• by Tanya Gazdik , October 19, 2014

The continued growth of ecommerce is creating a host of new challenges for pet supply retailers, according to a Millward Brown Digital study.

The relatively low cost of entry into ecommerce versus traditional brick-and-mortar retail businesses has resulted in dozens of new entrants across consumer packaged goods categories.

For consumers, the advantages of ordering regularly purchased items like pet food online represent a significant opportunity to grow ecommerce sales. According to the American Pet Products Association, Americans spend more than $55.7 billion a year on pet-related purchases, and almost 40% of that spending is on pet food.

Big-box specialty retailers PetSmart.com and Petco.com have both experienced relatively flat traffic in the last year. In contrast, online-only upstarts have exploded in the two last two years. Online-only retailer Chewy.com has been at the leading edge of that growth: with traffic up over 500% since fall 2012.

Cross-shopping rates also continue to increase. Both Petco and Petsmart have experienced cross-shopping increases to 
Chewy.com as high as 180% in the last 13 months. Cross-shopping rates for the Amazon-backed property Wag.com are up an equally impressive 98% year-over-year.

The traffic advantage is still in favor of the big-box pet specialty retailers, but together, online-only retailers represent a collective threat, according to Millward Brown.

The challenge does not stop there. Petsmart.com and Petco.com shoppers are increasingly shopping on Amazon in the same session. Last month, almost 50% more shoppers visited the online retailer in the same session compared with last year.

Specifically, the growth of Amazon’s popular Amazon Prime program (which waves postage for members who pay an annual fee) may be its biggest threat to traditional retailers.

For consumers, the barriers of expensive shipping costs of heavy pet food and the inconvenience of visiting a traditional retail store are instantly removed. The percentage of Petco/Petsmart visitors that are Prime members has increased five-fold from 1% to 5% in the last year.

In other retail categories like home improvement or toys, merely cutting shipping prices has not been enough to slow the growth of Amazon, says Jason Caine, director, retail and CPG at Millward Brown.

“To successfully compete with the likes of Amazon, traditional big-box pet retailers need to effectively leverage their brick-and-mortar store network as a competitive advantage to satisfy shopper needs that online-only retailers cannot,” Caine tells Marketing Daily.

Equally challenging for brands is deciding where to prioritize resources as the number of online sales channels continues to multiply. Online channels are equally appealing to new pet food brands looking to establish themselves with a similarly low cost of market entry. Amazon has been a popular place for niche pet food brands to eat away market share versus more established brands.

The increase in eCommerce across CPG categories like pet food means that to succeed, manufacturers will need to better understand how consumers shop for particular categories and what marketing touchpoints have the greatest influence, Caine says.

“This means having more specific digital measurement goals beyond just click through,” he says.

Pet supply brands and retailers need to work together to develop what ecommerce category management and shopper marketing looks like, Caine says.

“Given shopping behavior in this category has shifted, marketers need to focus on understanding consumer behavior at each stage of the consumer journey in order to shape their marketing strategy to best compete,” he says.

For example, Millward Brown’s research of Amazon shopper behavior suggests that consumers are significantly less likely to consider a product it does not show up on the first page of search results.  

“This requires a far different shopper marketing strategy than in-store, where shoppers are more likely to be exposed to an endless number of brands,” Caine says.