At a time when many mom-and-pop and small local chain stores are scaling back or shutting their doors completely, Fairfield- and Westchester County-based Pet Pantry Warehouse is a full-fledged success story. In spite of the lagging economy and with big-box and Internet competitors nipping at its heels, the family-owned pet products retailer is thriving—and expanding.
How are they doing it? A combination of smart financial decisions, dedication to stellar customer service, and a keen eye for finding locations with the right demographics have helped the business grow steadily since real estate developer Barry Jacobson purchased the original Greenwich, Connecticut, store from its founder in 1995. Today, Pet Pantry employs about 50 people and boasts Connecticut locations in Greenwich, New Canaan, and Wilton, and Westchester locations in Larchmont and Rye.
After many years as a Pet Pantry customer, Jacobson, now president of Pet Pantry Warehouse, realized the potential in the market to provide a community-based, pet-nutrition-focused alternative to big-box retailers like Petco and PetSmart. Using private family financing, Jacobson and his sons, Adam Jacobson, executive vice president, and Ari Jacobson, vice president, set about transforming the struggling store from its largely wholesale model—selling pet food to animal shelters, animal hospitals, and veterinarians—to the retail format it now uses in all five locations.
“We created a more modern form of retail where everything our consumers need is on the shelves. That was how we initially transitioned the existing business into a more profitable endeavor,” explains Adam, who oversees operations and finance for the business.
Adding a large number of ancillary pet products to the mix—everything from leashes and collars to animal apparel, toys, and feeders—also helped boost profitability. The profit margins on these support products tend to be much greater than on food, which accounts for more than half of all sales company-wide. “Pet food is what brings customers through the doors, but our higher margins come from the ancillary products,” Adam says.
Even on the lower-margin pet-food side of the business, Pet Pantry’s focus on healthy, natural, and holistic options means its shelves are stocked with higher-end foods that command premium prices. The stores offer fresh-frozen raw pet food, freeze-dried and dehydrated pet foods, as well as specialized options such as limited-ingredient, grain-free, and low-glycemic foods. Most important, these top-shelf offerings resonate with the demands of Pet Pantry’s customers.
“There has been a humanization of the pet market. As people become more aware of their own health and well-being, that outlook is coming down the pipeline into pet food,” explains Ari, who handles purchasing for all Pet Pantry locations. Pet owners want their pets to mirror their own eating patterns, and they are willing to pay extra for more nutritionally complete products for their animals, he adds. It also helps that the company’s locations are in affluent areas where, Ari notes, “we are able to source higher-quality products than can be sold in other demographic areas.”
Making Pet Purchases Personal
Pet Pantry’s financial success comes, in large part, from being in tune with the needs of its customers. The stores as a whole—which currently do an average of 2,750 to 3,000 transactions per week—continue to experience year-over-year growth. The chain netted more than 5-percent growth last year, with two of its stores—the smaller locations in Larchmont and Rye—topping 10-percent in 2012. This organic growth has allowed the Jacobsons to bypass hard-to-find bank loans for Pet Pantry’s expansion, which this past fall included the two new locations in New Canaan and Wilton, Connecticut. These stores are expected to reach profitability within six months to a year of opening, mirroring the patterns of the chain’s other locations.
“We truly believe in the old-school way of doing business,” says Adam. “We want to know your name, and develop a healthy, happy relationship with your pet.” While he concedes that it is hard for the company to compete with national chains and online stores strictly on price, Pet Pantry uses its attention to service and pet nutrition to differentiate itself from large chains and online retailers.
Its store associates, for example, must have past animal experience, and are put through a comprehensive education program that includes training modules such as “Customer Service 101,” “In-aisle Product Introduction,” and “Advanced Animal Nutrition.” The total training lasts eight weeks, and staff members are tested upon completion. While the training is a big investment for the company, it is not one that it analyzes from a cost-benefit perspective. “The benefits are unquantifiable,” Adam insists. “We don’t even factor it as an expense; we look at it as a necessity. Whatever amount we spend on staff education, it is worthwhile at the end.”
The company’s Larchmont outpost is a good example of how this service-focused philosophy has helped Pet Pantry stay strong as national chains continue to encroach on its Westchester and Connecticut turf. Just months after Pet Pantry opened the Larchmont location, Petco moved in a mere three miles away on Boston Post Road. As a newcomer to the neighborhood, Pet Pantry was still working to establish its brand there, and did not yet have a loyal group of customers to count on. “We realized we couldn’t outspend a big national chain in advertising, but we could certainly work harder at developing lasting relationships with customers in the Larchmont area,” Adam Jacobson says. “So instead of trying to be like the big chains and follow their lead in the market, we doubled down on our training programs and customer service to compete.” The result? Since opening the Larchmont Pet Pantry location in March 2010, its month-over-month and year-over-year revenues have grown consistently. In 2011, the store’s first full year, it posted growth of 34 percent, and for 2012, Adam Jacobson reports the Larchmont location finished up with growth of more than 15 percent over the previous year.
Pet Pantry also introduced its Pet One Club loyalty rewards card as a way to better connect with customers. The program rewards members—who number more than 20,000 today—with in-store sales on top pet food brands. The company also communicates with its rewards-card members about informational lectures taking place in the stores and its many events in support of community organizations such as animal adoption groups. The cards also provide a savvy way for Pet Pantry to identify its best customers and to come up with ways to motivate less lucrative customers to shop more often.
Facing Down the Downturn
The company certainly has not been immune to challenges from the financial meltdown, however. It had to tweak its product mix, for example, to better reflect customers’ new economic realities. While shoppers are still committed to buying high-quality pet-nutrition products, they are no longer looking to splurge on extravagant items like cashmere dog sweaters and handmade, Swarovski crystal-embossed leashes and collars, which used to be hot sellers. “Sensing the shift in the market, we began to unwind that product category and we refocused our merchandising mix on less expensive products,” Ari explains.
Pet Pantry also has been forced to wrangle with suppliers over increasing commodity and transportation costs that have caused pet food prices to spike. Prices for commodities like wild bird seed and sunflower seeds for instance, are up anywhere from 2 percent to 10 percent, depending on the manufacturer—a tough pill to swallow, since inventory makes up a large chunk of Pet Pantry’s overall operating budget. The situation presents a double whammy for Pet Pantry: The company is stuck paying higher prices for products at a time when its consumers are looking for lower prices in the stores.
“It’s a constant battle between fair pricing on the shelf and the margin integrity of our business,” Ari Jacobson explains. “We cannot always raise prices in order to make up the difference, so we are forced to fight hard with our suppliers to negotiate better pricing in order to maintain a competitive price for our customers.”
For now, it seems Pet Pantry is winning the David versus Goliath battle. Store growth has been strong across all its locations, and the new stores are besting expectations to date. Ultimately, though, the Jacobsons believe the company’s success is less about savvy financial methodologies and strategic competitive initiatives, and more about staying true to an old-school, community-based retail approach that resonates with modern customers in this region. “We believe consumers continue to support our brand versus other pet food stores because we are a local, family-owned business with deep roots in our communities,” Adam says. “We truly care about them and their pets and we believe they feel it.”
That’s a sentiment Pet Pantry is banking on.
Amy Roach Partridge is a veteran business writer and editor based in Thornwood. She has long been a cat lover, but if her 5-year-old daughter gets her way, she will soon be browsing the pet store aisles for puppy paraphernalia.