It's reigning cats & dogs

Dr. Seuss has used up two of her nine lives. The 13-year-old cat first was rescued from a shelter, then her owners spent nearly $1,000 to save her from death by diabetes. She's now on a twice-daily insulin regimen. Clearly, pet owners are willing to spend a lot to keep their animals happy and healthy. Even in a down economy, pet supply retailers say customers keep pampering their furry friends. And MarketResearch.com reports 74% of people say they would go into debt for their pets.

The current U.S. pet population includes more than 353 million companion animals, with an estimated 62% of all U.S. households owning at least one pet, and three quarters of those households owning two or more pets. The $29 billion-per-year market is proving to be a golden goose for pet supply big boxers such as Petco and PETsMART. Petco reported a 14.4% increase in sales to $354.5 million for second quarter 2002, with comp store sales up 8.5%. PETsMART's second-quarter sales grew 11.9% to $652 million with comp store sales up 11.4%.

“The thinking is that even if unemployment increases, people are still going to buy food for their dog or cat. Buying a toy for their pet will make the pet feel better and therefore the owner,” says Salomon Smith Barney retail analyst William Julian. “Pet food and toys are not the first discretionary items consumers would cut back.” Salomon Smith Barney projects the pet food and supply retailing industry to grow 5% per year for the next five years, implying a growth rate almost twice as fast as the broader economy.

And the growing pet set is more discriminating, unwilling to settle for the limited selections offered in grocery and discount stores. “People are spending as much money on their pets as they are on their kids,” says Dianna Butler, owner of two coddled pooches and New York-based upscale pet supply retailer Passion for Pets Inc. “Many consider themselves pet parents versus owners. A pet today is not a pet, but a child.” Pet stores merchandise high-end products with the attitude that customers will be buying as if pets were their children, with tie-ins to Christmas, Easter and birthdays, she says.

Increasing health awareness among humans is translating into increased spending on premium foods and quality care products for pets, Julian says. And wealthy baby boomers are upping the ante, dolling up their doggies and kitties in $250 Gucci collars and $195 Burberry coats from Neiman-Marcus. Empty nesters will become an important consumer base as well. The 55-to-64-year-old demographic is expected to grow 26% in the next five years, Julian says. By 2004, seniors will be spending $310 per year on pets, compared to the average U.S. household pet expenditure of $260, according to Mediamark Research.

The phenomenon hasn't escaped some savvy entrepreneurs who have opened high-end stores and online outlets offering lavish pet toys, treats and gadgets. Mom-and-pop shops are emerging in communities with large concentrations of wealthy boomers, from Mackie's Parlour at the Hilton Village center in Scottsdale, Ariz., to Fi-Dough, a streetfront bakery, grooming salon and boutique in Boston's tony Beacon Hill district. Butler is busy scouting sites in south Florida, where she says an affluent demographic is eager to scoop up the high-ticket crystal food dishes, canine lingerie and spa-like grooming products she stocks.

While pet supply big-boxers dominate power center tenant rosters, mom-and-pop boutiques are better suited to upscale malls and neighborhood centers, says Bob Little, principal of Urban Equity Partners LLC in Cincinnati. “With institutional ownership of shopping centers, the independent mom-and-pop stores — those unique stores that set centers apart from competitors — are harder to find,” he says. “Mass pet merchants sell basic branded products, but that unique entrepreneurial flavor is missing.”

HAPPY TAILS

The percentage of pet owners who indulge their pets is on the rise…