1H 2019 Deal Hound – Pet M&A Report
The U.S. Pet Industry continues to evolve and restructure at an accelerated pace through the first half of 2019, as the influence of e-commerce and IT pushes big-box retailers to fully embrace an “omnichannel” sales strategy in order to maintain their competitive edge. A recent report from Packaged Facts estimates that the online sales of pet-related products will surpass $11 billion in 2019, a significant leap from $3.2 billion in 2015, representing a 50%+ annual growth rate for online retail alone. As e-commerce continues to disrupt traditional retail in nearly every consumer product category, M&A participants in the Pet Industry increasingly view an online sales presence as a “must-have” offering.
Although the shift towards online retail has been rapidly growing for well over a decade, only recently have the largest industry participants, such as PetSmart, Petco and Walmart, began to diversify their channel mix to actively pursue customers both in physical stores as well as online. While traditional brick-and-mortar retailers are seeing major headwinds in terms of consumer spending, it is primarily the growth of pet e-commerce that has contributed to the growth of the industry over the past couple of years. “Online shopping has not just been cannibalizing existing business from brick-and-mortar channels. Instead, for the past few years, the Internet has been disproportionately responsible for helping to keep the U.S. pet industry on a healthy growth track,” says David Sprinkle, research director for Packaged Facts.
With e-commerce projected to account for nearly 20% of nationwide pet product sales this year, specialty and big-box chains have also been differentiating themselves from traditional online retailers by focusing on veterinary and pet care services. This is evidenced by Petco’s additions of Thrive and PetCoach, PetSmart’s partnership with Banfield Pet Hospitals and Walmart’s opening of PetIQ vet clinics in its store locations. The new PetCoach locations will offer grooming, training, dog walking and selected retail products, while Banfield and PetIQ locations provide veterinary services. These types of services inside pet superstores have been successful in attracting pet owners to physical store locations.
