Category update: Pet merchandise
Bunnings expands pet products offering
Offering brand new pet products gives Bunnings the chance to cement itself even further as a one-stop-shop, category killer. However opportunities still exist for independent retailers willing to find different niche markets.
Thu Mar 23 2023
A large majority of Bunnings' stores is expected to have its new and expanded pets offer by the end of March. The specialty petcare department will have items ranging from (dry) food to toys and bowls for commonly owned pets such as cats, dogs and birds, and take up a larger space within a traditionally-sized Bunnings store.
The hardware retailer is set to offer close to 1000 pet-related products within a dedicated selling space of 40sqm in its stores. Some of the space in Bunnings stores handed over to pet products with be partially taken from categories like children's playground equipment. Bunnings managing director Mike Schneider told The Australian:
What we are going to be bringing to life in our stores ... is quite a comprehensive step change in our pet range, probably the biggest category expansion in Bunnings for 20 years.
While Bunnings has sold pet enclosures and cages for some time, its accelerated offer will take the retailer into more daily product offerings for pet owners. It will focus on general merchandise rather than services such as grooming or vet-care in store.
One factor to consider regarding Bunnings' move in the pets' category is how the moderately high inflationary environment affects competition. Competing purely on the basis of low prices is tough when prices keep rising.
Introducing a new category or new products in a category, for which there is no price history, means the only competitive requirement is undercutting overall market prices.
The other factor to consider is that there are two types of discretionary categories. Where some discretionary categories will suffer during economically tough times, others will flourish as they provide a replacement purchase. This famously applies to the purchase of women's lipstick, and Bunnings may be banking on pet accessories working in the same way.
The market
Animal Medicines Australia estimates the pet care market at $30.3 billion, with the average household spending $3237 a year on a dog and $2074 on a cat. It is a market that has increased, on average, 7.4% per year since 2018. Thanks to the coronavirus pandemic, pet ownership in the country grew to 69% - roughly 28.7 million pets - within two years from 2020, a jump from 61% in 2019. (Source: Yahoo Finance) Marketing professor Jana Bowden of Macquarie Business School told Yahoo Finance:
As a category-busting lifestyle brand, Bunnings' expansion into the pet category is formulaic. The potential in the pet and pet supplies retail category is obvious. The market size is expected to grow at 5% in 2023 alone. This is underpinned by extraordinary levels of pet ownership.
Hybrid and remote working have been cited as driving the rise in pet ownership as more people move to the regions while keeping their big city jobs and finding they now have the lifestyle where they can have a dog, cat or even a horse.
Pet-related goods are also seen as recession-proof, given households rarely cut spending on furry friends even during times of financial stress.
Competition
The Bunnings expansion into pet supplies means it will compete directly with supermarkets, which are the largest distribution channel for pet food. In December 2022, Woolworths announced it spent $586 million to buy a 55% stake in Petspiration which owns the PETstock retail banner, 276 stores, 65 vet clinics and 162 grooming salons. It also has e-commerce platforms and a loyalty program with 2.4 million members. Woolworths is investing alongside founders Shane and David Young.
Related
Woolworths takes majority stake in PETstock - HNN Flash #124, December 2022Bunnings' product range will be pitted against discount retailers like Kmart, also owned by Wesfarmers, and have an impact on competition with smaller specialty pet retailers such as Petbarn and Pet Circle, as well as independents. Professor Bowden said:
Small pet retailers typically take pride in their more local, personal, relationship-oriented connection with their consumers and, for many, this along with their niche product and service offerings have been their point of differentiation to date.
However, what they lack is breadth of product assortment and range, as well as the ability to deliver on convenience and value - and that's exactly the opportunity that Bunnings - as a big-box retailer - is capitalising on.
Professor Bowden acknowledged this would be a very challenging period for independent pet stores. However, she said these smaller specialty retailers would have to focus on niche products and value-add pet services - which Bunnings wouldn't offer - in order to survive. She said:
It will also mean thinking more carefully about store location, to fill the geographic gaps that Bunnings can't reach easily with its location pull.
While Bunnings' focus might be more limited than that of specialist pet shops, competition could intensify around everyday pet essentials, with Bunnings' promise to offer the lowest price on stocked items putting pressure on other retailers. Mr Schneider told The Age
Our ability to buy bulk volume products, to merchandise that in an appealing way is the group's main strength when it comes to the animal products market.
Bunnings has already established itself as a pet-friendly store with its open-arm policy on pet visitors. The hardware retailer allows shoppers to bring their pets in store provided they are carried, on a lead and wearing a muzzle, or sitting and secured in a shopping trolley. He also said:
[Pet ownership] has become a very important part of many, many families across Australia and we think that that connection that people have with the Bunnings brand, bringing those pets into the store, creates a great advantage.
We believe Australians have a really deep passion for everything around their home and everything that's in their home. And we do think we can bring a very, very competitive offer into this market and we think that given the sort of comfort that the customers have bringing their pets into the business it's going to be a very good complementary category for us.
As Mr Schneider points out to The Australian:
I'm not sure you can bring your pets into a supermarket.
Opportunity
Mr Schneider said the company saw huge potential in the product range as pets increasingly become part of Australian families. He told The Australian:
When you do look at the fact that we as a retailer really participate strongly in everything around the home and we talk about our ranging lens being everything from the front gate to the back fence and wanting to cater to all members of the family, whether it's the younger members of the family or those wanting to stay in their homes longer. I think there's a very natural extension to the four-legged members of the family and when we look at the sort of growth of the existing pet range, it's really clear customers, where we have a good pet range, have been looking for more from Bunnings in this space.
And when you line it up with the fact that you've got such high participation rates now in terms of pet ownership across the country, it's a natural extension for us. While we do think that there's a couple of other channels to market, (but) the uniqueness of what we can do, and the natural draw that people have to go to Bunnings on a weekend to do things with the whole family, really sort of extends through into pets.
He said the retailer would start off in cat, dog and bird products but could eventually move to offer products for other animals (such as horses or alpacas) depending on the store location. Mr Schneider told The Australian Financial Review (AFR) that ranges would be relevant for coastal or rural communities, for example.
It is also about convenience and having these products under one roof. He said:
The hallmark of Bunnings' success over the years has to do with being very focused on the things where it believes it can add value, and I think convenience, price and range on an assortment are things that are very much at the core of Bunnings. The challenge of services is the ability to execute them at scale.
Bunnings also has plans to move into other growth categories. Mr Schneider said:
We want to grow the market and grow our share, but we want to grow categories in which we operate and where it makes sense to take logical next steps in categories where we may have a small representation but we think we can expand that in a very meaningful way.
Identifying opportunities to grow and grow profitably fits very neatly in our strategic agenda.
