Petsmart 2004 Annual Report Download - page 24

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allowed our associates to spend more time serving customers. We believe these strategic initiatives will
continue to drive enhanced comparable store sales growth, proÑtability and return on investment.
The Pet Food and Pet Supply Industry
The pet product industry serves a large and growing market. The American Pet Products Manufacturers
Association or APPMA, estimated the 2004 market at approximately $34.4 billion, an increase of over 100%
since 1994. Based on the 2005/2006 APPMA National Pet Owners Survey, more than 69 million households
in the United States own a pet. This translates to approximately 91 million cats and 74 million dogs. The
APPMA also estimates 63% of United States' households own a pet and 45% of those households own more
than one type of pet.
The pet product industry can be divided into the following categories: food, supplies/medicines,
veterinary care, pet services (such as grooming or boarding) and purchases of pets. The APPMA estimates
dog food, cat food and treats are the largest volume categories of pet-related products and in 2004
approximated $14.2 billion, or more than 40% of the market. Many premium pet food brands, which oÅer
higher levels of nutrition than non-premium brands, are not currently sold through supermarkets, warehouse
clubs and mass merchandisers due to manufacturers restrictions, but are sold primarily through superstores,
specialty pet stores, veterinarians and farm and feed stores.
Pet supplies and medicine sales account for approximately 24%, or $8.1 billion, of the market. These sales
include dog and cat toys, collars and leashes, cages and habitats, books, vitamins and supplements, shampoos,
Öea and tick control and aquatic supplies. Veterinary care, pet services and purchases of pets represent
approximately 23%, 7% and 5%, respectively, of the market.
Competition
Based on total sales, we are the largest specialty retailer of pet food, supplies and services in North
America. The pet food and pet supply retail industry is highly competitive and can be categorized into Ñve
diÅerent segments:
‚ Supermarkets, warehouse clubs and other mass and retail merchandisers;
‚ Specialty pet supply chains and pet supply stores;
‚ Independent pet stores;
‚ Catalog retailers; and
‚ Internet retailers.
We believe the principal competitive factors inÖuencing our business are product selection and quality,
convenience of store locations, store environment, customer service, price and availability of pet services.
Many of the products we oÅer are not currently available in supermarkets, warehouse clubs or other mass and
retail merchandisers. We believe we compete eÅectively within our various markets; however, some of our
mass and retail merchandise competitors are larger in terms of overall sales volume and have access to greater
capital.
We are currently the only major specialty pet retailer that markets to customers through stores, catalogs
and the internet, and we believe this gives us a competitive advantage. In addition, we believe our pet services
business, which supermarkets, warehouse clubs and other mass and retail merchandisers cannot easily
duplicate, is a competitive advantage.
Our Strategy
Our strategy is to be the preferred provider for the lifetime needs of pets. Our primary initiatives include:
Add stores in existing multi-store, new multi-store and new single-store markets. Our expansion strategy
includes increasing our share in the top 60 existing multi-store markets, penetrating new multi-store and
single-store markets and achieving operating eÇciencies and economies of scale in distribution, procurement,
2