Retail Channel Monthly $ Update – September Final & October Advance

In May 2020, the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. We have not beaten the virus yet so we will continue to track the ongoing recovery of the retail marketplace with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Retail Report for September and then move to the Advance Report for October. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the September Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. $ fell in January & February but set a new $ record in March. In April $ fell but rebounded in May to another record high. Sales have slowly declined through September. Here are the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The final total is $1.7B more than the Advance report projected a month ago. All groups but Relevant Retail were up slightly. The specifics were: Relevant Retail: -$0.3B; Gas Stations: +$1.0B; Auto: +$0.8B: Restaurants: +$0.3B. Sales vs August were down in all groups. As you recall, Total Retail $ales broke $600B for the 1st time in December. Although September $ were slightly below December, they were still the 8th highest of all time. Auto continues to have the strongest recovery with an annual YTD growth rate since 2019 of +11.8%. A spending dip in September is the “norm” in U.S. Retail. It is more important that for the 4th consecutive month, all groups were positive in all other measurements.

Now, let’s see how some Key Pet Relevant channels were doing in September.

  • Overall – 10 of 11 channels were down vs August but all were up vs September 2020 and September 2019. In YTD $, all were up vs 2020 and 10 vs 2019. September was the 9th biggest month in history for Relevant Retail.
  • Building Material Stores – Their amazing lift may finally be slowing. The surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Their Spring lift has slowed in 2021 but Building and Farm stores are still going strong. Sporting Goods stores have a similar spending pattern. Sales took off in May 2020, hit a record peak in December and continued strong into 2021, peaking in March. $ have slowed with a big drop in September, but YTD they are +47.7% vs 2019, an Annual Growth Rate of 21.5%!
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs Aug. but YTD are on par with the 2020 binge. They are up 19.5% vs Sept. 2019 and 14.9% vs YTD 2019. Drug Stores were +$17B (+5.7%) for 2020. They had a record March. Sales have been stable since then, but all other measurements are positive and YTD $ are +7.6%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. Monthly sales by channel have been slightly up or down since then but GM has been strong, +15% YTD. $ Stores & Clubs/SuperCtrs are leading the way with a combined annual growth rate of +8.8%. These channels promote value. Their success reinforces its importance to consumers. Disc. Dept. Strs $ fell 11.5%, but that’s much better than -19% in 2019.
  • Office, Gift & Souvenir Stores– $ fell from August but were +22.3% vs September 2020. The pandemic hit them hard. They are still down YTD vs 2019. Recovery is still a long way off, but their situation is improving.
  • Internet/Mail Order – Even their $ were down vs August but the pandemic continues to foster this channel’s growth. In September of 2019, their YTD growth was +14.1%. Now, their avg growth rate is +19.6% – up 39.0%
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. September was their 3rd biggest month, and they had the only increase from August. YTD $ are +27.4% vs 2020 and +40.5% vs 2019.

Relevant Retail began recovery in May and set a $ record in December. $ fell in Jan & Feb, turned up again in March and began a monthly up/down rollercoaster. September $ are down but all but 1 channel are ahead of all 2020 & 2019 $. The key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, the Advance numbers for October.

2020 was a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell from their December peak in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record of $633B. April sales were down slightly but they took off again in May to set yet another spending record, $643.1B. June>Sept $ fell but then came back in October with the 3rd biggest $ month in history. All major groups were up from September and were positive in all other measurements for the 5th straight month. Some other areas of the economy are still suffering, some spending behavior has changed, and inflation has become a bigger factor in increases. However, consumers continue to spend “big bucks”, especially in Relevant Retail, and the overall Retail marketplace continues its strong recovery.

Total Retail – In March, Total Retail was $633.1B, a new record. In April, $ales dipped to $625.5B but were still $218.3B more than April 2020 – a record increase, more than double the size of last year’s record drop. In May, sales set another new record, $643.1B. June>Sept sales dipped slightly but stayed above $600B. October brought a resurgence with monthly sales of $634.6B, the 3rd biggest month in history. Moreover, the current YTD average annual sales growth rate since 2019 is 9.3%, the highest ever in records going back to 1992. INFLATION NOTE: Retail $ were +14.7% vs October 2020. Inflation was +6.2% so up to 42% of the lift came just from higher prices. The “Real” increase was +8.5%. In October 2019 (pre-pandemic) Retail $ were +3.7% over 2018. Inflation was 1.8%, 48% of the lift. This produced a “Real” increase of +1.9%. Long term, strong inflation can slow spending but right now, Retail is outperforming pre-COVID 2019.

Restaurants – This group has no negative measurements vs 2020 or 2019 for 5 straight months. February 2020 YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1B, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February, YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily from April through July. Sales dipped slightly in August/September but came back strong in October. YTD their $ are +30.4% vs 2020 and +5.0% vs 2019. Their recovery is getting stronger.

Auto (Motor Vehicle & Parts Dealers) – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and has slowed only slightly from April>October as sales exceeded $123B in all 8 months – the 8 biggest months in history. To show the effectiveness of their campaign, just look at the data. This group has exceeded $110B in monthly sales only 17 times in history. 14 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +11.6% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed and continued to grow to to a record $53.5B in July. They fell in Aug/Sept but turned up in October. They have been positive in all measurements vs 2019 & 2020 since March. Their comeback continues but inflation comes to the forefront in this channel. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, October 2021 prices were 49.6% above 2020. That means that the 45.3% year over year $ lift in October was actually a decrease in the amount of gas sold. YTD Annual Growth Rate Since 2019 = +6.0%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. In looking at the individual channels in this group, we have seen a variety of results due to many factors, like non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December. They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February 2021 but set monthly records. In March they turned sharply up and then began an up/down $ roller coaster ride. In October they reached the 2nd highest amount on record. We should also note that while December 2020 is still #1, March>October are 8 of the 10 highest $ months of all time. Relevant Retail has exceeded $361B in monthly sales 10 times in history. 9 of those have occurred since the onset of the pandemic. It is also very important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 is +10.4%. The recovery has become widespread as all channels have been positive in all measurements vs both 2020 and 2019 for 3 consecutive months. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus an exceptionally long 2020 “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. October $ were up 5.0% from September and an increase occurred in all but one channel. Remember, the groups in the chart are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in 12 of 13 channels were up vs September but all were up vs October 2020, vs October 2019 and YTD vs 2020 and 2019. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.4%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 18 consecutive months. The group set an all-time record of $407B in December and finished 2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > Oct. were 8 of the 10 biggest of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift may be ending but consumers are still focused on their homes.
  • SuperCtrs/Club/Value/$ Strs – They kept the GM channel strongly positive. Value is still a big consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales increased for all channels in October and all other numbers were also positive. Even Department Stores $ are growing increasingly positive. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores held at about 8.8% and then moved up in October. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +7.9%; Dept Stores = +1.9%; Club/SuprCtr/$ = +9.1%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In June>Oct they beat 2020 $. The Health, Personal Care group finished 2020 at +1.8% but 2021 has been better. October was up 1.6% from September but YTD they are +10% vs both 2020 & 2019.

  • YTD Avg Annual Growth: Grocery = +7.3%; Health/Drug Stores = +5.2%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > Oct have been spectacular for all these channels. The increase in Clothing vs October 2020 was less than usual but was still +22.7%. Only Furniture was down vs September, but all groups remained positive in all measurements vs 2020 or 2019 for the 8th consecutive month.

  • YTD Avg Annual Growth: Clothing = +5.4%; Electronic/Appliance = +3.7%; Furniture = +10.0%

Building Material, Farm & Garden & Hardware – Their “Spring” lift which began in 2020 has slowed but they have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April, but has since slowed and stabilized. They are still +13.6% YTD. Avg Annual Growth = +13.5%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. Sales grew 1% vs September, but it was still good enough for the 10th consecutive monthly record. October YTD they are +31.0% vs 2020. Avg Annual Growth = +17.1%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 -$1.0B, -0.7%. In March 2021 sales took off and reached the $14+B level in May and they have stayed there. Sales grew 8.0% to $15.7B in October, which set a new all time $ record and broke the $15B barrier. YTD sales are now +28.1% vs 2020 +27.1% vs 2019. Their recovery has become very real. YTD Avg Annual Growth = +12.7% (4th Best)

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. October was +6.1% vs September and +7.4% vs 2020. YTD $ are +14.2%. YTD Avg Annual Growth = +17.6%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>October are 8 of the 9 biggest $ales months in history with the 8 largest year over year monthly sales increases ever. The total increase was +$945B, which is over 5 times the -$174B decrease from March>May 2020 which caused so much concern. At yearend 2020, Restaurants and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but they still led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has been even better. In June > October all major groups are positive vs both 2020 and 2019. The recovery has also become real for virtually all channels and monthly sales continue to set records. In fact, the current annual growth rates of +9.3% for Total retail and +10.4% for Relevant Retail are the best in history. Retail has recovered and continues to grow but we’ll keep checking.

2020 U.S. PET SERVICES SPENDING $6.89B…Down ↓$1.73B

Except for a small decline in 2017, Non-Vet Pet Services has shown consistent growth in recent years. In 2018, that changed as spending grew a spectacular $1.95B to $8.72B. The number of outlets offering Pet Services has grown rapidly and consumers have opted for the convenience. However, prices were also strongly increasing. In the 2nd half of 2019 spending turned down and then plummeted in 2020 due to COVID. The final $ were $6.89B, down $1.73B (-20.1%). In this report we will drill down into the data to see what groups were most impacted. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

Services’ Spending per CU in 2020 was $52.53, down from $65.22 in 2019. (Note: A 2020 Pet CU (67%) Spent $97.34)

More specifically, the 20.1% decrease in Total Pet Services spending came as a result of:

  • 0.8% less households
  • Spending 3.40% less $
  • 16.62% less often

The chart below gives a visual overview of recent spending on Pet Services

You can see that after the big lift in 2018, spending essentially flattened out in 2019, similar to the pattern in 2016-17. Increased availability and convenience of Services has radically driven up the spending on Services. This happened despite a return to a more normal inflation rate, +2.4%. However, inflation grew even stronger, +2.5%. By the 2nd half of 2019, it made an impact as spending declined for the 1st time in 18 months. The 2020 pandemic brought restrictions and closures which drove spending radically down. Now, let’s look at some specific demographics of 2020 Services spending.

First, by Income Group.

In 2018, all groups spent more. In 2019, only the middle income group, $70>150K, spent more. In 2020 they had the biggest decrease, and their spending is now below the level in 2015. The only increase came from the $30>70K group, which is the only group earning under $150K which spent more than they did in 2015. The 50/50 dividing line in $ for Services was $123K. That is down from $125K in 2019 but still by far the highest of any segment.

  • <30K (25.4% of CU’s) – $19.66 per CU (-0.1%) – $0.66B, Down $0.05B (-6.7%)This segment is getting smaller and money is tight, so Services spending is less of an option. Their Services $ fell even farther below 2015.
  • $30>70K (31.1% of CU’s) – $35.95 per CU (+3.0%) – $1.47B, Up $0.01B (+0.9%) – In 2019 they had the biggest decrease. In 2020, they had the only increase and finished second in $ to the $150K> group.
  • $70>100K (15.0% of CU’s) – $41.87 per CU (-35.6%) – $0.82B, Down $0.42B (-33.7%) The spending of this middle income group had slowly but consistently grown since 2016. Then came the pandemic and the $ plummeted in 2020, falling even below the previous low point in 2016.
  • $100>150K (14.4% of CU’s) – $62.88per CU (-42.0%) – $1.19B, Down $0.79B (-40.0%)They had shown the strongest, most consistent growth since 2016. Then came 2020, when they had the biggest decrease, down 40.%.
  • $150K> (14.1% of CU’s) – $149.07 per CU (-19.6%) – $2.76B, Down $0.49B (-15.0%)They have moved steadily down since peaking in 2018. The pandemic drop in 2020 was -$0.49B, but they are still slightly above 2015 $.

Now, let’s look at spending by Age Group.

All age groups spent more on Services in 2018. In 2019, the groups under 45 spent less on Services while those 45 or older spent more. In the 2020 pandemic, everyone spent less but all stayed above 2015 $. Here are the specifics:

  • 75> (11.2% of CU’s) – $23.09 per CU (-55.0%) – $0.34B – Down $0.42B (-55.1%) This group has the greatest need for pet services, but money is always an issue. In 2019 they had the biggest increase. In 2020 they basically gave it all back, with the biggest drops in spending and frequency. 0.2% fewer CU’s spent 28.5% less $, 37.1% less often.
  • 65>74 (15.6% of CU’s) – $47.60 per CU (-25.0%) – $0.97B – Down $0.28B (-22.2%). This group is also very value conscious and growing in numbers. From 2016 to 2019 their spending was very stable. In 2020 it plunged by over 20% primarily due to a big decrease in frequency. 3.7% more CU’s spent 5.7% less $, 18.9% less often.
  • 55>64 (19.1% of CU’s) $53.15 per CU (-23.4%) – $1.33B – Down $0.37B (-21.7%) After a big drop in 2017, they began to slowly increase Services spending. In 2019, they moved up to the #2 spot in Services spending. A big drop in frequency drove spending down in 2020 but they are still #2. 2.2% more CU’s spent 1.9% less $, 21.9% less often.
  • 45>54 (17.2% of CU’s)- $75.38 per CU (-16.5%) – $1.70B – Down $0.31B (-15.2%) This highest income group was the leader in Services $ until 2016. They regained the top spot in 2019 and held on in 2020 despite a 20% drop in frequency which drove spending down -$0.31B. 1.5% more CU’s spent 5.2% more $, 20.6% less often.
  • 35>44 (17.0% of CU’s) – $56.91 per CU (-18.8%) – $1.27B – Down $0.30B (-18.9%) Spending exploded in 2018 with a $1B increase pushing them to #1. In 2019 they spent $1.6B more on Veterinary and Food and cut back on Services and Supplies. In 2020 both their spending and frequency fell. 0.1% fewer CU’s spent 8.9% less $, 10.9% less often.
  • 25>34 (16.0% of CU’s) – $52.85 per CU (-1.9%) – $1.11B – Down $0.03B (-3.0%) This group of Millennials “found” the Services segment in 2018 with a 36% increase in $. Their spending has slowly fallen since then. In 2020, their 3% decrease was primarily driven by a -9.7% drop in frequency. 1.2% less CU’s spent 8.6% more $, 9.7% less often.
  • <25 (3.8% of CU’s) – $32.44 per CU (+24.6%) – $0.16B – Down $0.03B (-14.3%) After 2018 this group returned to being a very minor player. 31% fewer CUs is significant. 31.2% fewer CU’s spent 19.7% less $, 55.1% more often.

In 2019, when overall Services spending fell $0.1B, the over 45 age group spent $0.51B more. The situation was reversed in 2020 as they spent -$1.38B less, 79.8% of the total $1.73B drop in Services spending.

Finally, here are some key demographic “movers” that drove the big drop in Pet Services Spending in 2020. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2018. The red outline stayed the same.

In 2018 the Services spending increase was very widespread with (88%) of all segments spending more. 6 of 12 demographic categories had no segments that spent less on Services in 2018. 2019 was very different and reflected the slight decrease in spending for the segment. All categories had segments that spent less on Services and 49 total segments (51%) had decreased Services $ from 2018. In 2020, the situation got markedly worse as 76 segments (79%) spent less and in 3 categories, no segments spent more.

You see from the graph that the biggest negatives were all substantially larger than the small increases. This speaks to the severity and widespread nature of the loss in $ in the segment. There was also considerable turmoil in Services spending. 3 groups maintained their position but 7 flipped from 1st to last or vice versa.

There was only 1 “usual” winner – Self-Employed, which have the highest income in their category. There were some winners that were definitely a surprise – Renters, Rural, $50>69K Income, Gen Z, High School Grads, Hispanic and Under 25 years old. That means that more than half of the winners were not expected.

In terms of “usual” losers, there really were none in 2020. The losing segments are where we find these usual winners:

  • 2 People
  • Married Couple Only
  • Homeowner w/Mtge
  • Managers & Professionals
  • Suburban
  • $100>149K
  • College Degree
  • 2 Earners
  • White, Not Hispanic

This actually makes some sense. The drop in spending was largely due to restrictions and closures caused by the COVID Pandemic. This would most impact the groups that usually spent the most and would produce the biggest decreases.

In our earlier analysis, we didn’t see any truly distinct spending patterns. The only lift in any age or income group, and it was miniscule, was from the $30>69K income group. However, it is significant that they are the only income group under $150K that didn’t spent less in 2020 than they did in 2015. The 50/50 spending point moved down slightly from $125 to $123 but that is somewhat deceptive. The highest income group, $150K> actually gained ground. This group has 14.1% of CUs but did 40.1% of the Services spending in 2020. That’s up from 37.7% in 2019.

After the huge lift in spending in 2018, Services spending plateaued in 2019. There were a lot of ups and downs, but overall the segment remained essentially stable at its new elevated level of spending. That changed with the pandemic in 2020. Like many retail services segments, Pet Services outlets were deemed nonessential and subject to restrictions This resulted in a radically reduced frequency of visits and was the biggest reason behind the 20% drop in spending.

There is no doubt that the Covid pandemic with widespread closures and “staying at home” had a big impact on this most discretionary Pet Industry segment. However, in recent years, with the increasing humanization of our pets, Pet Services have become more important to Pet Parents and the Pet Industry. For Pet retail outlets, offering Services provides a key point of differentiation and a reason to shop in their store. You can’t get your dog groomed on the internet or even in a Mass Market retailer. We expect this segment to come back strong in 2022.

 

2020 U.S. PET SUPPLIES SPENDING $15.16B…DOWN ↓$1.65B

Total Pet spending grew to $83.74B in 2020, up $5.31B (+6.8%) from 2019, a big turnaround. Unfortunately, the Supplies segment was on the other side as spending dropped to $15.16B, down $1.65B (-9.8%). (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

After flattening in the 2nd half of 2018, spending turned sharply down in the 1st half of 2019 and continued to decline through 2020 as the pandemic also contributed to the drop. 2019 & 2020 wiped out 93% of a 24 month $5B gain. We’ll “drill down” into the data to try to determine what and who are “behind” the 2020 drop in Supplies Spending.

In 2020, the average household spent $115.52 on Supplies, down 9.1% from $127.15 in 2019. (Note: A 2020 Pet CU (67%) Spent $172.42) This doesn’t exactly match the -9.8% total $ decrease. Here are the specific details:

  • 0.8% less CU’s
  • Spent 3.6% less $
  • 5.8% less often

Let’s start with a visual overview. The chart below shows recent Supplies spending history.

Since the great recession, spending trends in the Supplies segment have been all about price – the CPI. Although many supplies are needed by Pet Parents, when they are bought and how much you spend is often discretionary. Additionally, many of the product categories in this segment are now considered commodities, so price is the main driver behind consumer purchasing behavior. When prices fall, consumers are more likely to buy more. When they go up, consumers spend less and/or buy less frequently.

2014 was the third consecutive year of deflation in Supplies as prices reached a level not seen since 2007. Consumers responded with a spending increase of over $2B. Prices stabilized and then moved up in 2015.

In 2015 we saw how the discretionary aspect of the Supplies segment can impact spending in another way. Consumers spent $5.4B for a food upgrade and cut back on Supplies – swapping $. This, in conjunction with inflation, caused supplies to suffer as consumers spent 4.1% less, but they bought 10% less often. That drop in purchase frequency drove $1.6B (78%) of the $2.1B decrease in Supplies spending.

In 2016, supplies’ prices flattened out and consumers value shopped for their upgraded food. Supplies spending stabilized and began to increase in the second half. In 2017 supplies prices deflated, reaching a new post-recession low. The consumers responded with a huge $2.74B increase in Supplies spending that was widespread across demographic segments. An important factor in the lift was an increase in purchase frequency which was within 5% of the 2014 rate.

In 2018 prices started to move up in April and rapidly increased later in the year due to the impact of new tariffs. By December, Supplies prices were 3.3% higher than a year ago. This explains the initial growth and pull back in spending.

In 2019 we saw the full impact of the tariffs. Prices continued to increase. By yearend they were up 5.7% from the Spring of 2018 and spending plummeted -$2.98B. The major factor in the drop was a 13.1% decrease in purchasing frequency.

2020 brought the pandemic, with retail restrictions and the consumers focus on needed items. Both the amount spent and frequency of purchase of Supplies fell slightly. This could be the result of a strong consumer move to the internet.

That gives us an overview of the years leading up to 2020. Now let’s look at some specifics regarding the “who” behind the 2020 numbers. First, we’ll look at spending by income level, the most influential demographic in Pet Spending.

National: $115.52 per CU (-9.1%) – $15.16B – Down $1.65B (-9.8%).

All big income groups spent less but the 50/50 $ divide remained the same as 2019, $92K, the lowest of all segments.

  • <$30K (25.4% of CU’s)- $57.73 per CU (+2.1%) $1.93B– Down $0.09B (-4.6%). This group is very price sensitive, but they actually spent more per CU. 6.5% fewer CUs caused the decrease and put them even further below 2015 $.
  • $30K>70K (31.1% of CU’s)- $97.38 per CU (-5.1%) $3.97B Down $0.30 (-7.0%). This big, lower income group closely matches both the national pattern and that of the $150K+ group. The tariff prices had a big impact and COVID a lesser one. Amazingly enough, until 2019 they were the leader in Total Supplies Spending $.
  • $70>$100K (15.0% of CU’s) – $117.65 per CU (-21.3%) – $2.32B Down $0.54B (-19.0%). This middle-income group had been consistent in Supplies spending. 2020 hit them hard in all segments, including a 19% drop in Supplies $.
  • $100K>$150K (14.4% of CU’s) – $146.42 per CU (-14.4%) – $2.76B Down $0.36B (-11.4%). This higher income group is also sensitive due to family needs. They had the 2nd biggest % drop and traded Supplies $ for Food & Veterinary.
  • $150K> (14.1% of CU’s) – $225.91 per CU (-13.0%) $4.18B Down $0.36B (-8.0%). The $150>199K was up $0.01B but the $200K+ group spent $0.38B less. Money matters in Supplies, but the pandemic impact was widespread.

Every group spent less but the biggest negative impact occurred in the middle range – $70K >$150K. This group has the biggest family and career pressures, so it is not surprising that their discretionary spending on Supplies was less.

Now, we’ll look at spending by Age Group.

National: $115.52 per CU (-9.1%) – $15.16B – Down $1.65B (-9.8%).

It’s split, but simple. Young Millennials and old Boomers spent more. Everyone else spent less. Here are the details.

  • 55>64 (19.1% of CU’s) $108.93 /CU (-33.0%) – $2.73B – Down $1.26B (-31.5%). Low Supplies prices in 2017 got them on the Supplies Band Wagon. When prices turned sharply up in the 2nd half of 2018 and 2019, spending stalled then dropped. Spending fell again in 2020 as 2.2% more CU’s spent 26.2% less on Supplies, 9.2% less often. Part of the cut back on Supplies was to help pay for a huge spending increase in Food as they traded $.
  • 45>54 (17.2% of CU’s) $146.36 per CU (-13.2%) – $3.31BDown $0.45B (-11.9%). Until 2019, this highest income age group had been the leader in Supplies spending since 2007. More CU’s (+1.5%) spent 6.8% less on supplies, 6.9% less often. They had a 12% drop but returned to the top $ spot, now battling the 35>44 group.
  • 35>44 (17.0% of CU’s) $141.94 per CU (-2.1%) – $3.17B; Down $0.07B (-2.2%). This group is second in income and overall expenditures but also has the biggest families. After 3 strong years, the strong inflation drove the $ down in 2019. However, the Pandemic had little impact. 0.1% less CUs spent 5.5% more $, 7.2% less often.
  • 25<34 (16.0% of CU’s) $133.17 per CU (+29.8%) – $2.80B; Up $0.62B (+28.3%). After trading Supplies $ for upgraded Food and Vet Care in 2016, these Millennials turned their attention back to Supplies. The rising prices hit them hard in 2019 but they reversed this in 2020 as 1.2% fewer CUs spent 30.4% more $, 0.5% less often.
  • 65>74 (15.6% of CU’s) $96.07 per CU (+2.1%) – $1.96B – Up $0.11B (+5.8%). This older group is very price sensitive. When prices turned up in 2018, they immediately cut back on spending which continued into 2019. They came back in 2020 but not as strong as the 25>34 group. 3.7% more CUs spent 4.9% more, 2.7% less often
  • 75> (11.2% of CU’s) $43.04 per CU (-31.4%) – $0.63B, Down $0.29B (-31.5%). This lowest income group is truly price sensitive. They began to cut back on spending in the 2nd half of 2018 and this behavior continued in 2019. Their spending was severely impacted by the Pandemic as 0.2% less CU’s spent 19.4% less, 14.9% less often.
  • <25 (3.8% of CUs) $110.71/CU (-6.4%) $0.56B – Down $0.31B (-35.6%). 31.2% fewer CUs spent 8.8% less $, 2.6% more often. This group was fundamentally impacted by COVID as they lost 2.2M CUs, down 31.2%.

The impact of COVID was widespread but mixed. Only 2 disparate groups – 25>34 and 65>74 spent more.

Next, let’s take a look at some other key demographic “movers” in 2020 Pet Supplies Spending. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2019. The red outline stayed the same.

In 2019, in 9 of the 12 demographic categories all segments spent less on Supplies. In 2020 it was only 1. Also in 2019, 97% of 96 demographic segments spent less. In 2020 it was 81%. 2020 was bad but still an improvement over 2019.

Only 2 segments flipped from last to 1st as Managers/Professionals and Homeowners w/Mtge returned to their usual position at or near the top. 5 Segments held their position – 1 on top, 4 on the bottom. All of these are surprises as they are often in the opposite spot.

On the “winning” side there are a couple “usual suspects” – Mgrs/Prof & Adv. College Degree. The others are all somewhat surprising although Supplies has trended younger in recent years which would include Millennials & 25>34 yr olds. On the losing side, we already mentioned 4 surprises but there are a couple more – Suburban & 2 Earners.

Supplies is a discretionary segment, so it is more susceptible to market factors than the more needed segments. In fact, Supplies spending has decreased in 16 years since 1984. Since 2010, it has become very commoditized and price sensitive. 2 years of deflation drove spending up $5B. Then inflation hit and things turned around, -$2.98B. The 2020 Pandemic caused Pet Parents to focus on Pet Needs. This means that the more discretionary categories, Supplies & Services, lost ground. The overall decrease in Supplies was relatively small, under 10%, compared to the changes in other segments but it still shows the vulnerability of this more discretionary segment.

Retail Channel Monthly $ Update – August Final & September Advance

In May 2020, the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. We have not beaten the virus yet so we will continue to track the ongoing recovery of the retail marketplace with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Retail Report for August and then move to the Advance Report for September. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the August Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. $ fell in January & February but set a new all time $ record in March. In April $ fell but they rebounded in May to another record high. Sales have slowly declined through August. Here are the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The final total is $2.0B more than the Advance report projected a month ago. All groups were up slightly. The specifics were: Relevant Retail: +$0.7B; Gas Stations: +$0.6B; Auto: +$0.4B: Restaurants: +$0.3B. Sales vs July were down in all but Relevant Retail. Total Retail $ were the 8th highest month of all time. Total $ales broke $600B for the 1st time in December and has now done it 8 times. Auto still has the strongest recovery and is in fact prospering – annual YTD growth rate since 2019 is +11.9%. There were spending dips vs the previous month but for the third consecutive month, all groups were positive in all other measurements.

Now, let’s see how some Key Pet Relevant channels were doing in August.

  • Overall– 5 of 11 channels were down vs July but all were up vs August 2020 and 10 vs August 2019. In YTD $, all were up vs 2020 and 10 vs 2019. August was the 4th biggest month in history for Relevant Retail.
  • Building Material Stores – Their amazing lift may finally be slowing. The surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Their Spring lift has slowed in 2021 but Building and Farm stores are still going strong. Sporting Goods stores have a similar spending pattern. Sales took off in May 2020, hit a record peak in December and continued strong into 2021, peaking in March. After slowing in July, the $ increased in August. YTD they are +47.4% vs 2019, an Annual Growth Rate of 21.4%!
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs July but YTD are on par with the 2020 binge. They are up 14% vs August 2019 and 14.3% vs YTD 2019. Drug Stores were +$17B (+5.7%) for 2020. They had a record March. Sales have been stable since then, but all other measurements are positive and YTD $ are +7.6%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. Monthly sales by channel have been slightly up or down since then but GM has been strong, +14% YTD. $ Stores & Clubs/SuperCtrs are leading the way with a combined growth rate of +8.5%. These channels promote value. Their success reinforces its importance to consumers. Also, Discount Dept Stores are again back in the game.
  • Office, Gift & Souvenir Stores– $ increased slightly from July and were +20.5% vs August 2020. The pandemic hit them hard. They are still down vs 2019 – monthly and YTD. Recovery is a long way off, but things are improving.
  • Internet/Mail Order – Their $ were up vs July as the pandemic continues to foster this channel’s growth. In August of 2019, their YTD growth was +13.9%. Now, their avg growth rate is +19.6% – a 41.0% increase.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. Their August $ were down slightly from July but still #4 of all time. YTD sales are +27.5% vs 2020 and +39.3% vs 2019. Very strong!

Relevant Retail began recovery in May and reached a record level in December. $ fell in Jan & Feb, turned up again in March and began a monthly up/down rollercoaster. August $ are up and all channels but 1 are ahead of 2019 & 2020. The key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, the Advance numbers for September.

2020 was a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell from their December peak in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record of $633B. April sales were down slightly but they took off again in May to set yet another spending record, $643.1B. June>Sept $ fell but September was still the 8th biggest $ month in history. All major groups were down from August, but were positive in all other measurements for the fourth straight month. Some other areas of the economy are still suffering, some spending behavior has changed, and inflation has become a bigger factor in some increases. However, consumers continue to spend “big bucks”, especially in Relevant Retail, and the overall Retail marketplace continues its strong recovery.

Total Retail – In March, Total Retail hit $633.1B, a record for the most spending in any month in any year. In April, $ales dipped to $625.5B but were still $218.3B more than April 2020 – a record increase that was more than double the size of last year’s record drop. In May, sales set another new record, $643.1B. June>Sept sales dipped slightly and September was the 3rd smallest month this year, which is normal. However, at $606.8B, it was still the 8th biggest month in history. Moreover, the current YTD average annual sales growth rate since 2019 is 9.2%, the highest ever in records going back to 1992. Total Retail has not just recovered. It is stronger than ever.

Restaurants – This group has no negative measurements vs 2020 or 2019 for 4 straight months. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1B, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February, YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily from April Through July. Sales dipped slightly in August/September but were still strong vs 2019 & 2020. YTD their $ are plus 30.5% vs 2020 and +4.1% vs 2019. Their recovery is getting stronger.

Auto (Motor Vehicle & Parts Dealers) – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April>September as sales exceeded $122B in all 7 months – the 7 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 16 times in history. 13 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +11.8% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed and continued to grow to to a record $53.5B in July. They fell in Aug/Sept but are still +38% from 2020. They have been positive in all measurements vs 2019 & 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, September 2021 prices were 42.1% above 2020. That means that the 38.3% year over year $ lift in September was actually a decrease in the amount of gas sold. YTD Annual Growth Rate Since 2019 = +5.2%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but set monthly records. In March they turned sharply up and then down in April. They bounced back in May then fell in June & July. In August sales rose again but fell in September. However, we should note that while December 2020 is still #1, March > September are 7 of the 9 highest $ months of all time. The Relevant Retail Market has exceeded $361B in monthly sales 9 tImes in history. 7 of those have occurred since the onset of the pandemic. It is also very important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +10.4%. The recovery has become widespread as all channels have been positive in all measurements vs both 2020 and 2019 for 2 consecutive months. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus an exceptionally long 2020 “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. September $ were down 3.6% from August and the drop was widespread. However, a dip in September $ is normal and at -3.6% it was less than half of the -8% drop in 2019. The groups in the chart are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in 12 of 13 channels were down vs August but all were up vs September 2020, vs September 2019 and YTD vs 2020 and 2019. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.4%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 17 consecutive months. The group set an all-time record of $407B in December and finished 2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > Sept. were 7 of the 9 biggest of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift may be ending but consumers are still focused on their homes.
  • SuperCtrs/Club/Value/$ Strs – They kept the GM channel strongly positive. Value is still a big consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales fell for all channels in September, but all other numbers were positive. Even Department Stores $ are growing increasingly positive. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores has remained near the current 8.8%. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +7.4%; Dept Stores = +1.2%; Club/SuprCtr/$ = +8.8%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In June>Sept they beat 2020 $. The Health, Personal Care group finished 2020 at +1.8% but 2021 has been better. September was down from August but YTD they are +10% vs 2020 and 2019.

  • YTD Avg Annual Growth: Grocery = +7.2%; Health/Drug Stores = +5.2%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > Sept have been spectacular for all these channels. The increase in Clothing vs September 2020 was less than usual but was still +22.5%. Only Furniture was up vs August, but all remained positive in all measurements vs 2020 or 2019 for the 7th consecutive month.

  • YTD Avg Annual Growth: Clothing = +5.1%; Electronic/Appliance = +3.4%; Furniture = +10.3%

Building Material, Farm & Garden & Hardware – Their “Spring” lift which began in 2020 may be slowing. They have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April then trended down May > Sept. They are still +14.4% YTD. Avg Annual Growth = +13.8%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. Even though $ fell 10% in September, it was still good enough for the 9th consecutive monthly record. September YTD they are +32.9% vs 2020. Avg Annual Growth = +17.1%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 -$1.0B, -0.7%. In March 2021 sales took off and reached the $14+B level in May and they have stayed there. Sales fell -2.9% in September, but their YTD sales are now 27.8% above 2020 and 26.0% more than 2019. Their recovery has become very real. YTD Avg Annual Growth = +12.3% (4th Best)

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. September was -2.5% vs August but +10.6% vs 2020. YTD $ are +15.2%. YTD Avg Annual Growth = +17.9%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>September are 7 of the 8 biggest $ales months in history with the 7 largest year over year monthly sales increases ever. The total increase was +$861B, which is 5 times the -$174B decrease from March>May 2020 which caused so much concern. At yearend 2020, Restaurants and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but they still led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has been even better. In June > September all major groups are positive vs both 2020 and 2019. The recovery has also become real for virtually all channels and monthly sales continue to set records. In fact, the current annual growth rates of +9.2% for Total retail and +10.4% for Relevant Retail are the highest in history. Retail has recovered but we’ll keep checking.

2020 U.S. PET FOOD SPENDING $36.84B…Up ↑$5.65B

The Pandemic of 2020 caused much turmoil in the retail marketplace. The Pet Industry grew but the results by segment were mixed. Total spending reached $83.74B, up $5.31B (+6.8%). Food saw panic binge buying in the 1st half. It slowed slightly in the 2nd half, but spending was still strong. The other necessary segment, Veterinary, also had double digit growth. The 2 discretionary segments, Supplies and especially Services were hit hard. Here are the specifics:

  • Pet Food – $36.84B; Up $5.65B (+18.1%)
  • Pets & Supplies – $15.16B; Down $1.65B (-9.8%)
  • Veterinary – $24.85B; Up $3.05B (+14.0%)
  • Pet Services – $6.89B; Down $1.73B (-20.1%)

The industry truly is a “sum” of its integral segments, and each segment has very specific and often very different buying behavior from the many consumer demographic segments. For this reason, we’re going to analyze each of the industry segments first. This will put the final analysis of Total Pet Spending into better perspective. Note: The numbers in this report come from or are calculated by using data from the current and past US BLS Consumer Expenditure Surveys. In 2020, this was gathered by the U.S. Census Bureau from over 42,000 interviews and spending diaries. The final data was then compiled and published by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2020 Pet Food Spending totaled $36.84B in the U.S., a $5.65B (+18.1%) increase from 2019. This was the largest increase in history. It’s interesting that 4 of the 5 greatest $ increases and the 2 biggest $ decreases have all occurred in the last 6 years. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. In earlier research we discovered a distinct, long term pattern in Pet Food Spending. In 2018 we broke the pattern due to outside influences – 1st the FDA warning, then with COVID in 2020. Here is Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation.

The pattern began in 1997. Retail Pet Food Spending increases for 2 consecutive years then reaches a plateau year or even drops. There was a notable exception in the period from 2006 to 2010. During this time, there were two traumas which directly impacted the Pet Food Retail market. The first was the Melamine recall, which resulted in radically increased prices as consumers insisted on made in USA products with all USA ingredients. The second affected everyone – the great Recession in 2009. This was the first time that annual U.S. retail spending had declined since 1956. The net result was that the plateau period was extended to include both 2009 and 2010.

For 20 years, Pet Food was driven by short term trends. A new food trend catches the consumers’ attention and grows…for 2 years. Then sales plateau or even drop…and we’re on to the next “must have”. After 2014, the changes  became more pronounced and the situation got even more complicated. These complications are due to a number of factors starting with the move to high priced super premium foods, but including increased competition, especially from the internet, and behavioral changes, like increased value shopping. Let’s take a closer look at spending since 2014.

First, some specifics behind the record $5.65B (18.1%) increase to $36.84B. In 2020, the average U.S. Household spent a total of $280.38 on Pet Food. This was an 18.7% increase from the $236.26 spent in 2019. This doesn’t exactly “add up” to the 18.1% increase in total Food Spending. With additional data provided from the US BLS, here is what happened.

  • 0.5% less U.S. CUs
  • Spent 40.8% more $
  • 15.7% less often

By the way, if 67% of U.S. CUs are pet parents then their annual Pet Food Spending is $418.48. Here’s a rolling history.

2014 marks the beginning of the Super Premium era. It began in the 2nd half of 2014 with the 25>34-year-old Millennials making the 1st move. In 2015 the Baby Boomers got on board in a big way, producing a $5.42B increase in spending, the biggest lift in history at the time. 2016 saw a spending change that was accelerated by the high prices of Super Premium Pet Foods. After consumers choose to upgrade to a more expensive pet food, their #1 priority becomes, “Where can I buy it for less?” “Value Shopping” on the internet was a major contributing factor in the big spending drop in 2016.

2017 was an up year which, based upon history, should have been due to a “must have” trend. There were some possible candidates, but nothing stood out. A deeper dive into the data showed that the $4B increase in Pet Food spending in 2017 didn’t come from a new trend. It came from a deeper demographic penetration of Super Premium foods. Value shopping in a highly competitive market, especially on the internet had made Super Premium pet foods more accessible to a broad swath of consumers.

Like Pet Food, human behavior has changed over the years in regard to our pets. In the 90’s, Pet Owners became Pet Parents. Then, after the turn of the century we began truly humanizing our pets. This movement is very accurately reflected in the evolution of Pet Food. We became increasingly more conscious of fulfilling the health needs of our pets, beginning with the first move to premium foods in 2004. This ramped up considerably after the Melamine scare in 2007. Now consumers read pet food labels, research ingredients and expect their pet foods to meet the same quality standards as the best human foods. This was very evident in 2018. It should have been a year of increased spending but the consumers’ reaction to the FDA grain free warning threw the pattern out the window. In the beginning of 2019 Pet Food spending stabilized as some doubts were raised about the validity of the warning. In the second half of the year Food Spending increased +$2.3B. Some Pet Parents began to return to the topline Super Premium Foods. In some cases, they opted for even more expensive varieties. We also saw some new groups get on board the Super Premium Express.

After the 2019 recovery came the pandemic of 2020. There is nothing more necessary to a Pet Parent than pet food. This spurred binge buying, especially in the 1st half of the year and drove the biggest annual spending increase in history.

The growth of Pet Food spending since 2014 reflects the rise of Super Premium but also another trend – the spectacular increase in the number and use of Pet Medications and Supplements, which are often produced in the form of treats. Together, the strength of Pet Food and these product subcategories reflect the Pet Parents’ absolute number 1 current concern – the health, wellbeing and safety of their Pet Children, which starts with the quality of their food. How big is this trend? Prior to the pandemic, at Global Pet Expo 2020, the 2 product categories with the most exhibitors were #1 Treats and #2 Supplements.

Now let’s look at some specific 2020 Pet Food Spending Demographics. First, we’ll look at income. Prior to 2014 it was a less dominant factor in Food spending. However, the move to Super Premium has brought it more to the forefront. In 2015 the spending of the over $70K group exceeded the <$70K for the first time. In 2020 it was almost twice as much. In 2020 the 2 big groups below $70K spent more than 2019 but all 3 big groups under $100K spent less than they did in 2015. The over $100K income group spent twice as much in 2020 as they did in 2015. Due to this movement to higher income groups, we have added a new measurement – spending over/under $100K. In 2015, the 50/50 divide on Pet Food spending was about $70K. In 2020 it is now approximately $107K, breaking the $100K barrier for the first time. It is also up from 87K in 2019. That’s a big change. The chart below shows the annual spending for the major income groups from 2015 through 2020. This should put the 2020 numbers into better perspective.

Before we get into the details for 2020, we should note the uniqueness of 2 years. With competitive pricing on Super Premium Foods and the consumers’ commitment to pet health, 2017 was the only year since 2015 with spending growth in every major income group. In 2018 the FDA grain free warning turned this situation around as all groups spent less. Now, 2020.

2020 National Numbers: $280.38 per CU (+18.7%); $36.84B; Up $5.65B (+18.1%); 2015>2020 – Up $7.35B (+24.9%)

The spending pattern was mixed. The groups <$70K and the $100K> group spent more while the middle income group spent substantially less. The inflation rate in 2020 fell from 2.9% to 0.1% which may have helped the low income groups.

Here are 2020 specifics:

  • Under $30K: (25.4% of CU’s) – $146.95 per CU (+22.3%) – $4.61B – Up $0.57B (+14.2%). Obviously, this group is very price sensitive. It is also getting smaller. The number of CU’s was down 6.5% in 2020 and 18.8% since 2015. This decrease masks the true food situation. While their Total Food spending is lower than 2015, their Avg CU spending on food in 2020 is up 22.2%. Their Total Pet Food spending is being driven down by the substantial and consistent decline in the number of CUs. This makes their spending increase in 2020 even more significant. Even this lowest income group remains fully committed to their pets.
  • $30K>$70K: (31.1% of CU’s) – $193.98 per CU (+1.2%) – $8.17B – Up $0.02B (+0.3%). This group had a 2.0% decrease in the number of CUs which basically negated their slight increase in spending. The Pet Food spending within this big group was definitely mixed. The $30>39K group lost CUs but they radically increased spending, +$0.95B (+45.4%). The $40>49K group grew +0.6% in numbers but they dialed back their spending -$0.13B. The average income for Retirees is now $42K so many are included in this group. They undoubtedly contributed to the growth in CUs but even their +$0.62B increase in Pet Food spending couldn’t turn the $40>49K group positive. Now, the most negative group, $50>69K. They lost 4.5% in CUs and spent -16.3% less per CU on Pet Food. These 2 factors pushed their Total Pet Food Spending down -$0.79B (-20.9%). It was a big drop but not enough to overcome the lift from $30>39K.
  • $70K>$99K: (15.0% of CU’s) – $203.13 per CU (-33.7%) – $3.75B – Down $2.15B (-36.4%). The Pet Food Spending for this group had been very stable. In 2017, this changed as they got “on board” with Super Premium Pet Food. They also became more sensitive, reacting to the FDA warning in 2018, bouncing back in 2019 and then plummeting due to Covid in 2020. They are middle income, with family responsibilities and under considerable monetary pressure.
  • $100K> (28.5% of CU’s) – $515.06 per CU (+44.0%) – $20.31B – Up $7.20B (+55.0%). 87% are college grads so they saw the value of Super Premium food very early. Their 2018 decrease in spending due to the FDA warning was minimal, -0.05B as many opted to move up to even more expensive types of food. They came back strong in 2019 and then were the driving force behind the huge lift in 2020. We should note that their lift was not universal. CUs making $100>149K or over $200K spent $8.89B more, while CUs making $150>199K spent $1.68B less. However, without the overall $100K> group, Pet Food Spending would have been down -$1.55B in 2020.

In 2018, the decrease in Pet Food spending was widespread across incomes. In fact, groups totaling 83.9% of all U.S. households spent less on Pet Food. In 2019, the rebound spending increase only happened for households with incomes above $40K, 61.4%. In 2020 the Pandemic lift occurred at both ends of the income spectrum but the $100K> group was the only true driver as their lift was 127% of the total increase. Besides the biggest increase in history, 2020 was significant for another reason. In the era of Super Premium, Pet Food spending has become increasingly tied to income. In 2020, the 50/50 dividing line on share of spending exceeded $100K for the 1st time. Now, Spending by Age Group…

2020 National Numbers: $280.38 per CU (+18.7%); $36.84B; Up $5.65B (+18.1%); 2015>2020 – Up $7.35B (+24.9%)

One assessment, although it is not 100% accurate, is very close. That assessment is that It’s a generational thing. Baby Boomers and Millennials spent more. Gen X, Gen Z and those born before 1946 spent less.

  • 55>64 (19.1% of CU’s) – $583.23 per CU (+90.2%) – $14.63B – Up $7.09B (+94.0%). This group (all Baby Boomers) has been at the forefront of recent major spending swings. In 2015 many of them upgraded to Super Premium. In 2016 this group looked for and found a better price. In 2017 they led a deeper penetration of the upgrade. In 2018 they had a -$3.5B reaction to the FDA warning. They began to recover in 2019 but it was far short of the drop. Then came 2020, which saw an unprecedented lift in spending. There were 3 major contributing factors. First was panic, binge buying due to pandemic. They also were still recovering from the FDA warning. Finally, the pandemic caused the loss of over 2 million <25 CUs. Many of them moved back with their parents. They obviously took their pets with them, so this contributed to the spending explosion in the 55>64 year old group.
  • 45>54 (17.2% of CU’s) – $247.46 per CU (-21.7%) – $5.45B – Down -$1.63B (-23.1%). This group is #1 in income and total CU expenditures. Up until 2015 they were #1 in Pet Food spending. They bought premium food but didn’t “buy in” to Super Premium until 2017. They were negatively impacted by the FDA warning, but they rebounded stronger than any other group. In 2020, their spending dropped significantly. The decrease corresponded almost exactly to a $1.68B drop by the $150>199K income group. Although some may have dialed back their purchases. It is likely that most found value and cheaper prices by buying on the internet. They actually spent 9.7% more but 28.7% less often.
  • 65>74 (15.6% of CU’s) – $248.30 per CU (-1.1%) – $5.20B – Up $0.32B (+6.5%). This group is now all Baby Boomers and growing (+2.0%). They are starting to retire but many are still working (0.6 per CU). Because of their reduced income, they are often slower to react to industry trends. However, they have shown slow but consistent growth every year since 2015. They are Boomers so their Pets are a major priority. They spend 1.13% of their total CU expenditures on their pets. Only the 55>64 yr olds spend a higher percentage.
  • 35<44 (17.0% of CU’s) – $195.39 per CU (-13.9%) – $4.38B – Down -$0.61B (-12.2%). They are primarily young Gen Xers. They are 2nd in income and CU spending but have the biggest families so value shopping is a way of life. Their spending pattern tends to match the older Gen Xers but is less volatile. Their drop in frequency was 14.7%.
  • 25>34 (16.0% of CU’s) – $222.60 per CU (+26.9%) – $78B – Up +$0.87B (+22.3%). In recent years the spending pattern of these Millennials has foreshadowed the overall market for the following year. However, no one could have predicted the pandemic. They reacted strongly with a 22.3% increase in $. They spent 30.6% more, 2.8% less often. Another situation should be noted. They are the most stable in spending. That is surprising.
  • 75> (11.2% of CU’s) – $140.98 per CU (-5.1%) – $2.00B – Down -$0.02B (-1.1%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. However, they remain committed to their Pets and high quality food.
  • <25 (3.8% of CU’s) – $74.69 per CU (-24.5%) – $0.39B – Down -$0.37B (-48.4%). The number of CUs fell by 2.2M, -31.2%. Many moved back with their parents or in with other adults. It’s obvious by the big drop in CU Pet Food spending that those who maintained their households had a lower percentage of pet ownership.

The situation in the age groups in 2020 seems to be a generational divide. With Boomers & Millennials on the plus side and everyone else on the downside. Another significant event was that the title for top Pet Food spending CU was passed back to young Baby Boomers from old Gen Xers. The Boomers built the Pet Industry. Their dominance will inevitably fade but it will take a long time. Need proof? Look at the ongoing strong performance by the 65>74 year olds.

We need to drill deeper. Let’s take a look at the segments with the biggest change in spending in 9 categories. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2019. The red outline stayed the same.

We have seen some big spending swings in recent years. Some were industry driven. Others were due to an outside influences like the FDA warning in 2018 and now the Pandemic in 2020. These outside influences had a common driver – fear. The FDA warning caused Pet Parents to back away from grain free dog food. The Pandemic caused many of them to stock up on (binge buy) their Super Premium Pet Food. This produced the biggest Pet Food Spending Lift in history. 2019 saw a recovery lift but it was almost a “normal” year in between the 2 big swings in 2018 and 2020.

The 2020 lift was truly a spectacular year of growth, but it was also somewhat stable as 5 of the 9 segments with the biggest growth were the same as 2019 and are often the best performers. The 55>64 yr olds are a true subset of the Baby Boomer group. They have been on top 3 times since 2015. Only 2 segments flipped from 1st to last and they are really the same group, Gen X. Among the losers, Renters repeated but the others were new. There were a few definite surprises. Gen X, 2 people CUs and the Big Suburbs are usually among the leaders in spending.

You see that the biggest increases were notably larger than the decreases. This was the pattern across the demographic categories. The lift was driven by specific segments. In fact, 49% of 96 demographic segments actually spent less on Pet Food. This is not what you would expect in a year that produced the biggest spending increase in history.

This Pandemic lift was fear driven and very emotional. Although most groups now view pets as part of the family, there is one group that will always be at the top, Baby Boomers. They were the first Pet Parents and their love for their Pet Children truly fueled the spectacular growth of the Pet Industry. This emotional connection has driven many big swings in spending in recent years. There is another consideration. Generations are segments with almost the same individuals every year. The 2020 lift was largely driven by a specific group – Baby Boomers. We’ll see what 2021 brings.

U.S. CU INCOME AND SPENDING IN 2020

The Pandemic of 2020 had a huge impact on life in America. The stay at home mandates and lockdowns especially affected the Retail Trade. The effects weren’t always negative. In our regular analysis of Data from the Census Bureau’s Monthly Retail Trade reports, we saw some channels, deemed essential that actually benefited from the pandemic restrictions. Although Restaurants, Auto and Gas Stations were initially hit hard, the essential channels in the Relevant Retail group benefited from a lift in consumer spending so much that spending in the whole Retail Sector turned positive for 2020 vs 2019. Admittedly, the increase was small, +0.5% but Sales have continued to grow in 2021 in virtually all channels as at least Retail Spending has essentially recovered from the pandemic.

This data is gathered directly from Retailers by the Census Bureau so it is essentially the “sellers’ point of view”. The US Bureau of Labor Statistics conducts an annual Consumer Expenditure Survey (CEX), which is also designed and executed by Census Bureau Personnel. This presents the spending situation from the “buyers’ point of view”. The data is gathered from diaries and interviews of over 42,000 U.S. CUs (Financially Independent Consumer Units – essentially Households). The early days of the pandemic caused some problems in information gathering and responses, especially in the Diary method. These variances generally showed up in specific small segments. The overall data and the numbers for larger groups were still well within acceptable guidelines. The Census Bureau adapted their methodology to better fit the situation so that by the 2nd half of 2020, the response rate had returned to more normal levels.

The 2020 Consumer Expenditure Data was just released by the US BLS. You are all familiar with some of the data as I use it to develop mid-year and annual reports on Spending in the Pet Industry segments and Total Pet. The data goes way beyond that. It details the CU spending on over 1650 specific expenditures by over 80 demographic segments. Yes, it covers Pet Food $ but it also includes the amount spent on underwear for Children under 2 years old as well as the amount spent on bottled gas for an owned vacation home. To say that it is detailed would be a serious understatement. It also points out another major difference between the CEX and the Monthly Retail Trade report. Both are about spending. However, the Monthly Retail Trade report shows where the $ were spent but doesn’t provide details on what was bought. The CEX is essentially the opposite. It details what was purchased but doesn’t say where the consumers bought it. These 2 viewpoints are both important in getting an overall view of the situation.

I am currently building the database for my Pet Industry reports but I thought that the unique nature of 2020 merited a preliminary summary of the overall spending situation. This will put the Pet spending data into a better perspective. We’ll start with some basics and then get a little more specific for some relevant expenditures. However, if you want to know the spending situation on bottled gas for owned vacation homes, you’ll have to send me a separate request.

# of CU’s (000) – The number of CU’s in 2020 was 131,234K – down -1,008K (-0.8%). That’s 1 million less than in 2019. How unusual is that? I can’t say for sure as I only have annual data going back to 1984. However, in these records an annual drop in CUs has NEVER happened before. The 2 smallest increases were 30 thousand (+0.03%) in 1993 and 77 thousand (+0.06%) in 2009. Both 1993 and 2009 were years with significant recessions.

Let’s look at what groups lost CUs and where the people may have gone.

Here are some big decreases:

  • <25: -2,288K (-31.2%)
  • Renter: -3,083K (-6.4%)
  • Born <1946: -1517K (-9.0%)

The loss in the oldest Americans is not unexpected and is primarily due to movement to assisted living or passing on. There was an increase in homeownership, but it was far less than the drop in renters. The <25 group is getting older, but it should still be growing, not dropping precipitously.

Here are some significant increases:

  • Married, Child 18+: +322K (+3.3%)
  • 2+ Adults, No Kids: +689K (+3.2%)
  • 5+ CUs: +726K (+5.8%)

This clearly shows that a lot of the <25 group, moved back home with their parents or in with other adult friends.

This data shows that the CU count drop was driven by the pandemic economic impact on the younger crowd. Before we get into the $. Let’s look at some CU characteristics for 2020. We’ll note the changes from 2019

Number in CU

  • Avg: 2.5
  • Children <18: 0.6
  • Adults 65>: 0.4
  • Earners: 1.3

Housing Tenure

  • Homeowners: 66% (up from 64%)
    • With Mtge: 39% (up from 37%)
    • W/O Mtge: 27%
  • Renters: 34% (↓ from 36%)

Race/Ethnicity

  • African Americans: 12.7% (↓ from 13.1%)
  • White (Not Hisp), Asian or A/O: 73.1% (↓ from 73.4%)
    • White, Not Hispanic: 66.4% (↓ from 66.6%)
    • Asian: 4.7% (↓ from 4.8%)
    • All Other: 2.0%
  • Hispanic/Latino: 14.2% (↑ from 13.6%)

HS Grads w/at least Some College: 69% (↑ from 67%)

BA/BS> : 46.7% (↑ from 44.3%)

At least 1 vehicle: 90% (↑ from 89%)

Now let’s get into the $, First Gross Income

CU Gross Income – The average CU income in 2020 was $84,352. That’s up +$1500 (+1.8%) from 2019. Considering the impact of the pandemic on the workplace, any increase seems surprising. Let’s see what groups had the biggest gains and losses in earnings. The changes are expressed in percentages to allow better comparison of the impact.

Here are some big “winners”:

  • Bottom 80% of CU Incomes: +4.7%
  • < 25: +16.1%
  • Singles: +10.3%
  • Renters: +4.1%
  • Unmarried, 2+ Adults: +12.3%
  • 5+ CUs: +6.8%
  • 3+ Earners: +7.5%
  • Married, Child 18+: +4.0%
  • HS Grads: +4.6%

The income increase primarily occurred in CU’s with the lowest 80% of income. You see big increases in groups like <25 and Singles which lost a significant number of CUs. Obviously, things improved for those in these groups that held their ground. Many of the “lost” CUs moved in with parents or other adults. This had a positive impact on the income of those CUs – like Unmarried 2+ Adults, Married Couples w/child over 18, 3+ Earners and 5+ CUs. You also see that HS Grads had the biggest income increase, which is not the “normal” way of things.

And here are some that didn’t do that well:

  • Top 20% of CU Incomes: -0.2%
  • Mgrs & Professionals: -4.7%
  • Self Employed: -1.1%
  • 55>64: -4.8%
  • Homeowners w/Mtge: -1.0%
  • College Grads: -1.2%

The overall income of CUs increased 1.8% but not for the highest earners. The income for the 20% of CUs with the highest income actually fell -0.2%. The 2 highest income occupations – Managers & Professionals and Self Employed had drops in income, as did College Grads. The 55>64 year olds, the highest income group of Baby Boomers and Homeowners w/Mtge also lost ground. Overall, CU Income was up, but it was not a “normal” year.

Note: Income Disparity – CUs in the bottom 80% of Income make $51,072 per year. That is only 60.5% of the average CU income of $84,352. It is also just 23.4% of the income for the top 20%. The upper 20% (26.1M CUs) make more than 4 times as much as the bottom 80% (105.1M CUs). The top 20% earn 51.5% of the $11.1T in Total U.S. Income.

CU After Tax Income – In 2020 this was $74,949, up $3,462 (+4.8%) from 2019. The increase in these spendable $ was more than double the increase in gross income $ and almost triple the percentage increase. Let’s take a look.

Three higher income groups that had decreased gross income turned it around to produce an increase in after Tax $

  • Top 20% of CU Incomes: +0.8%
  • Homeowner w/Mtge: +3.0%
  • College Grads: +1.0%

This next group was negative in gross $. All but Self-Employed improved performance in net income but they still stayed negative. The Managers & Professionals had the biggest improvement, going from -4.4% to -0.4%.

  • 55>64: -3.3%
  • Mgrs & Profess: -0.4%
  • Self-Employed: -1.1%

In this group, the poorer got “richer” with a bigger increase in after Tax $. I added the <$30K group to our list because their performance was amazing.

  • Bottom 80% CU Inc.: +9.3%
  • <30K Income: +23.7%
  • <25: +19.4%
  • HS Grads: +9.7%
  • Renters: +7.7%
  • Singles: +12.4%
  • Unmarried, 2+ Adults +13.9%

There is 1 Winner in gross income that actually did worse in after tax income – Married, Child 18+: +1.0% (↓from 4.0%)

Now let’s move on to spending. First, Total Expenditures in 2020.

CU Total Expenditures – The Average CU in 2020 had total expenditures of $61,334, down -$1702 (-2.7%) from 2019. This is not unexpected with the trauma and restrictions of the pandemic. Let’s see what groups had the biggest losses and those with gains in spending. The changes are expressed in percentages to allow better comparison of the impact.

Here are some groups with Big Decreases in Spending:

  • Top 20% of Income: -5.5%
  • Mgrs & Prof: -6.7%
  • Self-Employed: -5.0%
  • 2 Earners: -4.2%
  • 2+ CUs: -3.8%
  • College Grads: -5.8%
  • Asians: -8.3%
  • Boomers: -7.5%
  • Urban, 2.5>5M Pop: -9.1%

You can see that in general, the biggest dips in spending came from the highest earning groups and it was skewed a little older but generally widespread, with 2+ people CUs (70.2% of the total) down -3.8%.

Now let’s see some groups that went against the trend and Increased their Spending in 2020:

  • 2nd Highest Income 20%: +1.1%
  • Lowest 20% of Income: +0.2%
  • Service Workers: +0.3%
  • 3+ Earners: +1.4%
  • Single, 1 Earner: +3.3%
  • < Assoc Degree: +0.4%
  • African Americans: +0.2%
  • Gen Z & Millennials: +2.2%
  • Urban <100K Pop: +3.0%

In general, the increases came from lower income groups, but it was somewhat mixed with both the 2nd highest income and lowest income groups spending more. That means that 40% of CUs spent more but were not able to overcome the drops by other groups, especially the big decrease from the highest earners.

We noted the extreme disparity in Income. Is there also a big Disparity in Spending? Yes! The Top Earning 20% of CUs still spend essentially as much (37.3% of the Total $8.0T) as the bottom 60% (39.3%). Per CU, they spend 2.8 times as much. Total Spending fell $287B from 2019 to 2020. 73.4% of this drop came from CUs in the top 20% in income.

We have looked at the demographics of the change in spending from 2019 to 2020. Now let’s look at some significant changes in how the money was spent.

Food, Booze & Apparel

  • Food at Home: +6.4%
  • Food away from Home: -32.6%
  • Alcohol at Home: +4.5%
  • Alcohol away from Home: -43.9%
  • Apparel: -23.8%
  • Laundry/Dry Clean: -52.6%

As we know, Supermarket Spending was up +10.7%. This shows that a lot of that lift came from nonfood items. The Restaurant & Bar numbers reflect the big drop that we saw in sales at Retail Restaurant outlets. We should also note that the 20% of CUs making the most money had a 44.8% increase in Wine at home. Their drop in Restaurant spending was also equal to the total $ spent by CUs with the lowest 40% of income. Although Clothing stores began to recover in 2021, you see the impact of store closings. Plus, if you work from home, clothes are less of a priority, and you need less dry cleaning.

Housing: +3.5%

  • Owned Home: +9.9%
    • Mtge Interest: +8.7%
    • Insurance: +9.5%
    • Maintain/Repair Serv: +18.6%
    • DIY Repair Supplies: +24.4%
  • Rental: -0.5%
    • Rent: -0.8%
    • Insurance: +8.0%
    • Maintain/Repair Serv: +32.3%
    • DIY Repair Supplies: +42.5%

We see the impact of the additional CUs acquiring homes. We also see the focus on home maintenance that drove the big spending lift in Home Centers and Hardware. One thing is constant. Insurance companies charge more!

Housekeeping Supplies: +9.3%

  • Laundry Supplies: -8.1%
  • TP & Paper Towels: +2.7%
  • Lawn & garden: +29.1%

Laundry – do less. Toilet Paper – buy more. Plus, don’t forget to maintain your yard!

Household Furniture & Equipment: +11.8%

  • All Furniture: +2.5%
  • Outdoor Furniture: +64.7%
  • Outdoor Equipment: +440.2%
  • Office Furn. Home Use: +143.9%
  • Computer Hdwe, NonBus: +41.9%
  • Portable Heat/Cool Equip: +19.4%

If you spend more time at home, including working there on a regular basis, you’re going to need furniture and equipment to do it comfortably. A home office requires office furniture. You’ll also want to upgrade your home computer. If your office is set up in a small room or basement, you need to insure a comfortable air temperature. Finally, when you take a break, why not comfortably relax in the backyard?

Transportation: -8.5%

  • Buy New Car/Truck: +2.9%
  • Buy Used Car/Truck: -0.7%
  • Leased Vehicles: +12.3%
  • Gasoline: -24.3%
  • Insurance: +1.9%
  • Parking: -45.8%
  • Rental Vehicles: -43.9%
  • Air Fares: -68.8%
  • Mass Transit: -53.7%

We saw in our Retail Channel analysis that the Auto Industry had broken even by year end 2020. That was largely driven by aggressive deals on new cars. That is reflected in these numbers. We also travelled significantly less, which is reflected by Gasoline, Mass Transit, Parking, Air Fares and Rental Cars. Once again, we can always count on insurance companies …as that spending went up +1.9%.

Healthcare: -0.3%

  • Medical Insurance: +3.9%
  • Physicians’ Services: -17.1%
  • Hospital Room/Services: -4.3%
  • Drugs: -2.0%
  • OTC Vitamins: +14.0%
  • Medical Equip/Supp: -12.4%

Health Care spending was down. Much of the expenses for COVID were covered and elective treatments were reduced. Even regular doctor visits declined. You can see that some people increased home remedies and of course, we can always count on the Insurance Industry – spending up +3.9%.

Entertainment: -5.8%

  • Fees/Admissions: -51.8%
  • Online Gaming Serv: +131.4%
  • Video Game Softwre: +36.7%
  • Video Game Hdwre: +51.7%
  • Video Streaming Serv: +34.5%
  • Musical Instruments: +35.4%

We still needed to have fun but as you see movies and in person events largely went away. We turned strongly to the internet. The big increase in musical instruments is interesting. Remember, a Musical Instruments Store chain made the list of the Top 100 Retailers for the very first time in 2020.

We have largely been focused inside the home. Let’s take a look at what was happening in terms of outdoor recreation and living. Remember sales in Sporting Goods Stores took off in the latter part of the year.

Outdoor Entertainment & Recreation: +48.9%

  • Camping trailers: +941.9%
  • Motorized RVs: +294.9%
  • Motorized Boats: +79.1%
  • Rental of RVs: -24.5%
  • Athletic/Exercise Gear: +32.0%
  • Hunting/Fishing Equip: +42.0%
  • Winter Sports Equip: -10.4%
  • Water Sports Equip: +33.1%
  • Fireworks: +154.4%

You can see that we moved towards the outdoors, and the commitment was strong. We didn’t rent. We bought! Winter Sports was an exception because you can’t just go skiing. You need to go to a resort. The lift in home fireworks was huge and probably reflects consumers trying to make up for the cancellation of a lot of the planned July 4th celebrations.

Miscellaneous Expenditures of Interest

Here are some other interesting big changes in expenditures that don’t immediately fit into previous categories.

  • Personal Care Services: -30.3%
  • Digital Book Readers: +35.6%
  • College Tuition: -18.4%
  • Elem/HS Tuition: +42.9%
  • Marijuana: -6.5%
  • Lottery/Gambling Losses: -12.2%
  • Funeral Expenses: +53.4%
  • Charity Contributions: +66.1%
  • Political Contributions: +63.0%

These generally are expected changes, but they may be bigger than expected. I was surprised by the increase in Charitable and Political contributions. It does reinforce the fact that Americans want to get involved in a crisis. I must admit that I was stunned that we spent less on Marijuana. Gambling losses were down but never fear, betting has moved online. Plus, the Top 20% in Income loss 34.5% more on gambling than in 2019.

One last thing: Government Stimulus Money. Each of these 5 groups has 20% of Total CUs, based upon income level. Here is their share of Stimulus $:

  • Total $timulus – $251B
  • Under $24K – 15.3%
  • $25>45K – 20.0%
  • $46>75K- 22.2%
  • $76>124K – 24.0%
  • $125> – 18.5%

The payment was relatively balanced. However, it is concerning that the smallest share went to the lowest income group. Perhaps, the program should have been skewed even more towards lower income groups.

The data in the report often provides specific examples which reflect the trends seen in our ongoing analysis of sales by Retail Channel. I hope that it gives you a better feel for the monetary impact of COVID on U.S. Households in 2020.

Retail Channel Monthly $ Update – July Final & August Advance

In May 2020, the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. Now, the virus is resurging so we will continue to track the impact on the recovery of the retail marketplace with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Retail Report for July and then move to the Advance Retail Report for August. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the July Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. $ fell in January & February but they took off in March, setting a new all time $ record. In April $ fell but they rebounded in May to another record high. June & July saw more dips. Here are the major retail groups. (All Data is Actual, Not Seasonally Adjusted)

The final total is $3.3B less than the Advance report projected a month ago. All groups were down slightly. The specifics were: Relevant Retail: -$2.1B; Gas Stations: -$0.2B; Restaurants: -$0.4B; Auto: -$0.5B. Sales vs June were down in all but Gas Stations and Restaurants. Total Retail $ were the 3rd highest month of all time. Total $ales broke $600B for the 1st time in December and has now done it 7 times. Auto still has the strongest recovery and is in fact prospering – annual YTD growth rate since 2019 is +12.8%. Except for the spending dips vs June, for the second consecutive month all groups, including Restaurants, were positive in all other measurements.

Now, let’s see how some Key Pet Relevant channels were doing in July.

  • Overall– 7 of 11 channels were down vs June but all were up vs July 2020 and 10 vs July 2019. In YTD $, all were up vs 2020 and 10 vs 2019. July was the 6th biggest month in history for Relevant Retail.
  • Building Material Stores – Their amazing lift may finally be slowing. The surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Their Spring lift has slowed in 2021 but Building and Farm stores are still going strong. Sporting Goods stores have a similar spending pattern. Sales took off in May 2020, hit a record peak in December and continued strong into 2021, peaking in March. July $ fell slightly from June. However, YTD they are +49.6% vs 2019. That’s an Annual Growth Rate of 22.3%!
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are up vs June but YTD are on par with the 2020 binge. They are still up 15.8% vs July 2019 and 14% vs YTD 2019. Drug Stores were +$17B (+5.7%) for 2020. They had a record March. Sales have fallen since then. However, all other measurements are positive and YTD $ are +7.2%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. In April, sales in all but $ stores declined but they bounced back in May. In June sales dipped for again for all. In July $ Stores dipped again but along with Clubs/SuperCtrs they are leading the way with a combined growth rate of +8.6%. These channels promote value. Their success reinforces its importance to consumers. Disc. Dept Strs are also back in the game.
  • Office, Gift & Souvenir Stores– $ increased slightly from June and were +25% vs July 2020. The pandemic hit them hard. They are still down vs 2019 – monthly and YTD. Recovery is a long way off, but things are improving.
  • Internet/Mail Order – Their $ fell slightly in July but the pandemic continues to foster this channel’s growth. In July of 2019, their YTD growth was +14.0%. Now, their avg growth rate is +19.6% – a 40.0% increase.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. Their July $ were down slightly from June but still #3 of all time. YTD sales are +28.2% vs 2020 and +39.5% vs 2019. Very strong!

Relevant Retail began recovery in May and reached a record level in December. $ fell in Jan & Feb, turned up again in March and began a monthly up/down rollercoaster. July $ are down but virtually all channels are showing growth. The key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, the Advance numbers for August.

2020 was a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell from their December peak in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record of $633B. April sales were down slightly but they took off again in May to set yet another spending record, $643.1B. June>August $ fell but August was still the 5th biggest $ month in history. Auto, Gas Stations and Restaurants were down from July, but all the major groups were positive in all other measurements for the third straight month. Some other areas of the economy are still suffering, some spending behavior has changed, and inflation has become a factor in some increases. However, consumers continue to spend “big bucks”, especially in Relevant Retail, and the overall Retail marketplace continues its strong recovery.

Total Retail – In March, Total Retail hit $633.1B, a record for the most spending in any month in any year. In April, $ales dipped to $625.5B but were still $218.3B more than April 2020 – a record increase that was more than double the size of last year’s record drop. In May, sales set another new record, $643.1B. June>August sales dipped slightly but August was $629.1B, the 5th biggest month in history. Moreover, the current YTD average annual sales growth rate since 2019 is 9.0%, the highest ever in records going back to 1992. Total Retail has not just recovered. It is stronger than ever.

Restaurants – This group has no negative measurements vs 2020 or 2019 for 3 straight months. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February, YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily from April Through July. Sales dipped slightly in August but were still strong vs 2019 & 2020. YTD their $ are plus 30.6% vs 2020 and +3.1% vs 2019. Their recovery is getting stronger.

Auto (Motor Vehicle & Parts Dealers)   – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April>August as sales exceeded $127B in all 6 months – the 6 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 15 times in history. 12 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +11.8% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed and continued to grow in April > July to a record $53.5B. They fell in August but are still +36% from 2020. They have been positive in all measurements vs 2019 & 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, the August 2021 prices were 42.7% above 2020. That means that the 36.2% year over year $ lift in August was actually a decrease in the amount of gas sold. YTD Annual Avg Growth Rate Since 2019 = +4.5%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but set monthly records. In March they turned sharply up and then down in April. They bounced back in May then fell in June & July. In August sales rose again and it was the 5th largest month on record. We should also note that that while December 2020 is still #1, March > August are six of the eight highest $ months of all time. The Relevant Retail Market has exceeded $366B in monthly sales 8 tImes in history. 7 of those have occurred since the onset of the pandemic. It is also very important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +10.1%. In August Department Stores “got on board” so all channels are now positive in all measurements vs both 2020 and 2019. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus an exceptionally long 2020 “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. August $ were up slightly from July but none of the increases were “off the charts”. However, it was still the 5th largest month in history for Relevant Retail outlets. The groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in only 4 of 13 channels were down vs July but all were up vs August 2020, vs August 2019 and YTD vs 2020 and 2019. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.1%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 16 consecutive months. The group set an all-time record of $407B in December and finished 2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > August were 6 of the 8 biggest of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift may be ending but consumers are still focused on their homes.
  • SuperCtrs/Club/Value/$ Strs – They kept the GM channel strongly positive. Value is still a big consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales rose in August and all other numbers are positive. Even Department Stores $ are now finally all positive. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores has remained near the current 8.5%. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +7.1%; Dept Stores = +0.4%; Club/SuprCtr/$ = +8.5%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In June>August they beat 2020 $. The Health, Personal Care group finished 2020 at +1.8%. 2021 has started even better. August was up +0.4% and YTD they are +10.1% vs 2020 and 2019.

  • YTD Avg Annual Growth: Grocery = +6.8%; Health/Drug Stores = +4.9%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > August have been spectacular for all these channels. The increase in Clothing vs August 2020 was not “off the chart” but was still +36.6%. All of these groups were up vs July and they remained positive in all measurements vs 2020 or 2019 for the 6th consecutive month.

  • YTD Avg Annual Growth: Clothing = +4.7%; Electronic/Appliance = +3.5%; Furniture = +10.3%

Building Material, Farm & Garden & Hardware – Their Spring lift began on time in 2020 but may be finally slowing. They have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April then trended down May > August. They are still +15.4% YTD. Avg Annual Growth = +13.6%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. January > August set monthly records and August was the 2nd biggest month in history. August YTD they are +36.1% vs 2020. Avg Annual Growth = +17.0%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 -$1.0B, -0.7%. In March sales took off and reached the $14+B level in May and they have stayed there. Sales fell -2.0% in August but their YTD sales are now 28.4% above 2020 and 25.0% more than 2019. Their recovery has become very real. YTD Avg Annual Growth = +11.8% (4th Best)

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. August was +5.9% vs July and +10.6% vs 2020. Their YTD $ are +15.7%. YTD Avg Annual Growth = +17.8%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>August became the 6 biggest $ales months in history with the 6 largest year over year monthly sales increases ever. The total increase was +$783B, which totally dwarfs the -$174B decrease from March>May 2020 which caused so much concern. At yearend 2020, Restaurants and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but overall, they led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has grown even more positive. In June > August all major groups are positive vs both 2020 and 2019. The details show that the recovery in Relevant retail has become real for virtually all channels and monthly sales continue to set records. Retail has recovered and so far the resurgence of COVID has not negatively impacted Retail. We’ll keep checking.

 

2020 Top 100 U.S. Retailers – Sales: $2.4 Trillion, Up 8.5% – 152,931 Stores with Pet Products……plus the Internet!

The U.S. Retail market reached $6.22 Trillion in 2020 from all channels – Auto Dealers, Supermarkets, Restaurants, Online retailers and even Pet Stores. Due to the pandemic, this year’s increase of $30B (+0.5%) was far below last year’s increase of $216B (+3.6%). The Total Retail Market was massively negatively impacted by COVID related closures and restrictions and only eked out a positive number because of increased spending in the Relevant Retail Segment. (Data courtesy of the Census Bureau’s monthly retail trade report.)

In this report we will focus on the top 100 Retailers in the U.S. Market. The base data on the Top 100 comes from Kantar Research and was published by the National Retail Federation (NRF). The criteria for inclusion was changed for 2020 as Restaurants were removed from the list. Along with 15 restaurants, 3 other retailers from 2019 didn’t make the 2020 list. In order to make more valid comparisons between 2020 and 2019, I used the data to create a revised “Restaurant Free” 2019 list. The Top 100 are the retail elite and account for 39% of the total market. The vast majority also stock and sell a lot of Pet Products. Let’s get started. The report does contain a lot of data, but we’ll break it up into smaller pieces to make it more digestible.

We’ll begin with an overview:

  • The total Retail Market only grew $30B in 2020 (+0.5%) It was $216B (+3.6%) in 2019, +4.9% in 2018 and +4.3% in 2017. You can clearly see the impact of the pandemic on the Total Retail Marketplace.
    • The Top 100 grew $190B (+8.5%) – almost double last year’s +4.5% and radically better than the total market.
    • The Top 100 generates $2.4 Trillion in revenue, 39.1% of the total U.S. retail market – 8% more than 2019.
  • Let’s make the data a bit more relevant. If you remove the revenue from Auto, Restaurant and Gas Stations, the “targeted” retail market for the Pet Industry is $4.0 Trillion – 64.6% of the total market. By the way, the gain in share is due to the loss of revenue in Restaurants and Gas Stations.
    • If we also remove Restaurant & Gas Station $ from the Top 100, the remaining $2.4T is 38.8% of the total market.
    • … and 60.1% of the $4.0 Trillion “target” market.

The Top 100 generally outperforms the overall market. In 2020 the difference in performance was significant. The big lift was driven by the Top 100 targeted retail group, less gas stations. Remember, the Top 100 is really a contest. Companies drop out and new ones are added. This can be the result of mergers, acquisitions or simply surging or slumping sales. In 2020 in addition to 15 restaurants being removed, 3 companies dropped out due to a big drop in sales:

  • Ascena Retail Group
  • Saks/Lord & Taylor
  • Nieman Marcus

These companies are Apparel or Department Stores. Companies in both these groups generally fell in rank in 2020.

18 Companies were added to the top 100. Grocery – Supermarkets (9) and Convenience (2) led the way, along with:

  • Pet Store
  • Musical Instrument Store
  • Electronics Store
  • Auto Parts Store
  • Apparel Stores (2)
  • Alcoholic Beverage Store

Now let’s start “drilling down” into the specifics of the 2020 Top 100. First, let’s take Gas Stations out of the mix. Here’s a summary of Regular and Online Retailers versus Gas Stations.

For Gas Stations, you can see that their share of stores (5.5%) is significantly higher than their share of sales (0.6%). The impact of the pandemic on Gas Stations is very apparent as even these 3 biggest chains lost ground in $ and stores.

The impact on regular retailers was more complex. Their sales were up $191B (8.6%) while store count fell -0.2%.

  • 71 Retailers gained +$244.7B (+12.5%) in sales and +0.8%in stores.
  • 26 Retailers lost -$54.1B (-20.4%) in sales and -4.7% in stores.

Now that we have an overview of the Top 100, let’s take a look at the “targeted” retailer segment. There are 97 total companies. How many are buying and selling Pet Products? This will reinforce how Pets have become an integral part of the American Household and how fierce that the competition for the Pet Parents’ $ has become.

  • Of 97 companies, 81 are selling some Pet Products in stores and/or online – up from 69 in the 2019 list w/restaurants
    • Their Total Retail Sales of all products is $2.30 Trillion which is…
      • 95.4% of the total business for Regular & Online Retailers in the Top 100
      • 37.0% of the Total Retail market and 57.3% of Relevant Retail – from 81 Companies who sell Pet Products.
    • 69 Cos., with $2.16T sales sell pet products off the retail shelf in 152,931 stores – 600 more than they had in 2019.
      • As you can see by the growth in both sales and store count, “in store” is still the best way to sell pet.
    • Online only is another story and the story gets complicated.
      • Amazon includes Whole Foods, which has stores so the Amazon $ are in the “Pet in Store” numbers.
      • Retailers who only sell pet online are losing market share and closing stores. However, internet only retailers, like Wayfair are showing strong growth.
    • Obviously, not selling pet products is not the best way to go as this group was down in sales and especially in stores.

Pet products are an integral part of the strongest retailers and are widespread across the entire U.S. marketplace. Of the Top 100, 152,900 stores carry at least some pet items at retail. There are thousands of additional “pet” outlets including 15,000 Grocery Stores, 9,000 Pet Stores, 16,000 Vet Clinics, 5,000 Pet Services businesses and more. Pet Products are on the shelf in over 200,000 U.S. brick ‘n mortar stores… plus the internet.

Before we analyze the whole list in greater detail let’s take a quick look at the Top 10 retailers in the U.S.

  • They did $1.43 Trillion in Sales
    • 58.9% of Top 100 $ales
    • 23.0% of Total U.S. Retail $
  • 2 up, 3 down in rank; (Group is unchanged since 2015)
  • Sales are up for all. Amazon leads the way…again.
  • Store count is down 360, (-1.0%)

In the next section we will look at the detailed list of the top 100. We’ll sort it by retail channel with subtotals in key columns. We’ll then break it into smaller sections for comments.

I have not done a lot of highlighting however:

  • Pet Columns ’20 & ‘19 – a “1” with an orange highlight indicates that products are only sold online
  • Rank Columns – “Red” 2019 column is my revised 2019 list w/o restaurants. “Yellow” 2019 is the original 2019 rank with restaurants. 2020 changes in rank from the “Red” 2019 list are highlighted as follows:
    • Up 4-5 spots = Lt Blue; Up 6 or more = Green
    • Down 4-5 Spots = Yellow; Down 6 or more = Pink

Let’s get started. Remember online sales are included in the sales of all companies

Observations

  • After a number of acquisitions over several years, Drug is still in turmoil. Now we are seeing a growing number of closures of unproductive stores. However, sales are still growing. They are still “essential” outlets.
  • The decline of the Traditional Department store segment was accelerated by the pandemic. Sales were down -29.9% and stores -8.7%. Although all carry a few pet items, often online, this channel has never fully embraced Pet Products.
    • Sears demise is just getting closer.
    • Saks sold Lord & Taylor in November 2019 and fell off the list as did Neiman Marcus.
  • Much of the growth in the Convenience Store Chains in the Top 100 in recent years has come through acquisitions. There were no major acquisitions, but 2 chains were added to the revised list. Overall, $ and stores are +1.0%.
  • Military Exchanges/Commissaries have added locations in recent years, which fueled the growth in sales. In 2017 they began reducing the number of Army/AF Exchanges. By 2019 this policy had spread to all military groups. In 2020 the number of stores stabilized but sales were up for all outlets and 3.0% overall.
  • Alcoholic Beverage stores make their first appearance in the Top 100 – probably due to more at home dining.
  • Auto Parts Stores accelerated their $ growth from 5.5% to 8.4% and added a new chain, Advance Auto. All chains but Advance also increased their stores for a net gain of 250 (+1.5%)
  • In Apparel, Ascena dropped out, but Lululemon and American Eagle were added. These stores were nonessential, so sales and rank fell for virtually all and $ were -15.8% for the channel. Store count was mixed but down -1.6% overall.

Observations

  • Electronics/Entertainment was up 17.6% in sales but down -6.4% in stores which reflects the pandemic influence.
    • Amazon growth accelerated in the pandemic from 20.9% in 2019 to 33.7%. With the acquisition of Whole Foods in 2017 they also have a small but growing brick ‘n mortar presence in the market.
    • Only Verizon and Gamestop declined in $ and lost significant rank. Dell Technologies was added to the group.
  • Signet Jewelry’s sales were down -12.5%. Their decline began in 2017 but was radically increased by COVID.
  • Mass Merchants have 3 of the 7 largest volume retailers in America – Wal-Mart, Costco and Target. In recent years, Wal-mart & Costco have driven the growth in this channel. In 2020, the lift was strong across the board, +10.4%.
    • Wal-Mart had a 8.7% increase in sales which is triple last year’s 2.6%. Their SuperCenter business was essential, so store sales increased, and their online sales took off. However, “regular” Discount Department Stores are losing market share. This impacts both Wal-Mart and Target so many outlets are adding more fresh groceries.
    • Target posted a 4th consecutive sales increase in 2020, +19.8%, the largest in the string and for the entire group.
    • Costco had another +9.3% increase. New store growth slowed but the $ are increasing, both in store and online.
    • BJ’s sales were up +17.0%, the 3rd consecutive increase after a string of annual declines from 2013 to 2017.
    • Meijer had +10.6% growth in sales and increased their store count by 3.2% in 2020.
  • Consumers’ thoughts turned to their homes in the pandemic. This was very apparent as Home Improvement & Hardware companies increased sales by +20.2%. The big guys, Lowe’s, Home Depot & Ace led the way but only True Value had decreased sales or store count.
  • Like 2018 & 2019, all Home Goods Companies but Bed Bath & Beyond increased sales. They also drove down store count. Sales were up 10.1%, but it was again driven by Wayfair, +$4.1B (+54.6%) who now ranks #35, up 19 from 2019.
  • Tractor Supply $ skyrocketed, +26.8%, triple their average rate of +8.3% since 2013. They also increased stores +4.1%.
  • Hobby & Crafts stores $ were down -4.8%, due to Hobby Lobby and down -0.3% in stores due to Michael’s.

Observations

  • Supermarkets – $483B in Sales; 24 Companies; With 23 Selling Pet Products in 17,000 stores. This is a very important group for the Pet Industry. With the highest frequency of consumer visits of any channel, the competition is fierce. The mergers and acquisitions have slowed. All companies but Southeastern showed increased sales, most in double digit %. Southeastern Grocers filed for bankruptcy in 2018. Store closures and reduced sales continue.
    • Overall sales were up $46.4B (+10.6%) while store count fell slightly, -0.1%
  • Small Format Value Stores: These stores offer both value and convenience – great consumer appeal in a pandemic.
    • All companies increased sales and store count. Overall $ales were up $8.7B (+15.5%) and stores were +4.0%.
    • Dollar General continues to lead the way in growth, Sales +21.6%, Stores +6.0%.
    • Dollar Tree growth in sales and stores more than doubled 2019 but still lags behind Dollar General.
    • Big Lots had small growth in stores but a 16.4% increase in sales, for 2 consecutive years of increases.
  • Pet Stores, as essential retailers showed strong growth in 2020. Sales were up $1.8B (+10.8%) and the number of stores grew by 3.8
    • After the acquisition of Chewy in 2017, PetSmart’s sales registered a huge increase. In 2020 Chewy undoubtedly produced a substantial amount of the $ growth as consumers increased online shopping.
    • Petco qualified for the Top 100 for the first time in 2016. They hung on in 2017 but didn’t make the cut in 2018 & 2019. In the 2020 restaurant free list and with a pandemic surge in sales, they came back strong at #75. It is also important to note that they had a 5.6% increase in stores.
  • Office Supply Stores – This channel continues its decline as Consumers accelerated their move to online ordering.
  • Sporting Goods – This group also benefited in the pandemic as consumers turned their attention to personal recreation. 2 companies closed a few stores and 1 had no change but all increased sales with overall growth of $2.3B (+9.3%). By the way, the largest company, Dick’s Sporting Goods opened enough stores to push the group to +0.1%.

Gas Stations and the Totals

Gas Station Observations

Although gas stations aren’t relevant in terms of Pet Products Sales, they are relevant in our daily lives.

  • Falling gas prices in 2019 flattened the revenue growth of the total Gas Station Channel. The Top 100 Gas Station sales and stores were both up that year only because Speedway acquired Andeavor Brands with their 3200+ outlets.
  • 2020 brought the pandemic and gas usage plummeted. The big chains outperformed the overall channel, but all closed some outlets and had decreased sales.
  • In 2021 recovery began, prices inflated and 7 Eleven bought Speedway. We’ll see the impact on the Top 100 in 2021.

Wrapping it up!

The Top 100 became the Top 100 by producing big sales numbers and their performance, except for 2018, has usually exceeded the overall market. In 2019 things returned to “normal”, +4.5% for the Top 100 vs +3.6% for Total Retail. Normal went away in 2020 with the onset of the pandemic. Restaurants and Gas Stations were hit hard by closures and consumers’ stay at home attitude. The impact on regular retailers varied widely. Essential outlets like Grocery, Supercenters/Clubs and $ Stores prospered. Retail channels like Hardware, Farm and Sporting Goods stores also benefited as consumers focused their attention on “home”. Of course, sales from internet retailers exploded and we can’t forget Pet Stores. Consumers spent more time with their pets and adopted more. This drove up product sales. The non-essential stores were a different story entirely. Department Stores, Office Supply, Apparel and Jewelry stores were hit hard. All but Apparel had been trending down for years, but the pandemic accelerated their slide.

The pandemic also caused a change in methodology for choosing the Top 100 as restaurants are now excluded from the list. Using available data, I took it upon myself to generate a revised “restaurant free” 2019 Top 100 to allow more valid comparisons between the two. This “relevant retail” Top 100 grew $191B (+8.6%) in 2020 and has been a major factor in the ongoing recovery of the U.S. Retail Marketplace.

Pet Products are an important part of the success of the Top 100. 81 companies on the list sell Pet Products in 152,931 stores and/or online. Let’s look closer at the 69 companies that stock pet products in their stores. This group generated $2.16T in total sales. How much was from pet? Let’s “Do the math”. If we take out the $18B done by PetSmart & Petco, and the remaining companies generated only 1.7% of their sales from Pet, we’re looking at $36.4B in Pet Products sales from only 67 “non-pet” sources! (Note: The 1.7% share for Pet is a low-end estimate based on data from the Economic Census.) The APPA reported $64B in Pet Products sales for 2020. That means 67 mass market retailers accounted for 56.8% of all the Pet Products sold in the U.S. in 2020. Add back Petco & PetSmart/Chewy and the Top 100 did 81.8%.

Pet Products are widespread in the retail marketplace but the $ are concentrated. Regardless of your position in the Pet Industry, monitoring the Top 100 group is important. This group reflects the triumphs, tribulations and ongoing evolution in the retail market – the growing influence of the internet and the importance of Value. The COVID-19 crisis caused turmoil in 2020. 2021 has started strong. We’ll see what changes it brings to the retail market and the Top 100.

Retail Channel Monthly $ Update – June Final & July Advance

In May 2020, the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. Now, the virus is resurging so we will continue to track the impact on the recovery of the retail marketplace with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Retail Report for June and then move to the Advance Retail Report for July. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the June Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. $ fell in January & February but they took off in March, setting a new all time $ record. In April $ fell but they rebounded in May to another record high. Now, in June another $ dip. Here are the major retail groups. (All Data is Actual, Not Seasonally Adjusted)

The final total is $3.5B more than the Advance report projected a month ago. All groups but Auto were up slightly. The specifics were: Relevant Retail: +$2.3B; Gas Stations: $1.4B; Restaurants: +$0.1B; Auto: -$0.3B. Sales vs May were down in all but Gas Stations and Total Retail $ were the 2nd highest month of all time. Total $ales broke $600B for the 1st time in December and has now done it 5 times. Auto still has the strongest recovery and is in fact prospering – annual YTD growth rate since 2019 is +13.1%. Except for the spending dips vs May, for the first time since the recovery began, all groups, including Restaurants, were positive in all other measurements.

Now, let’s see how some Key Pet Relevant channels were doing in June.

  • Overall– 6 of 11 channels were down vs May but all were up vs May 2020 and 10 vs May 2019. In YTD $, 10 were up vs 2020 and 10 vs 2019. 9 were up vs both. June was the 5th biggest month in history for Relevant Retail.
  • Building Material Stores – Their amazing lift continues. The ongoing surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Their Spring lift has slowed but Building and Farm stores are still going strong. Sporting Goods stores have a similar spending pattern. Sales took off in May 2020, hit a record peak in December and continued strong into 2021, peaking in March. April & May $ fell slightly but rebounded in June. YTD they are +51% vs 2019. That’s an Annual Growth Rate of 22.9%!
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs May but YTD are on par with the 2020 binge. They are still up 15% vs June 2019 and 14% vs YTD 2019. Drug Stores were +$17B (+5.7%) for 2020. Their $ rose in June after monthly declines from a record March. Now all measurements are positive and YTD $ are +7.4%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. In April, sales in all but $ stores declined but they bounced back in May. In June, sales dipped for all but they are going strong. $ Stores and Clubs/SuperCtrs are leading the way with a combined annual growth rate of +8.4%. These channels promote value. Their success vs both 2020 and 2019 reinforces its importance in Consumer spending decisions.
  • Office, Gift & Souvenir Stores– $ increased slightly from May and were +41.6% vs June 2020. The pandemic hit them hard. They are still down vs 2019 – monthly and YTD. Recovery is a long way off, but things are improving.
  • Internet/Mail Order – Their $ increased slightly in June as the pandemic continues to foster this channel’s growth. In June of 2019, their YTD growth was +13.3%. Now, their avg growth rate is +20.6% – a 54.6% increase.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. Their June $ were up slightly from May and another all-time record. YTD sales are +30.5% vs 2020 and +39.3% vs 2019. Very strong!

Relevant Retail began recovery in May and reached a record level in December. $ fell in Jan & Feb, turned up again in March and began a monthly up/down rollercoaster. June $ are down but virtually all channels are showing growth. The key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, here are the Advance numbers for July.

2020 was a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell from their December peak in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record of $633B. April sales were down slightly but they took off again in May to set yet another spending record, $641.5B. June $ fell but the rollercoaster ride continued as July $ bounced back to become the 2nd biggest $ month in history. Auto and Relevant Retail, the leaders of the recovery, were down from June but all the major groups were positive in all other measurements for the second straight month. Some other areas of the economy are still suffering, some spending behavior has changed, and inflation has become a factor in some increases. However, consumers continue to spend “big bucks” and the overall Retail marketplace has strongly recovered.

Total Retail – In March, Total Retail hit $633.1B, a record for the most spending in any month in any year. In April, $ales dipped to $625.5B but were still $218.3B more than April 2020 – a record increase that was more than double the size of last year’s record drop. In May, sales set another new record, $641.5B. In June sales dipped slightly but rebounded in July to $637.0B, the 2nd biggest month in history. Moreover, the current YTD average annual sales growth rate since 2019 is 9.2%, the highest ever in records going back to 1992. Total Retail has not just recovered. It is stronger than ever.

Restaurants – This group has no negative measurements vs 2020 or 2019 for 2 straight months. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February, YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily in April and May. Sales dipped slightly in June but were still strong vs 2019 & 2020. In July the $ turned up. YTD their $ are plus 30.5% vs 2020 and +2.4% vs 2019. Their recovery is getting stronger.

Auto (Motor Vehicle & Parts Dealers)   – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April>July as sales exceeded $134B in all 5 months, by far the 5 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 13 times in history. 11 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +12.8% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed and continued to grow in April > July to a record $53.7B, 38.1% above July 2020. They have been positive in all measurements vs both 2019 and 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, the July 2021 prices were 41.8% above July 2020. That means that the 38.1% year over year $ lift in July was actually a decrease in the amount of gas sold. YTD Annual Avg Growth Rate Since 2019 = +4.2%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but set monthly records. In March they turned sharply up and then down in April. They bounced back in May then fell in June. July was down slightly from June, -$1.5B (-0.4%) but was still the biggest July ever and the 6th largest month on record. We should also note that that while December 2020 is still #1, March > July are five of the seven highest $ months of all time. The Relevant Retail Market has exceeded $366B in monthly sales 7 tImes in history. 6 of those have occurred since the onset of the pandemic. It is also very important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +10.3%. Through July all but Department Stores continue to be positive in all measurements vs both 2020 and 2019. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus never ending “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. July $ were down slightly from June and none of the increases were “off the charts”. However, it was still the 6th largest month in history for Relevant Retail outlets. The groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in only 4 of 13 channels were down vs June but all were up vs July 2020, vs July 2019 and YTD vs 2020. Only 1 was down YTD vs 2019 and they were only -0.1%. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.3%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 15 consecutive months. The group set an all-time record of $407B in December and finished 2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > July were 5 of the 7 biggest of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift continues unabated as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – They keep the GM channel positive. Value is still a major consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales rose in July and all other numbers are positive. YTD Department Stores $ remain up vs 2020 but are down -0.1% vs 2019. Their problems began before the Pandemic. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores has remained near the current 8.6%. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +7.1%; Dept Stores = -0.07%; Club/SuprCtr/$ = +8.6%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In June/July they beat 2020 $. The Health, Personal Care group finished 2020 at +1.8%. 2021 has started even better. Although July was down -1.0%, YTD they are +10.2% vs 2020 and +9.9% vs 2019.

  • YTD Avg Annual Growth: Grocery = +6.9%; Health/Drug Stores = +4.9%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > July have been spectacular for all these channels. The increase in Clothing vs July 2020 was not “off the chart” but was still +45.8%. All of these groups were up vs June and they remained positive in all measurements vs 2020 or 2019 for the 5th consecutive month.

  • YTD Avg Annual Growth: Clothing = +4.8%; Electronic/Appliance = +3.6%; Furniture = +10.2%

Building Material, Farm & Garden & Hardware – Their Spring lift began on time in 2020 and has never stopped. They have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April then trended down May > July. They are still +16.4% YTD. Avg Annual Growth = +14.1%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. January > July set monthly records and March had the most $ of any non-December month in history. July YTD they are +39.0% vs 2020. Avg Annual Growth = +17.5%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 -$1.0B, -0.7%. In March sales took off and the channel set a new all-time monthly record of $14.39B in May. However, they beat that record in June with $14.41B and now July with $14.65B. Their YTD sales are now 36.2% above 2020 and 26.0% more than 2019. Their recovery has become very real. YTD Avg Annual Growth = +12.2% (4th Best)

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. July was -3.7% vs June but still +3.7% vs 2020. Their YTD $ are +16.9%. YTD Avg Annual Growth = +18.0%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>July became the 5 biggest $ales months in history with the 5 largest year over year monthly sales increases ever. The total increase was +$701B, which totally dwarfs the -$174B decrease from March>May 2020 which caused so much concern. At yearend 2020, Restaurants, Auto and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but overall, they led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has grown even more positive. In June and now July, all major groups, including Restaurants are positive vs both 2020 and 2019. The details show that the recovery in Relevant retail has become real for virtually all channels and monthly sales continue to set records. Retail has recovered so the question is, “Will the resurgence of COVID negatively impact Retail?”

PET STORES – A 30 YEAR HISTORY from 1987 to 2017

Pet Products are sold seemingly everywhere today – 160,000 retail outlets of all kinds – clothing stores, supermarkets, gas stations, the internet. That number climbs to over 200,000 when you add in the services outlets. However, when you think of the beginning of this colossal industry, you must think of the independent pet store as the seed that became the mighty oak. We will take a look back to 1987 to see where this channel was and how it has evolved through the years.

The data in this report is courtesy of the U.S. Census Bureau. Their Economic Census is done every 5 years in years ending in “2” and “7”. The early years have only basic information but since 1997, more detailed information is readily available. In 2017 they did change some classifications which will make a few comparisons no longer possible.

Let’s get started. Here is a detailed chart on some key measurements and a graph of their growth from 1987 > 2017.

The little chart has a wealth of information, and the graph shows the spectacular overall results. First, the number of stores almost doubled but the key factor was that the sales per store is 7.4 times greater. The number of stores increased but superstores and chains became the dominant type. This is evident by the fact that the number of employees per store is 2.3 times more in 2017 than it was in 1987. Add this to the attitudinal conversion of pet owners to pet parents, with an ever increasing personification of their pets and you get 13.5 times more $.

Now let’s drill deeper. Sales increased +$16.99B (+1249%). How much of the increase was real or just due to petflation?

The annual growth rate in “full” $ was 9.0% from 1987 to 2017. Pet Food and Supply prices went up 77.5% during this time. This is an annual inflation rate of 1.9% which is better than the overall 2.6% CPI rate during this period. This made the “real” growth rate 7.0%. That’s damn good and means that 77.3% of Pet Store $ growth has been real. However, this doesn’t tell the whole story. On the chart you see that real growth flattened from 2007 to 2012. This was largely due to the fact that Pet Food and Supply prices increased an incredible 17.0%. (8.2% per year) from 2007 to 2009. Coming at the onset of the recession, this drove consumers to look for value. The result was that consumers moved strongly to other channels. Pet Stores’ share of total pet products sales fell from 39.0% in 2007 to 33.1% in 2012 and Total General Merchandise took over the top spot in Pet Products sales. All the Food and Supply prices have fallen or at least flattened out since 2009. Total Pet Products inflation from 2009 to 2017 was 1.1%, an annual rate of 0.13% – almost nothing. As a result, “real” sales for Pet Stores returned to a more normal path.

Now, let’s take a look at the progress of the key contributing factors over the years in 5 year segments.

  • 1987 to 1992 – The Number of Pet Stores grew significantly – from 5475 to 7150 (+30.8%). The number of employees per store is about the same. Superstores and chains were just getting started so these were mostly traditional sized stores. The amount of sales per store increases 50% as American’s love for pets truly begins to show. The result – sales basically double in 5 years.
  • 1992 to 1997 – The rise of Superstores. Note the 37.1% increase in employees per store. They are being built and they generate significantly more volume per store – +76.6%. The result – sales more than double in 5 years. In 1997 Pet Stores pushed Supermarkets out of the top spot in Pet Products sales, with 40% of all $.
  • 1997 to 2002 – Superstores continue to rise but at a cost to the independents. The net result is 692 fewer outlets (-8.3%). The Sales per store increases 50.8% which reflects the higher percentage of larger format stores. The total channel sales growth rate slows markedly from the previous 10 years, but sales were still up +38.2%.
  • 2002 to 2007 – The channel bounces back with a 15.2% increase in stores – most of which are chains and superstores. The per store sales goes up another 30.5%, reflecting this change. The result – sales grow 50.3%. They continue to hold their ground in the overall marketplace, with 39% of all Pet Products Sales.
  • 2007 to 2012 – Huge price increases…plus a major recession. There is no growth in the number of stores, but an even higher percentage are superstores. The overall channel sales growth – +29.9% – exactly mirrors the per store growth. Also consider:
    • The overall pet food and supplies category (in all channels) grew 50% from 2007 to 2012.
    • Actual Pet Store Sales from 2007-2012 was only up 6.6% – (Factoring in the huge price increases)
    • The result – Pet Store Sales grew but had a big loss in pet products market share – down to 33.1%
  • 2012 to 2017 – Inflation essentially ends, and more outlets are opened, +13.5%. Per store sales were also up slightly, +9.8%. This produced an overall sales increase of +24.7%. Products were +27.7% which resulted in a minimal gain in market share to 33.3%. This is small, but significant because Pet Stores and $ stores were the only brick ‘n mortar outlets to gain pet products market share in a major consumer movement to the internet.

Through the years, pet Stores have grown larger in size but paused their growth in numbers from 2007 to 2012, largely due to the great recession. During this recession period, their growth in revenue slowed to +29% and did not kept pace with the overall market in the Pet Food and Supplies category, so they lost some market share. However, they bounced back in the 2012 to 2017 period, with more stores and a total sales increase of 24.7% (Products $ were +27.7%). Although this was the smallest $ percentage increase in history it was very significant. The Pet Products marketplace is incredibly competitive, and a new major player is now in the game – the internet. Pet Stores, with their vast array of pet products and services and $ stores, with their value and convenience were the only 2 brick ‘n mortar retail channels to gain share in Pet Products in what was a tsunami like movement of consumers to internet shopping. It shows that Pet Stores have not lost their appeal and that they are both resilient and adaptable in changing circumstances.

Now, let’s look deeper into the retail sales numbers for Pet Stores for trends in specific Product segments. There is sales data from the U.S. Economic Census back to 1987. From 1997 on the data gets reasonably detailed. As I said the Census Bureau changed their product classification system in 2017. This will keep us from doing some comparisons to earlier years. However, I have built a chart which is inclusive of both systems to maximize our ability to compare specific data.

The chart contains all available data. The 2017 numbers are highlighted to indicate the % change from 2012.

  • Green = 10%> Increase
  • Blue = <10% Increase
  • Pink = Any Decrease

Here are the details which are followed by specific category observations for each 5 year period.

Observations 1992 to 1997

  1. Data was limited in 1992 but we saw strong growth in store count as superstores and other chains rapidly expanded.
  2. Sales in Pets and Pet Products more than doubled, +103.9% as Pet Stores became the #1 “go to” channel for Pet Products. Over 95% of Pet Stores’ total sales came from Pets and Pet Products in both 1992 and 1997.
  3. There was a hint of growing diversity as Pet Services $ grew by 260% and A/O revenue more than doubled. Pet Book sales also doubled as they reached what would be their all-time high in $.

Observations 1997 to 2002

  1. The store count fell 8% due to the loss of many independent stores. Total revenue increased 38% but the $ per store increased 50%, which reflects the dominance of the larger stores.
  2. Pets and Pet Products $ales increased +36.2%, which was slightly less than total revenue so their share of Total Pet Store $ dipped to 93.8%. This came from a combination of factors.
  3. The number of stores carrying live pets (nonfish) fell -11.8% but sales increased +32.5%. Obviously, the sales were becoming more concentrated. Fish and aquarium supplies was a different story. The numbers are bundled but Total Aquarium (Fish & Products) fell -28.5% in store count and -12.7% in $. This Category became markedly less popular.
  4. Pet Services continued strong growth, with a 53% increase in store count and a 267% increase in sales. A/O revenue increased +19.6%. Books were available in 40.2% more stores but began their long revenue slide -24.9% in $.
  5. Non Aquarium Pet Supplies increased sales $1.0B, +48.8% to $3.1B, which allowed them to slightly widen their razor thin lead over Pet Food as the #1 category in Pet Stores.
  6. Pet Food sales increased sales by $0.9B, +42.9% to $2.9B. We should note that in 1997 and 2002 Pet Food was carried in 2% fewer stores than Pet Supplies. However, there is no doubt that Food is the primary driver in most pet store consumer visits. It is the most “needed” category for Pet Parents. That’s why it’s put at the back of the store.
  7. Pet Store offerings became a little more diverse. However, 78.7% of Pet Stores’ total revenue in 2002 and 89.5% of the increase from 1997 came from Pet Food and Non-Aquatic Pet Supplies. They are the key categories.

Observations 2002 to 2007

  1. Total revenue increased to $11.4B. (+50.3%) as store count grew 15.2%, primarily due to chains.
  2. The sale of pets (non-fish) increased both in number of stores (+8.1%) and sales volume (+17.1%).
  3. In 2007 Pet Foods became the largest segment. Sales were $4.6B, +$1.7B (+59.6%). This was due to the initial move to premium which began in 2004 and the 2007 melamine recall which began the “buy Made in the USA” trend.
  4. Pet Supplies share of $ is much higher in Pet Stores than in the overall market. Sales hit $4.2B, +$1.1B (+37.3%) but the growth rate was below the overall market. This segment is very vulnerable to migration to other channels.
  5. Between 2002 and 2007, Aquarium products came back strong, with spectacular growth in the number of outlets – +25.8% and volume, +$405M (+59.3%). Sales reached a billion dollars for the first time – $1.09B to be exact.
  6. A/O products $ grew +25.6% but Pet Books continued their slide, -21.1%. Their drops pretty much mirror the overall book market as more and more consumers turn to other sources and to electronic formats.
  7. The Service Segment provided by Pet Stores reached $734M, up $427M (+139%) in revenue – Now 6.4% of Total $.

Observations 2007 to 2012

  1. Total revenue hit $14.7B, a $3.3B increase (+29%). However, the store count remained stagnant at just under 8800.
  2. Pets, Food and Supplies sales increased $2.9B to $13.3B. However, this 27.6% increase was considerably below the 50% increase in the overall Pet Products market, which resulted in a large drop in market share for Pet Stores.
  3. Pets (nonfish) were sold in 3% fewer outlets…but the drop in sales was very significant… -34%.
  4. Pet Foods remained the largest segment with strong growth, +44.8%. This $2.1B gain accounted for 63% of the increase in the total $ for the channel. This is probably a reflection of the strength of “premium” pet food sales. Notably, the number of stores stocking pet food exceeded the number stocking supplies for the first time…ever.
  5. Pet Supply Sales increased $0.9B (22.5%). This is less than half of the increase of the overall market and reflects the consumer migration to other channels. Prices deflated after 2009 and more categories became commoditized.
  6. Fish and Aquarium Products had no growth in the number of outlets and only 5% growth in sales. Considering the overall inflation rate during the period (+4.4%), “real” sales were essentially flat.
  7. A/O products growth slowed to +8.5%. Book sales continued to fall and in 2012 were less than half of 2002.
  8. Services were offered in 25% more Pet Stores and sales grew +$0.4B (+54.5%) to reach $1.1B, which was 7.7% of total revenue. Services is a great opportunity to gain business which can’t migrate to the Mass Market channels.
  9. Pets, Services and Channel Differentiated Premium Pet Foods and Products are keys to maintaining the consumer traffic and sales in the Pet Store Channel. The U.S. consumer is looking for value. The generally higher prices on supplies and “regular” food in these stores have encouraged the migration to other channels.

Observations 2012 to 2017

  1. Total Revenue increased $3.6B, +24.7% to reach $18.4B. The store count grew +13.5% to 9984 – almost hit 10,000.
  2. Pets and Pet Products $ was $17.1B, a $3.7B (+27.7%). This was strong enough for Pet Stores to be only 1 of 2 retail channels to actually gain share (only 0.2%) in Pet Products $ against the strong consumer movement to the internet.
  3. Live pets/fish $ grew +$0.23B, +32.9% to $0.9B but the % of stores stocking any live animals fell to a record low 58%.
  4. Pet Food $ales soared to $9.8B, up +$3.1B (+45.5%) and for the first time, in 2017 accounted for more than half of total Pet store revenue – 53.3%. The number of stores stocking pet food was 14.8% more than the number stocking supplies. Pet Food provided 83.8% of the lift in Pet Products $ and 86.1% of the increase in total pet store revenue. Pet Food and more specifically super premium pet food was the primary reason that Pet Stores held their ground and even gained a little share in the overall Pet Products marketplace.
  5. Pet Supplies also increased sales, +$0.3B (+6.3%) but it was far less than food and their share of total Pet Store revenue fell to a record low 39.8%. The number of stores stocking Pet Supplies fell 5% and only 74.1% of Pet Stores stocked Pet Supplies – a record low.
  6. Aquarium Products, excluding live fish, showed some positivity. The number of stores stocking Aquarium Products increased +4.1% and sales increased +$0.1B, +11.2% to a total of $0.9B.
  7. All other products and services has always been a very small part of pet stores revenue but sales have always increased…until 2017 when they fell -16% and their share of total $ fell to 0.9%.
  8. The number of Pet Stores carrying books actually increased by 1% but sales plummeted to $3.3M, which is -89% below the sales from 20 years ago in 1997.
  9. The number of Pet Stores offering Pet Services actually fell -7.2% from 2012 and sales decreased -$30M (-2.7%) to $1.103B. This is a bit of a surprise but it came as a result of competition. Pet Services outlets grew in number, giving Pet Parents more options and better prices. This segment had not yet drawn a significant amount of new users. According to the US BLS Consumer Expenditure Survey, this changed in 2018 and spending skyrocketed. I’m sure that Pet Stores got their share. This segment is an important allure for Pet Parents who want one stop pet shopping.
  10. Pet Stores strongly increased sales from 2012 to 2017 and even gained a small amount of share in the total Pet Product marketplace where the internet cut into virtually every other channel’s business. This was primarily due to the consumer demand for Super Premium Pet Foods, where Pet Stores were the “go to” source.

Wrapping it up

Pet Stores pioneered the pet industry but they also led the way in trends that have spurred the spectacular growth of the industry since 1987. The rise of superstores and chains provided unprecedented space for Pet Supplies. This was important for existing manufacturers but it was especially important for new companies. There was finally retail space for a “flood” of new products. According to the US BLS Consumer Expenditure Survey, in 1987 Pets Supplies accounted for 13.9% of Total Pet Spending. Then came Pet Superstores and chains. By 1996 the Pet Supplies share of Total pet $ was 23.5%. It has remained near this level ever since. Although larger Pet Stores showed the way, this spurred a radical expansion of pet product distribution across the whole retail marketplace. Another key industry trend was the move to premium Pet Food. Pet Stores led the way again. They had the room for new premium foods, which became increasingly desired by Pet Parents. This trend began in about 2004. The 2007 Melamine recall accelerated the movement as consumers moved successively to made in the USA, then to all ingredients from the USA, next to all natural and now to super premium. Plus, you can add the latest big movement – pet health supplements, often in treat form.

Take a look at the following graph to better “see” the business impact of these trends on Pet Stores.

In 1997, Pets and Supplies $ dominated the channel with 58.2% of the total revenue. Food started to gain ground between 2002 and 2007 when premiumization began. They moved to the top in 2012 when overall Pet Stores lost considerable market share to other channels. Then Super Premium Foods took off and Pet Stores were the “go to” outlet. In 2017, the share of sales for Pet Food had essentially flipped from 2007. The A/O business has always been small but is now becoming insignificant. The Services Segment is small, around 6% of total revenue since 2007, but it is not insignificant. Offering Pet Services makes Pet Stores more of a one stop shopping experience for Pet Parents and is a big positive point of differentiation. This differentiation and the “one stop shopping” that it provides for Pet Parents was a key factor that allowed Pet Stores to hold their market share against the internet wave that began from 2012 to 2017.

There’s more to the story!

Larger format pet stores bundled into chains – big and small was obviously a great idea but more than that, the timing was perfect – for society, for consumer attitude and for the retail marketplace. To take a closer look at this timing, we have to go back over 75 years to the passing of the G.I. Bill in 1944. This rewarded Veterans for their service by providing education and job training benefits to help advance their after service careers. It also offered low interest home mortgages which was a major reason that the homeownership rate for the U.S. rose from 40% in 1940 to 60% in 1960. Also, more space was needed for this expansion which resulted in the creation of the suburbs, a new concept which offered the convenience of urban living with more space for households.

The soldiers returning from World War II also helped create another movement – more children. U.S. birthrates soared from 1946 to 1964, creating the largest generation – the Baby Boomers. Many of them grew up in this new suburban environment – which offered more space in a home that was owned and controlled by their parents. Pets began to be added to the household mix – sometimes in a big way. I am a Boomer. By the time that I was in 3rd grade (1956), my older brother and I had 2 dogs, 2 cats, a canary, a parakeet, a hamster and…a raccoon. In those days dogs and cats were “outdoor” animals. They didn’t come into the house but we let them take refuge in the basement during inclement weather. As we moved into our early teens, we no longer required a babysitter. While our parents worked, we roamed the neighborhood, especially in the summer. Our dogs were our constant companions. In the summer, we spent more time with them than we did with our parents. They became siblings to us so it is no surprise that when we grew up, we bought suburban homes, started families and added Pet “children” to our household.

So the changes in society and consumer attitudes were underway. However, we still needed major changes in the retail marketplace. When Boomers were growing up, Department Stores “ruled”. This channel has never embraced pet products. This indicated that they weren’t in tune with consumers and was an early sign that they would fade. In the 60’s discount stores came into being. First came general merchandise, Wal-Mart, K-Mart, Target. They grew and ultimately progressed to SuperCenters and Clubs in the 90’s. Consumers became used to large stores with a huge product selection. In the late 80’s and 90’s this concept trickled down as large format specialty stores came to the forefront – Toys R Us, Office Depot, Circuit City, Barnes & Noble, etc. Consumers were ready for Pet Super Stores.

There is one more key element – money. Income has been and continues to be the driving force in increased pet spending. Let’s go back to the key players. In 1991 the oldest Baby Boomers were turning 45. 45>54 is the highest income age group so in the 90’s, the biggest generation was entering their peak earning years. Pet Parents finally had outlets that not only filled their pets’ wants and needs but introduced new ones and… they had the money to buy it all.

The creation and development of larger format pet stores and chains was literally a positive example of the “perfect storm”. It was a great idea, all the elements were in place and the timing was perfect. Pet stores continue to evolve as the does the market. The store size has dialed back a little to make shopping a little more convenient. The channel is also not just huge chains. Small chains and local independents are also strong. The successful outlets are adapting to a virtual world, offering features like BOPIS. However, one thing will remain unchanged and that guarantees their continued success. Pets are very personal. Boomers were the first pet parents but they passed this mantle on to their children and it has now become the norm across the U.S. In fact the relationship has become even stronger as we increasingly personify our pets. This has led to substantial growth in categories like apparel but probably had its greatest impact on categories related to health. It fueled the spectacular and ever growing movement to higher quality, super premium foods and now medical supplements. Pet Parents want and need the opportunity for personal interaction when shopping for their pets, especially when considering any new product. This can only happen in Pet Stores.