We are leaving behind a very complicated year, between rising energy costs and the outbreak of war in Ukraine. From a management point of view, the most urgent factor was inflation, with generalized increase in prices. The critical situation had an impact on all product sectors, inevitably also affecting the pet food and product sector. To understand how the market has dealt with this phenomenon, we asked the owners of some independent pet shops about their personal pricing policy choices and the reactions of the consumers they observed in their respective sales spaces.
Attention to savings and contraction of volumes
The generalized increase in prices that has also affected the pet food sector has not taken consumers by surprise, as they are now accustomed to reduced purchasing power. Nonetheless, families have to balance the books and this fact generally translates into savings choices, such as purchasing a smaller quantity of product or moving towards cheaper brands or ranges. Leo Pogliano, Paco Pet Shop, Turin, commented: ‘Historically, the pet food sector has never experienced such sharp price increases on the shelf in such a tight time frame. The stability of costs and the growth in volumes had in fact made it a very interesting sector for new companies and investors, even structured ones. In the last two years, however, the balance has been lost and even the pet industry has had to deal with the dizzying increases in the prices of raw materials and energy, reflecting a series of increases on the market, even double-digits ones, several times a year. Consumers, now accustomed to very high inflation in all product categories, could only take note and shift their choices to premium quality foods with prices that have become super premium’.
Some spaces have opened up for products that seemed destined to disappear from the market, while others have even ceased to be produced because of a price that would have become unacceptable for consumers. ‘In my opinion, future prospects see a stabilization and tend to decrease, because it is known that full warehouses are not good for anyone’.
Volumes change
The fact that people get used to reduced purchasing power does not mean that they do not change their consumption behaviour. Indeed, this trend has been so clear as to translate into contractions in volumes, especially as regards some non-food segments, while the food sector seems to have held up better in the face of the inflationary challenge. Michele Monteforte, owner of Hobbyzoo chain, Catania, explained: ‘As for price increases, I believe that there has been a form of speculation on the part of the business world, in all sectors, not just our one, which has brought the problem to higher levels than those justified by the initial objective data. Faced with this situation, as far as we are concerned, we could do nothing but immediately pass the increases on to consumers, as the revenue margins are already quite limited’.
Paradoxically, customers in the past complained about any price increase, while lately everyone is aware of the situation and the high cost of living in every sector, so much so that even substantial increases are not stigmatized, but accepted as inevitable. ‘It is a fact, however, that in 2022 our chain recorded contractions in sales volumes in the non-food sector. In particular, products related to care and hygiene, such as litter, wipes, absorbent mats, have risen sharply in price and their sales have fallen considerably. For their part, accessories recorded -12% in value and -20% in volume. In the aquarium sector, there was even a collapse, with -25% both in value and in volume. Despite the increases, the food sector has given good signs in contrast with increases in both value and volume, demonstrating how people have concentrated their spending on food, saving on the hygiene and care accessories sector’.
Margin reduction to protect sales
In the pet product sector, too, consumers have learned to appreciate quality and to seek high-end solutions to satisfy the growing attention towards specific and natural nutritional solutions. This trend to purchase high-end products has risked stopping in the face of prices that have become too high. For some retailers who are particularly attentive to these product segments, it was therefore a matter of evaluating how and how much to absorb the increases in order to avoid a reduction in sales volumes of particularly valuable lines.
Giovanni De Padova, Zampetta Verde, Como, told: ‘In this period there have been increases on almost all fronts: from suppliers, for the rent of the premises, bills, etc. As far as our customers are concerned, we have not yet had negative feedback due to increases. From the very beginning, we have aimed at a quality offer with products not available in large-scale distribution, both in terms of food and selection of accessories. Furthermore, it must be said that we owners of Zampetta Verde are the first consumers of the products we sell and we know well that the cost of a natural and organic diet is economically more demanding than traditional food. For this reason we have decided to postpone the increases until June as regards some products and brands in the food sector, while we have already taken steps to adjust the price lists for accessories’.
Differentiating assortment
The decision to focus on products that cannot be found in large-scale distribution is certainly a winning one, even if the excessive increases of some references may require to make a selection in the offer, favouring products that cannot be missing and accepting in some cases to reduce profit margins.
Giorgia De Cicco, La zampa Pet Boutique, Parma, commented: ‘My shop is not the classic pet shop, but it is somehow similar to a boutique where there is no shortage of food, but which concentrates the largest part of its offer on clothing, toys, and accessories. Even though I am in the city centre, I have a diversified clientele and offer all price ranges. And speaking of prices, I must say that this year’s increases have created some difficulties. I have seen even high-spending customers reflect on the increased prices and hesitate on purchases, or others accustomed to perhaps buying three coats at once, settling for two items to avoid spending too much. To deal with this situation I have tried not to always pass the entire increase on the final price, reducing my margins, but keeping the offer of those products that I want to be present in my offer. In other cases, instead, if the increase was significant and I do not consider the reference as essential for my customers, I have also given up keeping some products in the assortment’.
High-spending clientele
In delicate periods like these, where the increase in costs is generalized, being able to count on high-spending consumers helps to overcome many critical issues. Silvia Bachis, Animal One, Milan, explained: ‘This year has been characterized by a rain of price increases. Something disheartening at first, but in line with the increase in costs on all fronts. Our customers, for the most part high-spending, have not shown to suffer from this situation. On the contrary, they have experienced the increases without too many problems. The segment of customers with less economic possibilities initially showed some discomfort, but also in this case we later witnessed an acceptance of the phenomenon, as the desire to offer the best to one’s pets is now fundamental for everyone. For this reason, I would say that we have not recorded any drop in sales’.
In times of crisis, high-spending customers represent a guarantee for sales volumes. Furthermore, the fact that pets are increasingly considered real members of the family also motivates many people to invest substantial sums for their maintenance, rather renouncing some personal purchases considered superfluous after all. Nicla Santamaria, Dog Chic Boutique, Verona, said: ‘My shop is to all intents and purposes a boutique where clothing collections alternate according to the season. As for the winter collection that ended, the costs of the various references have increased compared to the previous collection, just as there have been increases in general for running my business. However, I have decided to pass on only the increases concerning the collection to the end customer, without charging the prices of the other additional costs that my business has had to face in this period. Customers have noticed the increases and in some cases I have experienced that for some regular customers this has translated into a reduction in the availability of spending, but this has not caused a loss in my overall turnover. The fact of addressing a high-spending clientele with high-end products has in fact allowed me not to suffer particular declines and indeed the turnover has increased also thanks to the arrival of new customers’.
One strategy adopted was to postpone the upward adjustment for references with increased price. It was decided to impact on margins to delay in-store inflationary incidence.
To meet the requirements of consumers with reduced purchasing power, discounts and promotions have been put in place to help customers maintain a high standard of choices.
The market has recorded the suspension or exit from the assortment of certain items because they are no longer in line with their commercial sustainability. The possible future return of these segments must be verified.
Aquariology pays a heavier price during the inflationary period, probably also linked to the increase in domestic management costs – real or perceived – of the systems.
Also given the fact that dogs are increasingly considered as members of the family, a Dog Chic Boutique shop is in many ways comparable to a baby products shop: there are many customers willing to give up something more for themselves, in order to buy quality accessories for their dog, non-trivial products, aesthetically beautiful and of superior quality ones.
