market that's been on the rise for decades. Now 67 percent of U.S. households have at least one pet, according to the American Pet Products Association. Americans spent $72.56 billion on pets in 2018, more than triple the same figure two decades prior — $23 billion. And the APPA expects that to grow to $75.38 billion this year.
"We've seen a (growth) trend that's been going on for over a decade now, which we kind of attribute to the humanization of pets," APPA CEO King said. "People really embracing pets as part of the family, willing to spend more on their pets for better food, better treats, better toys, sort of upgrading the whole experience."
King said that has proven out recently as the millennial generation has become a main driver of the trend. With it, the prevalence of natural, holistic and fresh foods has increased — as well as the amount spent on those more high-end goods. The APPA expects the amount pet owners spend on food alone to rise by more than a billion this year to $31.68 billion. These owners generally buy toys and care products made from natural materials, too.
"Products that were considered luxury items with older generations are more considered essentials for millennial pet owners," King said. "Whether it's clothing for their dog or a stroller for their pet ..."
Pet Supplies Plus plans to open a total of 30 franchise and four or five corporate-owned stores in 2019. Rowland expects to have made franchise deals for more than 90 stores this year by the end of December.
Annual sales are expected to rise past $1 billion for 2019, according to Rowland. Sales have grown each year over the past eight years, aside from one.
The company has 3,000 corporate employees. An average franchised store employs 12-20. Depending on the landlord's input and the size of the store — generally around 6,000-6,5000 square feet this year — the franchisee's startup costs can range from $500,000-$800,000.
Pet Supplies' first franchisee, who opened his first location 29 years ago, just opened a store in Sterling Heights in October. Jeff Bonanni currently operates five stores.
Total there are around 23 locations in Southeast Michigan. Rowland said he doesn't expect many more to come online in the near future.
"We're pretty built out here," he said.
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Pet Supplies Plus plots expansion as it passes $1 billion sales mark - Crain's Detroit Business
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