As one of the largest pet retailers in the United States, Petco dominates the market with over 1,500 stores across the country. However, Petco faces growing competition from both pet-specialized retailers and mass market general merchandise stores all trying to stake their claim in the expanding pet care industry.
In 2021, Americans spent a record $103.6 billion on their pets – up over 200% from $17 billion in 1994. With projections of steady growth ahead to $109.6 billion by 2024 according to the American Pet Products Association, competition for consumer pet spend will be intense.
In this comprehensive guide, we analyze Petco‘s top competitors, how they threaten Peto‘s market leadership as well as strategies Petco deploys to maintain dominance as picky pet shoppers have more retailers vying for their business.
Overview of Petco
Founded in 1965 in San Diego, Petco is a specialty retailer providing pet food, supplies, services and even live animals across their brick-and-mortar stores and ecommerce site. With about $4.9 billion in annual revenues, Petco trails only PetSmart in terms of sales among publicly held pet store chains.
Petco offers a broad merchandise selection with exclusive brands and services like grooming and training. Their competitor price matching policy also aims to go toe-to-toe with rivals on pricing. With so many competitors trying to emulate their model, Petco must continue innovating to maintain its standing.
Petco Pricing Strategy
Petco employs "GO EVERDAY" lowest price messaging in stores while running promotions like 5% off for repeat delivery subscriptions on Petco.com. As a picky shopper myself, I‘ve noticed Petco offers the deepest discounts on pet essentials for shoppers with Pals rewards membership which gives members 10% back in points on future purchases.
However, competitors like Chewy, PetSmart and Walmart often best Petco‘s baseline everyday pricing. Petco tries matching with its competitor pricing policy but gaps likely persist in practice on niche items. For pet owners trying to maximize tight budgets, chasing competitors‘ deals can mean skipping Petco altogether.
PetSmart – The Top Dog in Pet Retail
Without a doubt, PetSmart is Petco’s chief competitor. Founded in 1986, PetSmart now operates over 1,650 stores across the U.S., Canada and Puerto Rico driving more than $7 billion in annual sales. The key to PetSmart’s growth is acquiring fast-growing ecommerce site Chewy in 2017 for $3.35 billion.
While Petco and PetSmart have similar store formats, PetSmart has expanded faster thanks largely to the boost from Chewy’s digital revenues. Chewy also competes directly with Petco’s own site, offering competitive prices and fast shipping of pet essentials. With Chewy in the fold, PetSmart can provide better omnichannel integration than Petco.
Scale: PetSmart‘s network now exceeds Petco‘s roughly 1,500 domestic stores giving it advantage procuring exclusive brands and penetrating second tier markets.
Market Share: Among publicly listed pet specialty retailers, PetSmart controls over 58% market share based on sales compared to Petco‘s 33% share.
Recent Performance: PetSmart does not release full financials as a privately held company. However, PetSmart notes same-store-sales grew high single digits for 2021 versus just 4% for Petco showing stronger growth at existing locations.
Chewy – Pet Retail‘s Online Leader
Chewy was only founded in 2011, but has quickly become America’s top online pet store. Chewy captures nearly 55% of the online pet care market selling supplies and food for pets with a focus on fast shipping and competitive pricing. Under PetSmart, Chewy reached over $7 billion in sales in 2021 with 45% year-over-year growth.
Chewy’s massive selection of brands and products rivals any pet store. Chewy boasts over 2,000 brands compared to Petco’s 1,300 – giving it a wider selection. Chewy also offers competitive promotions like Autoship discounts to incentivize customers to skip stores and shop online.
With skyrocketing growth despite no physical locations, Chewy puts immense pressure on traditional retailers like Petco to grow their ecommerce business. While Petco does not break out online performance, consultancy Edge by Ascential estimates Chewy‘s online market share at 70% compared to just 16% for Petco‘s site. As the lines between brick & mortar and online retail blur, Chewy sets the pace in omnichannel pet retail.
Petland – Specializing in Live Pets
With under 100 domestic stores, Petland is much smaller than giants Petco and PetSmart. However, Petland positions itself differently by focusing on live animal sales – everything from puppies to reptiles. This specialty has increased Petland‘s brand recognition among pet buyers looking for a specific breed of dog or unique pet. Petland hits $100 million in annual sales from live animal sales alone based on store figures.
Petland‘s Achilles heel is a reliance on questionable pet suppliers and breeders according to some animal rights groups. Nonetheless, Petland remains popular in local markets by training staff to provide expert advice to live pet buyers. Petco and PetSmart have scaled back live pet sales – allowing Petland to fill a specialty niche despite controversy around some suppliers.
Pet Supplies Plus – Small but Mighty Competitor
At just 560 stores concentrated mostly in Michigan, Indiana and Ohio, Pet Supplies Plus has far fewer locations than Petco‘s national footprint. However, Pet Supplies Plus has carved out a territory in smaller local markets that Petco and other national chains have overlooked.
This neighborhood strategy has earned Pet Supplies Plus over $1 billion in annual revenues – impressive for a smaller chain. Pet Supplies Plus locations feel more like a local convenience store according to customers with staff knowing regulars by name. Petco tries replicating community feel via charity work and in-store services but has a more corporate aura.
Going forward, Pet Supplies Plus could expand into more of Petco’s territories after getting acquired by buyout firm Sentinel Capital Partners for $700 million in 2020. This extra investment could help Pet Supplies Plus compete through consolidation of fragmented independent pet retailers in secondary markets.
Other Pet Specialist Rivals
Beyond the major pet store chains, Petco faces competitive threats from smaller pet specialists nibbling away at market share. This includes:
Rover – The "Uber for pets," Rover connects pet owners with pet sitters and dog walkers, taking a share of the growing $5+ billion pet service market including sectors like boarding where Petco operates.
BarkBox – Specializes in dog-focused monthly subscription boxes of toys and treats personalized to each dog. BarkBox has over 2 million active subscribers highlighting the appeal of personalized pet services.
PetFlow – An online-only retailer focused specifically on scheduled pet food and supplies delivery, competing directly with PetCo‘s Repeat Delivery service which has not disclosed subscriber figures.
While individually much tinier than Petco, combined these emerging specialists present a long-term threat if Petco can‘t match their personalized offerings conveniently online. These disruptors pioneer sales and service models Petco often later attempts through adaptations like its own subscription box to respond to changing consumer preferences towards convenience.
Mass Retailers – Giant Competitors
As Petco battles specialist rivals, mass merchandisers with pet sections like Walmart, Target and Amazon pose imposing competitive threats due to their brand recognition, vast customer bases and expansive supply chains.
Walmart – Retail‘s Top Dog
As the world’s top retailer, Walmart is Petco’s most imposing mass merchant competitior. Walmart uses its buying power, logistics infrastructure and rock-bottom prices across categories to attract customers. Pet care is no different.
Walmarts 4,700 US stores feature a pet section stocking popular brands of pet food, medicine, toys alongside seasonal items. Walmart also maintains dedicated PetRx pharmacies within stores providing convenience for pet prescriptions.
With over $500 billion in total company sales, Walmart‘s pet category alone likely generates more revenues than Petco’s entire $5 billion consolidated business. Combined with Walmart’s expansive ecommerce operation including online pet pharmacy, Walmart readily beats Petco on convenience, pricing and selection – limiting how much market share Petco can realistically achieve.
Target – Bullseye on Petco Customers
Target is another mass merchandise threat having built big box stores across 49 states. Target‘s 1,900+ locations feature pet departments with prominent real estate carrying exclusive brands like Boots & Barkley alongside shopper favorites.
Leveraging analytics, Target employs personalized promotions and recommendations via its app and push notifications to drive attachment sales of items like pet toys when shoppers purchase pet food. This ends up taking a bigger share of wallet from pet owners.
As Target presses further into ecommerce like two-day shipping for Target.com purchases and same-day services from Shipt, it aims to pick off Petco patrons seeking convenience and variety under one roof.
Amazon – The Online Everything Store
Amazon is Petco‘s largest online rival thanks to its sprawling ecommerce platform. Via Amazon and Amazon-owned Wag, shoppers can purchase over 30,000 pet products from food to medicine delivered in 2 days or less to Prime members.
Amazon‘s goal is providing ultimate convenience – enabling pet owners to skip trips to physical pet stores altogether. Digital market researcher Edge by Ascential estimates Amazon already accounts for 15% of online pet care sales in contrast to 16% for Petco‘s site.
As consumer shifts online accelerate, Amazon thrives while Petco‘s store-first model faces real challenges matching Amazon‘s delivery speeds and customer experience. Per an Edge by Ascential survey, 70% of customers say their latest pet purchase occurred online highlighting the channel‘s dominance.
Recent Merger Activity Reshapes Competitive Landscape
Consolidation has ramped up across retail categories recently – and pet retail is no exception according to analysis from Pet Business Magazine. Petco itself went public via a SPAC-backed IPO as part of this trend.
Meanwhile, PetSmart acquired Chewy to expand its online capabilities. Private equity firm Sentinel Capital added Pet Supplies Plus to build a pet retail roll-up. More recently, Petco itself announced plans to acquire specialty veterinary hospital chain Thrive for $350 million to expand services.
These deals reshape the competitive landscape of pet retail. Sentinel could rapidly expand Pet Supplies Plus locations using its PE capital.
Similarly, Petco may be acquiring Thrive as much to deny rivals an acquisition target in high-growth veterinary as to directly reap synergies itself. Expect consolidation to continue as independents struggle against the purchasing and operating scale of chains and big-box players. Chains like Petco will seek to get bigger to protect market share.
Outlook for Pet Specialty Retail Market
Petco carved a lucrative niche in pet specialty retail. However, leading competitors like PetSmart and emergent threats from the likes of Chewy and Amazon put Petco’s market position under siege. Exacerbating this challenge is the rapid consumer migration toward online spending.
In Q1 2022, Petco reported e-commerce represented 21% of sales, up from 13% in 2018. However, some analysts peg the online penetration rate for pet products as high as 50% at just Amazon and Chewy. Warburg Pincus managing director Alan Schnaid estimates over 70% of pet care sales may move online in coming years.
Clearly Petco must rapidly adapt to an omnichannel model to stay relevant against pureplay Chewy and avoid ceding ground to player with stores and digital prowess like Target and Walmart.
Petco aims to slow competitors via its competitor price matching policies, broad merchandise mix, vet services and grooming. However staying ahead demands even faster innovation and shoring up its digital and services capabilities amid this structural channel shift in retail.
Expect Petco to face intensifying competition across segments in coming years as retailers juxtapose strategies to capitalize on Americans’ swelling pet budgets. Petco‘s Q4 2021 earnings presentation rightly called out competition 14 different times highlighting the threats across niches of pet specialty retail.
How effectively Petco navigates this period may determine whether Petco solidifies its status among leading pet retailers or finds itself chasing the pack.