SELLING PET SUPPLIES OR SERVICES?

leash4.jpgThere are two main ways to get involved with the pet industry:  sell products and supplies or sell services.  They both have their pros and cons but here’s why I like the service aspect more and why you may want to consider a combination of the two at the very least.

Anyone who sells pet supplies, whether online or via traditional outlets like a store, will tell you that it’s a volume business.  Profit margins on most pet supply items are relatively small compared to items like cameras or other types of consumer electronics.

So even if you sell $1,000 worth of pet supplies you may actually only have a gross profit of $400 — if you’re lucky.  And that’s not even accounting for expenses such as advertising, salaries, electricity, etc.  That means for every item you bought for 60 cents you sold for a dollar — hence, GROSS profit, not net profit.  Factor in all the ancillary expenses I just listed and you’ll be lucky to earn a 20% NET profit.

Now, take the dog walker who earns $100 a day.  That’s $100 in pure profit.  There were no expenses or inventory items applied to that profit.  The only “cost” was time.  

The negative with many service businesses, like pet sitting and pet grooming, is that there are only 24 hours in the day, 7 days in the week,  so you are inherently limited to how much you can earn based strictly on your time, unless, you’re able to grow your business by hiring and MANAGING other people to do what you do. 

This is often referred to as working “on” your business and not working “in” your business.

Many smart petropreneurs who provide services figure out a way to scale their business up by hiring other people to do what they do.  The groomer opens a grooming shop;  the pet sitter buys a pet sitting franchise that specializes in hiring and managing other pet sitters, etc.

In fact, look at what some of the retail leaders in the business are doing and you can see why adding services to the retail mix can be very good for the bottom line.

According to a recent PetSmart annual report:

“PetSmart generated $4.23 billion in net sales in 2006, up from $3.76 billion in net sales a year ago. Comparable store sales grew 5.0 percent in 2006, on top of 4.2 percent growth in 2005.

During the fourth quarter, pet services sales were $97.2 million, up 22 percent from the same period last year. For the full year, pet services generated $376.0 million in revenue, or 26 percent growth over 2005.”

Check it out:  pet services were up 26 percent vs. 5 percent for product sales!

If you’re already offering pet services — keep doing what you’re doing but also look to add additional services to your repetoir.  Dog walker?  Add poop pick-up services.  Groomer?  add dog walking services.  And why not sell some products as well?  While the margins won’t be as good, every additional revenue stream helps!

11 responses to “SELLING PET SUPPLIES OR SERVICES?

  1. With a pet service business, you still have overhead. Gas and car maintenance as well as advertising can take a big chunk out of your profits.

  2. I agree. Any business will have overhead. But inventory is a large part of “overhead”, and one aspect that the service-type business will have next to zero of. Inventory also ties up capitol. So I guess rather than suggesting that the dog walker in my example gets to keep 100% of the $100 they earn, perhaps it should be compared in percentages. I know from running my Lucy The Wonder Dog Dot Com website (which I sold in January) that inventory costs were approximately 40% of my “overhead”. That’s in addition to all the other expenses like office supplies, advertising, etc.

  3. You are right on the money with those figures, great topic

  4. The inventory costs can usually be cut in half or more with the use of drop-shipping suppliers. The retailers who are drop shipping my collars and leashes have increased in the last 6 months, and my business has been on a steady climb in the past year. My regular job was affected by the economic downturn, but my pet supply website has actually been growing in this poor economy.

    Now, my inventory is higher than my drop-shippers, but I have been able to cut it down by going with local suppliers for raw products and striking deals with them. I get wholesale pricing, but I do not have to buy 500 at a time, as long as I purchase x amount through the year to keep up my wholesale status. This won’t fly with some suppliers, but I have been able to find many that will.

    The other way to cut cash expenses is to join a barter group. I am a member of one here in Calgary, eXmerce, and it has really helped to keep cash in my pocket. I can get my business cards done with “barter dollars” in my account that I received from “selling” items to other members. I am not limited to the pet supply industry and am actually able to utilize any member, from accounting services to web-hosting.

    P.S. great article!

    • Hi Jill

      I am starting an online pet supply business and I am not sure if I should go it alone or buy into a franchise. I have researched some drop-ship companies and their policies (which can get tricky). With their minimums and drop-ship fees, unappealing return policies…etc.; plus running and maintaining your website. The saving grace is that the start up cost is very low. I Recently discovered a franchise company that claim to take care of most of the day to day operations so you can focus on marketing your site. It comes with a $5000 buy in and a $99 monthly maintenance fee. They handle the product updates for your store, integrates all shipping costs and taxes, website maintenance, and upgrades – as well as handling all drop shipping – at no additional cost. Also, the software to have access to detailed, real-time information about your site traffic, products, sales history and customer trends. With your experience in the industry, does the cost seem beneficial for the their service? Any other thoughts?

      Thanks
      Rick

      • Hi Rick,

        I can only tell you from my own experience, it is better to have your own business, sell only the items you want, and promote your website yourself.

        You can spend a lot of money marketing – or nothing using only free websites. But how may others have already bought into the franchise? And $5000.00 plus $99.00 a month seems very high to me. I have learned to always check the ratings with the BBB and I also check on ripoffreport.com or sites like that to see what others have had to say. It may be better to have a unique store on-line that is not selling the same products as everyone else, set up the same way, etc.

        I know that it can be hard to find good drop-shippers, but there are others like me out there who don’t have the silly minimums, shipping fee add-ons, etc. There are some out there, many do not advertise it, so it never hurts to ask.

        Hope this was of some help…

        Cheers
        Jill

  5. I am only 14 and have Started my own pet Business :] It is called Poopsie’s Pet Accessories (Named after my puppy’s nickname) and I am building up an inventory. It has always been my dream since 3 years to own a horse, and with this business will be building up and inventory and saving up for one! God is GREAT and I believe that my business will get me enough money for a horse! People can try to turn me down, but my pet accessories will stop that!😀 I am also a new inventor of an extremely wonderful pet pillow that I made/created and my dog loves that thing to BITS! I will NOT say the name though, or a description :]

  6. Hi Jill

    I am starting an online pet supply business and I am not sure if I should go it alone or buy into a franchise. I have researched some drop-ship companies and their policies (which can get tricky). With their minimums and drop-ship fees, unappealing return policies…etc.; plus running and maintaining your website. The saving grace is that the start up cost is very low. I Recently discovered a franchise company that claim to take care of most of the day to day operations so you can focus on marketing your site. It comes with a $5000 buy in and a $99 monthly maintenance fee. They handle the product updates for your store, integrates all shipping costs and taxes, website maintenance, and upgrades – as well as handling all drop shipping – at no additional cost. Also, the software to have access to detailed, real-time information about your site traffic, products, sales history and customer trends. With your experience in the industry, does the cost seem beneficial for the their service? Any other thoughts?

    Thanks
    Rick

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  8. Hi,
    I have recently started a pet shop and i am thinking about pet supplies site(e-commerce).the start up capital req is too high.is it ok to ask for investors and knowing this my profits will be divided.also for my inventory how do i reach to bulk suppliers .

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