Petsmart 2011 Annual Report Download - page 12

households in the United States own a pet, which equates to nearly 73 million homes. In total, there are
approximately 86 million cats and 78 million dogs owned as pets in the United States.
The APPA divides the pet industry into the following categories: food and treats, supplies and medicines,
veterinary care, pet services (such as grooming and boarding) and live animal purchases. The APPA estimates
that food and treats for dogs and cats are the largest volume categories of pet-related products and in calendar
year 2011, accounted for an estimated $19.5 billion in sales, or 38.4% of the market.
Pet supplies and medicine sales account for 22.4% or $11.4 billion, of the market. These sales include dog
and cat toys, collars and leashes, cages and habitats, books, vitamins and supplements, shampoos, flea and tick
control and aquatic supplies. Veterinary care, pet services, and live animal purchases represent 27.8%, 7.2% and
4.2%, respectively, of the market.
Competition
Based on total net sales, we are North America’s leading specialty retailer of products, services and sol-
utions for the lifetime needs of pets. The pet products retail industry is highly competitive and can be organized
into seven different categories:
• Warehouse clubs and other mass merchandisers;
• Grocery stores;
• Specialty pet supply stores;
• Veterinarians;
• General retail merchandisers;
• Farm and feed stores; and
• E-commerce and catalog retailers.
We believe the principal competitive factors influencing our business are product selection and quality,
customer service, convenience of store locations, store environment, price and availability of other services.
Many premium pet food brands, which offer higher levels of nutrition than non-premium brands, are not
currently sold through grocery stores, warehouse clubs and other mass and general retail merchandisers due to
manufacturers’ restrictions, but are sold primarily through specialty pet supply stores, veterinarians and farm and
feed stores. In addition, our unique relationship with Banfield allows us to sell therapeutic pet foods at our stores
with Banfield hospitals. We believe our pet services business provides a competitive advantage that cannot be
easily duplicated. We compete effectively in our various markets; however, some of our grocery store,
warehouse club and other mass and general retail merchandise competitors are much larger in terms of overall
sales volume and may have access to greater capital.
Our Strategy
Our strategy is to be the preferred provider for the lifetime needs of pets. Our primary initiatives include:
Create meaningful differentiation that drives brand preference. We are focused on developing and
strengthening our brand identity and enhancing the emotional connection pet parents make with their pets and
with PetSmart. We remain committed to our promise of providing Total Lifetime CareSM for every pet, every
parent, every time. We provide pet parents with information, knowledge, trust and product solutions, including
both exclusive and private label offerings, that help their pets live long, healthy and happy lives. Our marketing
and advertising efforts focus on emphasizing our unique offerings for customers and promoting our strong value
proposition. Through extensive and on-going customer research, we are gaining valuable insights into the wants
and needs of our customers and we are developing solutions and communication strategies to address them. Our
PetPerks® program, which is available in all our stores, plays a central role in this effort. We are also able to
reach customers through various online communities and social networking sites. With increasingly greater
capacity to customize offers relevant to our customers, we believe we are helping them build a stronger, more
meaningful bond with their pet and a greater loyalty to PetSmart.
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