Dog eat dog world for pet food retailer

Big box-style shopping for pet care supplies and food is in the doghouse. And that's forced Richmondheadquartered Petcetera to shut down another six of its remaining 18 stores across the country.

According to Dan Urbani, Petcetera's president and CEO, the footprint of some of his stores is just too large to be viable anymore.

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Locations in Penticton, Edmonton, Calgary, Saskatoon, Winnipeg and Dartmouth, Nova Scotia will close May 31 as part of ongoing restructuring plans.

The Richmond location will continue to operate for the foreseeable future.

Petcetera, which employs about 300, down-sized from 50 stores to 18 stores in 2009. And last month it filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act.

Urbani said he is looking at every viable option to reorganize the business. Of the six stores in the recent closure two of them (Calgary and Winnipeg) are part of a conditional sale to rival PetSmart.

"With PetSmart, their new prototype store is 8,000-square-feet. Ten years ago the prototype was 18,000-square-feet," Urbani said. "So, the competitive nature of the industry is calling for a smaller footprint because of the maturity of the industry."

When Urbani opened his first Petcetera store in 1997, it sprawled over 26,000-square-feet.

"It drew from a large area because the market was immature and there wasn't a lot of pet superstores," Urbani said. "Today, there's a lot of stores that have filled the gap, and the need to have that big box store is not required anymore, because based on the assortments available to the consumer, we can offer that in under 10,000-square-feet."

Coincidentally, the pair of stores being sold to PetSmart are in that size category, Urbani said, adding even smaller, boutique-style pet stores in the 1,500-squarefoot range offer shoppers convenience, but not a wide range of products.

But the paring down in floorspace at Petcetera runs counter to figures from Agriculture Canada which stated pet food sales is projected to grow from the $1.7 billion pet owners spent in 2011 to $1.9 billion by 2016.

"Yes, there's growth in the market, but the retail square footage is growing faster than the growth of the food industry," Urbani said. "And that means there's going to be struggle where some stores will lose market share."

Making that shift to smaller store size is a difficult process, Urbani said, adding that among the 12 left bearing the Petcetera name, include some very profitable locations such as the one in Richmond which has 17,000-square-feet of retail space.

"It's a big store, but the footprint works really well for us," Urbani said.

"We've got a good audience there, and we're achieving our sales expectations."

As the business moves forward Urbani said he is continuing to explore options which may include continuing with the remaining bundle of stores, or selling them.

"One thing in business is that you never say never," Urbani said.

Big box stores are "expensive animals," said SFU marketing professor Lindsay Meredith who added Petcetera's situation is a case of a market re-defining its economies of scale.

"They (big box stores) work for one reason only, and that's if you get really large sales volumes going out the front door. And if you don't have that, you get the kiss of death."

Meredith said a big box concept with a relatively narrow focus - such as pet care - can run into trouble, whereas the likes of big box giant Costco provides a much greater array of products and a more assured volume of business.

"To make a big box operation work you had better have done your homework and be in places where there are large concentrations of pets and the people who have the money and are inclined to buy all kinds of the products you carry," Meredith said.

Plus, over time changes in the market that once provided good sales can make a difference, Meredith said.

"Take the classic piece of suburbia where you have a family with two parents, 2.3 kids, one dog and one cat," Meredith said.

"Guess what, kids grow up and dogs and cats grow old and croak. Then do the remaining husband and wife go on and continue to buy more cats and dogs. Not necessarily."

The Richmond location of Petcetera is among the chain's 12 stores which will remain open after a second round of restructuring by the locally-based pet supply store shut the door to six other outlets. Photo by Philip Raphael/Richmond News

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