Big pet stores sniffing around for smaller retail spaces

An Unleashed by Petco store

Kai Ryssdal: Pet ownership, it seems, has survived the Great Recession intact. The American Pet Products Association released sales figures from 2010 last week: up more than 6 percent to $48 billion.

Not all that surprising, when you consider almost three-quarters of households own a pet. The country's second-largest pet supply retailer wants to be the first-largest, so it's trying to capture some more market share. By getting smaller.

Shannon Mullen reports.


Shannon Mullen: There's a new pet store in the suburb of Acton, Mass., near the local grocery store and a Starbucks. When you walk in, two things stand out right away. There are no animals for sale, and the shelves are full of mostly natural, high-end food brands. Next to the gourmet cookie case, there's a big chalkboard listing store events like pet adoptions and ice cream socials for dogs.

Michelle Harding: We're going to get to know you, your kids, your pets.

Michelle Harding oversees the store. She wants customers to feel like this place is part of their community.

Harding: I mean, it is the size of a Blockbuster video. It is very trendy, upbeat, your sales staff is in jeans and really cool T-shirts.

The new chain is called Unleashed by Petco. Yes, that Petco. In the past year, it's opened 28 of these boutique stores in California and the East Coast.

Jim Myers: Well, clearly we're trying to attract a different customer.

Petco CEO Jim Myers.

Myers: One of our big things we're looking at is, you know, how do we continue to expand the market share of Petco, and find a larger group of people that aren't currently being served in the way that they're looking for.

Now Petco is putting its much smaller concept stores closer to where people live, with signs that say "Unleashed" in big letters, and "by Petco" in much smaller print.

Susan Fournier: So they're growing by using their brand asset, but they're trying to get distance from their main brand.

Susan Fournier teaches marketing at Boston University's School of Management. She says for some consumers, bigger isn't better anymore, and Petco is tapping into that. Plus its market has a growing number of affluent pet owners.

Fournier: So they've seen that there's a new segment and people are willing to spend more money, they're less price sensitive, let's get them to buy more expensive things, let's create a decor that makes them feel a little more special.

That last one -- personal connection -- it's how independent pet stores separate themselves from corporate competitors. But Unleashed stores promise that now too, plus Petco's big enough to offer lower prices than the local guy.

So, is the local guy worried? Not Mike DiTullio. He owns a shop called Especially for Pets, just a few miles from the new Unleashed store in Acton.

Mike DiTullio: My customers will say to me, I would never go to a Petco.

Mullen: What's the reason?

DiTullio: Because they do not want to put the health and welfare of their pet in the hands of a large corporation.

DiTullio's been selling only natural pet foods for 23 years. He says he's noticed a slight dip in business since Unleashed arrived, but he thinks that could just be the bad economy.

DiTullio: This is not a sour grapes story for me, all right? You know, they're coming into my market with my concept, so I guess I'm doing something right.

Petco CEO Jim Myers thinks he's got it right, too. He says the Unleashed stores are doing well enough so far, that 18 months from now, there'll be twice as many of them.

In Acton, Mass., I'm Shannon Mullen for Marketplace.

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