Introduction
PetSmart was formed in 1986 and opened two stores in Phoenix in 1987 operating under the name PetFood Warehouse. The name was transformed to PETsMART in 1989. It continued to flourish and went public in 1993 on the NASDAQ stock exchange. PETsMART later formed a charity organization that was non-profit, and its primary aim was to provide a home for abandoned homeless pets and put an end to euthanasia. The name PETsMART was rebranded to PetSmart in August 2005; this move was to broadcast its evolution from a store that supplies pet to a company that is solution-oriented. PetSmart was assimilated by BC Partners in 2014 for a fee worth 8.7 billion dollars.
Pet Smart is the leading industry that deals with dogs and cats. It is the best speciality retailer supplier of pet meals in the U.S.A; it has a supply chain of more than one thousand, four hundred stores in Canada, Puerto Rico, and the USA. It provides eleven thousand products that range from scratching posts to iguana binds. It offers various services such as grooming and training of the dogs, vet services, doggie day camp, and pet expressions; it provides housing facilities for the cats and dogs along with day care services. Pet Smart has various types of animals such as amphibians, reptiles, fish, birds, and several types of small mammals such as mice, guinea pig, hamsters, and Chinchillas.
The research will provide insight about the services and product manufactured by PETM. In PetSmart, pets can be bought or be adopted because it aims at providing lifetime solutions concerning the needs of the pets. They believe people who love pets are better people because that is the effect of the pet. PetSmart mission is to give back to the society by creating a connection between the pet owner and its pet so that the both of them can live a fulfilled life. PetSmart supports an organization that care and rescue homeless pets, by making the community comfortable, they not only get the satisfaction of how the pets add value to the lives of the society- they get to live it.
The research will explain the cost of production and its impact. PetSmart offers back to the society by collaborating with the local rescue groups. It donates a place for the groups and provides them with pet food and other supplies. The fees generated by the adoption of the pets belong to the rescue group, and PetSmart provides new parents with a guidebook entailing the necessary information concerning the pet care. PetSmart provides employment opportunities to more than a thousand veterinarians in the pet hospitals; this are in-store and provide full services, they are independent of PetSmart and are available to more than seventy per cent of the retail stores.
This paper will examine the supply and demand of PetSmart products. PetSmart manufactures and sells a variety of dog and cat products- Great choice; it is a line of hard goods mainly for dogs and cats. Authority is a premium food line while simply nourish is a super-premium food line for dogs and cats (Sec.gov, 18). Tow paw is a private label that specifically deals with hard goods for dogs. Toy Shoppe and Whisker City produce toys and furniture for dogs and cats. It sells aquariums, fish tanks, stands, and accessories. It sells the horse products under the State Line Tack section and offers a range of saddles pads, bridles, etc.
Supply and Demand
PetSmart (PETM) supply is never affected by the growing competitiveness of the online retailers in the past decade. PETM has maintained its foothold in the retail provision of the pet meal; the reason contributing to this monopolization is because no company can afford to sell more than a sixty-pound bag of pet food at a discount price while offering free shipping for a long an extended period. The demand for PETM products has maintained to be relatively elastic since consumer spending pattern less influence it.
PETM sell high-quality pet meals and products with a range of eleven thousand items. PETM utilizes the social technology and manages to sell additional ten thousand products in their websites. They offer surplus benefits that accompany their products; such as the pet and veterinary services; this ensures the customers remain loyal and promotes the selling opportunities by creating referrals.
In the past five years, pet ownership in the United States has been rising at a high rate, and this has caused the industry to experience a flourishing growth despite the economic crisis. The purchasing of pet food and its supply is inflexible in nature thus making it have a relatively inelastic demand. Spending on pets requires just a small portion of the budget since it is centred on meals and various consumables, which demand to be regularly bought (Sec.gov, 8). PetSmart retail stores are reaping the benefits from the increase in the ownership of pets, and it has increased its per capita non-refundable income. The demand for the premium and super-premium pet meal and online animal pharmaceutical sales has also played a significant role in the industry growth.
PETM has three business categories, merchandise segment (88.5%) which deals with pet products that are consumable, hard goods and live pet. The services sector (10.9%) that offers diversified pet services such as grooming, obedient training, etc. The other portion includes license fees and compensations for particular operating expenses charged.
With rising in returns, it has been assumed it is because of use of technological advancement in production hence improvement in automation that results in costs dropping as a part of revenue. The rising generation of returns has made the PETM revenue to increase from 6.92 billion dollars in 2014 to 7.11 billion dollars in 2015.
Price Elasticity of Demand
While marking the prices of products in PETM, the consumer responses are considered since they tend to be more informed through research to determine the rates that are favourable. Consumers have the opportunity to settle for alternatives that might arise. Buyers always look for genuine and the high value thus; the retailers are subjected to either increasing the benefits of the products or to reduce the cost of the output.
The sales depend on consumer expenditure, which is influenced by external factors that PETM has no control over including general economic conditions, consumer trust, tax and inflation, fuel and energy costs. The global political instability might also influence the favourable price to the consumer thus, reduces the consumer level of expenditure and confidence thus dropping the sales and demand. During recessions, the prices for the products might be viewed as high by the users; thus opting not to purchase and hence dropping sales. A decrease in sales hurts the business because the returns levels are low.
The demand for the products by the consumers depends solely on the price. When the price of the product increases, the sales tend to drop especially if no added benefits have been included. However, fewer consumers might consider the product as of high quality (Berens, 1). The accomplishments of PETM are facilitated by their positive response to respond to the advancing trends in the diverse population and consumer tastes, and hence, growth is cultivated through firm customer foundation and increases the average sales.
PETM has extended its e-commerce market, by responding to the online platform, PETM acknowledged that they value the online customers, and feel the challenge to compete to satisfy their needs through Omnichannel.
When the prices are increased for the products and clients become price sensitive, there will be a significant drop in sales. Elasticity can be measured by determining the percentage change in sales divided by percent price change.
Price sensitivity of customers (Demand Curve) (Nelson, 5)
When the price elasticity is negative, it indicates the sales dropped with the increase in price. When the price elasticity is positive, it indicates the target market is insensitive to the price changes. In PETM, the price elasticity is one. Hence, it means the target market is not affected by the change in prices; the demand is still consistent with providing food, and other consumables are essential.
Cost of production
PETM has employed fifty-three thousand individuals, and approximately twenty-six thousand were full-time employees. PETM focuses on maintaining a strong team by investing in training and education. Due to its expansion and setting of new stores in the existing markets, it demands finances, and the extra cost of production and the new stores end up attracting several clients from the existing stores and reducing their sales (Berens, 2).
The store development plans subjects increased demands on existing systems. The managements become ineffective, resulting in performance inefficiencies that could harm the financial results. The stores will require construction and building materials costs, which could affect the finances. PETM signs a lease of nine months before the shop opening, thus in case of an economic instability they cannot adjust the damage.
Petsmart Same-Store Sales Decline (Nelson, 3)
Overall Market
The pet industry is becoming a competitive ground. The flourishing and earning high revenues thus attracting investors; PETM is competing with retail suppliers of pet products such as supermarkets, warehouses and other merchandises. The competition is stiff with stores that specialize in pets while others are independent shops. PETM encounters stiff competition since some stores can produce store format that is similar to PETM especially in the pet food and their products. Some supermarkets and warehouses tend to reduce their product prices to maintain the customers; therefore, PETM is forced to reduce its prices making the market shares to reduce and which affects its sales and profits (Sec.gov, 12). The competition challenges PETM to change their operating strategies to retain the market share.
PETM tends to stand out by manufacturing high-quality products, offer a unique combination of product collection, competitive pricing, and offer satisfactory customer services, and ensure our clients’ experiences are unique. If PETM fails to acknowledge changes in their consumers’ preferences, this might decrease the advantage over their competitors making its enterprise and revenues suffer. The top competitors are the grocery stores, E-commerce and catalogue retailers, general retail merchandisers, independent grooming, boarding, and obedient training services providers.
The barriers to the pet industry are rather unique. The capital required and the economies of scale are the major obstacles since they need a lump sum of cash. For grooming and training services, certificates and licensing are an essential requirement (Berens, 5). This makes it difficult for new entities to succeed in the industry. The pet industry is saturated; thus, PETM has to set itself apart and maintain the customers’ loyalty and confidence.
Recommendations
The PetSmart should venture into e-commerce widely. There is a lot of competition from e-commerce retailers such as Amazon and eBay. The online stores are expanding with consumers opting for the option since it is faster and products are sold at a fair price. The e-commerce business is flourishing rapidly than the online industry. PetSmart needs to embark on vigorous advertising and promotions. Adverts will increase awareness of the products the company deals with as well as the recommended retailing price. Staged promotions will attract new customers as well as reward those buyers which who have always consumed PetSmart products. Advert and promotions will assist in customer retention. Launching other lines of products that deal with pets will also be helpful for the company.
PetSmart should provide solutions and improve the communication strategy with the clients to gain an insight concerning their preferences. It should maintain its free shipping policy because this is an advantage that has facilitated PetSmart to keep a foothold in the industry. Also, it should be aggressive in acquiring e-retail shares by offering clients competitive prices and a determined marketing.
Work cited
Berens, Caitilin. "Business Opportunities in Pet Care". Inc.com. 2012. Print.1-5.
Nelson, Samantha. "Must-Know: Why PetSmart’s Same Store Sales Declined - Market Realist". Marketrealist.com.2014. Print. 1-5.
Sec.gov, "UNITED STATES SECURITIES AND EXCHANGE COMMISSION". 2016. Print. 8-32
