COVID-19 Means Pet Care Is Booming, But Not Every Company Gets A Treat

Privately held Petco announced this week that after two months of mulling strategic options like a sale, the San Diego-based chain of 1,500 pet stores has filed preliminary paperwork for an initial public offering. Whether Petco actually goes the IPO route or ends up finding a buyer remains to be seen, but one thing is clear — consumer demand for pet supplies and services is hot right now. And so are the digitally innovative companies that sell them.

The pandemic has not only changed the way people shop, it has also changed how we work — and increased the amount of time we spend at home. Taken together, COVID-19 has given rise to a pet craze that’s brought new attention to what’s a $100 billion annual industry in the United States alone.

“It has just been staggering how quickly people have pivoted to find ways to keep their dogs engaged and mentally stimulated,” CEO Spencer Williams of pet supply company West Paw told CNN Business recently, noting a 55 percent year-on-year increase in sales from May through September.

A Mixed Breed

But as much as the overall pet industry is experiencing a boom, many individual shops within this niche segment are wrestling with many of the same issues as the broader retail sector faces.

Specifically, they must determine how to meet customers where and how they want to shop — finding the right balance of space, services and safety features within a business that’s still often built around brick-and-mortar stores.

In the case of Petco, which was taken private for $4 billion in 2016, the pandemic has been both a challenge and an opportunity for a company that had already been working to ramp up its digital business.

“Petco is the grocery store, the pharmacy and the doctor’s office for our nation’s pets,” Chief Digital and Innovation Officer Darren MacDonald told PYMNTS in September. “Everything we’ve done to adapt to consumer demands in the COVID environment has only made us stronger.”

But as Petco spruces itself up for a sale to the public or another private buyer, other players like Pennsylvania-based Pet Valu are heading in the opposite direction. Pet Valu this week announced that it was winding down operations at all of its 358 stores and warehouses in the Northeast and Midwest “due to severe impact from COVID-19.”

While COVID is certainly impacting all retailers, industry watchers pointed to the fact that Pet Valu typically operated in 3,000- to 5,000-square-foot stores. That’s about one-third the size of sector leaders like Petco and PetSmart, which meant Pet Valu couldn’t easily accommodate six-foot social-distancing rules.

The Digital Players Dig In

But beyond traditional brick-and-mortar pet stores, online retailers continue to do well.

For instance, fast-growing, digitally native upstart Chewy continues to ride the pet craze by offering new services to its giant base of subscribers. Earlier this week, Chewy announced that it was expanding its “Connect With A Vet” video-conferencing service to 35 states from just two, and plans to roll the service out nationally in the near term.

The veterinary-telemedicine offering is only available to Chewy’s Autoship loyalty customers, which currently account for 70 percent of the company’s sales.

“We have taken these millions of customer relationships and built a large base of repeat business that enables our rapid scaling and fuels our profitability on an accelerated timetable, as empowering as all of this is we are just getting started,” Chewy CEO Sumit Singh said on the company’s latest earning call with analysts, as per Investopedia.

COVID-19 Is Mostly Good For Pet Care

The pet care industry’s current digitization and competitive trends seem likely to continue, meaning the industry could see further consolidation and transformation.

But with the pandemic showing no signs of abating, consumers’ willingness to spend more time and money on their pets looks like it has staying power, too.

“We saw this during 9/11,” Chris Rowland, CEO of Pet Supplies Plus, told CNN Business. “Whenever there’s unrest, people tend to nest at home.” He added that when consumers “want to make their house feel even more like home, they get more pets — and pamper them more.”