Pet Friendly

Pet owners love their pets and the retail stores know it.

But PetSmart and Petco have two very different strategies for building customer loyalty and store traffic.

PetSmart plays up its services. Petco focuses on charitable causes — with promotion.

Many of Petco’s promotions trigger donations to its Petco Foundation, founded in 1999 to promote educational and charitable activities nationwide by partnering with local organizations.

An annual holiday campaign, the Tree of Hope Fundraiser, triggers a $1 to $20 donation to a local animal welfare group for every ornament sold. Online shoppers who donate $5 or more get a 10% discount. In 2005, the campaign raised $2.1 million.

Last year, Petco added an unusual offer.

A $10 discount was offered on a $40 procedure that implants a microchip under a pet’s skin. The two vet services that do the microchipping, Luv My Pet and Vetco Hospitals, donated $1 to the Petco Foundation for each microchip implanted during the promotion.

Petco, the No. 2 pet retailer with approximately $2 billion in annual sales and 817 stores, also makes it fun for pets.

Last October, the chain commemorated National Pet Wellness Month with “Paws Across America,” sponsored by Hill’s Science Diet pet food brand.

Dogs got to participate in a 20-minute “community dog walk” hosted by Petco stores. A pet-health expo followed with information on first aid, nutrition, vaccinations and spay or neuter surgery.

Paws Across America T-shirts were passed out and participants were asked to donate $5 to the Petco Foundation.

The walks are “a great way for people to exercise their pet and meet other pet lovers in their area,” says Clint White, Petco’s manager of strategic partnerships and promotions.

Also in October, the annual “Howl-o-Ween” costume contest gets underway.

Dogs and cats dress up and trick-or-treat at the stores. The best costume at each location gets a prize package of Iams food and a Petco gift card. Iams and Greenies, both Procter & Gamble pet food brands, sponsored the contests last year.

Petco plays up specialty products and premium brands, like Iams, to distinguish its merchandise mix from supermarkets’ and mass merchandisers.

Petco’s sales rose 9% to $1.05 billion for the first half of 2006. Same-store sales rose nearly 3% for the half. The company went private in October, following its merger with Rover Holdings Co.

Americans own more than 125 million pets, and there are more “dual” households — dogs and cats, living together — than ever before, says Don Stuart, partner with trade consultancy Cannondale Associates.

And the stakes are huge as retailers compete for a share of the $38.4 billion market.

Pets as Children

PetSmart, the category leader with about $3.8 billion in annual sales, has a different way. It caters to “pet parents,” or owners who treat their pets like children.

Its goal?

Long-term loyalty driven by its “Total Lifetime Care” suite of services beyond its retail offerings.

If a pet gets sick, PetSmart’s 598 full-service veterinary clinics, called Banfield, the Pet Hospital, are at the ready. If the puppy needs a clipping, grooming, boarding and training services are available in the chain’s 887 stores.

And if the kitty needs a vacation, 60 PetsHotels can be found adjacent to PetSmart outlets. The hotels, first introduced in 2001, have enough luxurious amenities to make even Paris Hilton and her pooch turn a bit green.

At the “Bone Booth,” pets can receive phone calls from their owners. TVs are tuned to pet-themed shows. Lambskin blankets can stave off a chill from the occasional soft-serve ice cream cone. And “Kitty Cottages” use a separate ventilation system to keep dogs and cats from sniffing each other out.

If the hotels seem a bit too posh, there is always the choice of six Doggie Day Camps.

“A pet is basically another child to most owners,” Stuart says. “Pet stores have leveraged that trend with special offerings, not just competing on price, but also using service, convenience and variety to win loyalty.”

PetSmart’s focus on service is paying off.

The company’s service sales were $279 million for the first nine months of 2006, up 27% from the year before. Services account for only about 9% of PetSmart’s total $3 billion sales, so growth potential is strong. Total sales rose 13% for the first nine months of 2006.

TV and print ads help drive those sales.

In one spot, a daschund’s “mom” gingerly throws away the pup’s beat-up toy while he sleeps — the only time he doesn’t have it in his mouth. She then takes him to PetSmart to buy a new toy.

PetSmart spent $35 million on ads in 2005 and nearly $27 million in the first nine months of 2006, according to TNS Media Intelligence. Its 2005 spending reflects a repositioning that tweaked the brand name from PetsMart to PetSmart signaling its shift to value-added services from a more cost-conscious “mart” focus.

The company also runs in-store adoption centers, handling an average of 1,000 a day. And the chain’s 12-year-old foundation, PetSmart Charities, oversees donations to local shelters.

“PetSmart and Petco both own the premium end of the business,” Stuart says. “They offer upscale brands, and pets are their [whole] business, so consumers trust them.”