COMPANY PROFILE: My Pet Warehouse
My Pet Warehouse, a privately owned retailer formed in June 2009 by Philip Bartholomew, specialises in pet supplies, which it sells through its e-commerce website and 12 physical stores in Victoria, NSW, Queensland and Western Australia. The company has enjoyed double-digit growth year on year, with turnover in 2014-15 of $32 million and forecasts for strong growth for the current financial year.
Justin Grey: You’re aiming to triple My Pet Warehouse’s revenue over the next few years to between $75 to $100 million. That’s some bullish ambition…
Philip Bartholomew: I describe it as biting off more than you can chew, and you just chew a little bit quicker. Our online business is growing well more than 50 per cent per annum, and has been for some time. Our store network we’ll have a bit of a breather with because we’ve just come off opening eight stores in nine months. We will start aggressively growing towards the end of the year again and talk about taking things full circle. We’ve got some views on retail on the internet, and our online business is actually now helping us decide where we’re going to open [stores]. We’ve got 15,000 pieces of data every month telling us where our customers are. It makes perfect sense to put a store right in the middle of it, because it’s a cheaper delivery method for people purchasing goods.
JG: You’ve strategically set up the My Pet Warehouse store network so that the stores also function as mini distribution centres to cater for your strong online sales. What drove that decision?
PB: The journey goes back about four years ago. We were like everyone else in 2011. We looked at online when I was running Petbarn in 2004, and we couldn’t make it work – trying to work out how to send a parcel from A to B and make money. In 2011 we had another look at it. We put our toe in the water and we couldn’t make it work after a while. It was working, we were doing very nicely, but we we’re losing money because we were never recouping our full cost of freight. We persevered with that for a while, then we worked out that it’s a volume game, and it’s really a race to the bottom. We worked out that obviously freight’s the biggest issue, and the biggest challenge within the freight is cubic weight. Anything bigger than 40cm by 40cm by 40cm becomes a cubic weight issue. We’ve got these giant stores in different states that double as our distribution centres.
We don’t have money to burn, we’re privately funded – myself and a partner. We have banking covenants to meet, we have interest we need to repay. We’ve got to make sure that we are actually profitable at all times. There’s that challenge of maintaining profitability at all times while maintaining our growth and reinvesting our money and making online work.
JG: Where does My Pet Warehouse sit in the pet supplies market?
PB: When we launched My Pet Warehouse in 2009, I was just another retailer retailing pet supplies and accessories, starting out again from scratch having gotten out of Petbarn. Along the way, it’s changed as every business model does. We think there will always be pureplay online retailers. We believe that the future will be somewhere in the middle, and we believe our future will in fact be in the middle, but skewed towards online.
Online allows us to control that [customer service] process much better than what we can do with 120 stores. Australia is not a service-based country. It’s not the like US, it’s not like the Philippines. When you get a steak anywhere in the US, if someone doesn’t do a good job, you don’t tip them. Everyone is on their best behaviour to provide the best service. That’s not the case [in Australia]. Everyone tries, but it’s a country where we’re slightly disadvantaged. With it online, you’ve got your team within three or four rooms and it’s much easier to control that process from how. I’m actually sitting in the warehouse right now in Melbourne, and I’m actually watching [staff] pack parcels. Making sure that when [customers] open that parcel, they go, “Wow”. That’s living and breathing it, online allows us to do that.
JG: Obviously the market can accommodate more than the 12 stores My Pet Warehouse currently has. Is there a specific plan to roll out a certain amount of stores, or will it depend on that customer data gathered through online sales tells you?
PB: No. If we had unlimited funding, sure we would open stores. Right now, consolidating what we’ve got, and just doing things simple and well and giving customers what they all want and making sure that it’s dispatched the same day, will give us a ferocious amount of growth organically. We have plans to roll out more stores quite aggressively, late this year to early next year.
JG: Have you targeted a certain number of stores to get to?
PB: No. I think that will probably be trying to put too much unjust pressure on yourself. Because when you do that, you make mistakes. Retail is a simple business – look after your customer and they’ll look after you. We’ll maintain our growth based on what we can do financially, and what we can do profitably. We know that we can open stores relatively quickly and relatively successfully. When we’re in a position, we will always do that. We’ve got eight stores in Melbourne. I would say we could open up just as many in Sydney and Brisbane. We could comfortably have a network of 25-30 stores Australia-wide at a minimum.
From a business model, it also depends where online goes. If it continues to increase, our customers will ultimately decide what we do. I’d rather have 50 or 20 top stores in top locations, than have 100 stores, 20 of them in top locations, 20 of them okay, 20 of them break even, 20 of them dogs, and 20 of them a disaster. Which is what most retailers seem to do.
JG: Given how much online is paying dividends for My Pet Warehouse, is there an emphasis with the stores you do have to create instore experiences – pet grooming services, on site vet – to draw in customers?
PB: A lot of retailers are doing that now and it adds a lot of value. It can certainly be capital intensive. Grooming, we’ve experimented with. We’re not good at it. In itself it’s a whole different business that requires a whole different set of skills. We’ll, for the time being, stick to what we’re good at – pure retailing.
JG: How competitive is the pet suppliers retail sector? It’s an enviable market to be in because it’s not hard to convince pet owners to splurge on their pets. But like every other sector, customers are driving hard on price… .
PB: I think unfortunately [shopping only on price] is all they know. We’re sometimes part of it, but are we the cheapest? No. Are we the most expensive? No. We’re somewhere in the middle. Our focus is drawing our customers in, not so much us personally, but the entire industry. For example, in Australia pet specialty accounts less than 20 per cent of pet food sales. In America it’s 40 per cent. If all we did was focus on getting consumers from supermarkets to pet specialty, we almost wouldn’t need to discount a thing, because we would simply be creating a demand that’s there. But we just haven’t converted customers to cross over to pet specialty. That’s where our focus is.
I’ve just had a meeting with an airline and we’re trying to work out how we can get customers able to travel with their pets as carry on luggage. In America you can travel with pets with carry on luggage under your seat. We know if we could do that in Australia it would increase acceptance of pet ownership and I know for a fact that people would be more likely to buy a pet. If they’re holidaying or traveling with their pets, they’re more likely to stop in a pet store to buy their pet supplies. It then increases people’s awareness of pet ownership, pet products, good and services. Also allowing pets in hotels. Allowing pets in rental accommodation. Allowing pets to be more generally accepted on public transport, in taxis. All of these areas we’re looking at which will expand people’s awareness of pet ownership and ultimately increase our customer base.
JG: Pet pampering is a becoming a big thing locally too – Australia has finally caught on with that overseas trends. What’s the potential there for My Pet Warehouse?
PB: We think the pet pampering is there, but it’s nowhere near where it’s going to be in the future. We find that certain ethnic minorities pamper their pets more and we know which groups of customers they are and obviously we target those as well. Then from a clothing point of view we know some ethnicities like a certain style of clothing and others don’t. This year we launched our winter coat range and we actually had a fashion shoot for pets in a photography studio dressing them up in their clothing and literally putting them out on a runway for a catalogue. You could spend up to $100 on a dog coat. You can actually buy a Driza-Bone dog coat! I’d say we’re not too far away from a $400-$500 dog bed. You’ve got memory foam dog beds.
JG: What are some of the key changes you’ve seen in the pet supplies industry in the 15 years to date you’ve been operating retail stores?
PB: A lot of people have come, a lot of people have gone. A lot of people have tried to buy their way into the pet industry and have failed. From a consumer point of view, it’s going exactly where I thought it would, and that is the market’s always there. Has the market grown? It’s grown, but it used to be all exclusively in certain markets. The biggest growth we’ve seen is in our market share increasing as a percentage against those markets. That is by far the biggest change. The other really cool thing we’ve seen – a really great thing – is a swing away from having pets in pet stores. It’s actually gone to such a point that some of our competitors actually have full-time pet adoption in their stores. What’s the difference between full-time pet adoption and a pet store? You’re effectively selling pets. We’ve never sold pets. We’re an ethical retailer; we’ve never sold shock collars because we don’t believe in them. We love the fact that people are more educated about how they buy their pets. It’s now through breeders or registered associations, or through pet adoptions. That’s really cool.
The third part is that because of this small humanisation of pets, it has bought pet ownership to a whole different generation of people. We’ve seen now programs where they have pet ownership in jails. Pet ownerships for school kids. There’s a school pet almost. The health benefits associated with pets or pet ownership … there’s medical studies show that people that have pets or kids that have pets are generally five per cent healthier than those who don’t.
JG: You’re in an interesting position of having formerly been CEO of what is now your biggest competitor, in Petbarn. What sort of perspective or insights does that give you?
PB: It certainly helps. It’s reassuring that I was for a period of time a part of the largest pet supply chain in Australia. My design is actually their logo. I guess I’ve been fortunate where I’ve started the same business now three times. I think this being my third time, I’ve got a fairly good insight of all the mistakes I’ve made the first two times, and that’s certainly helpful. You do have insights of what your competitors do a lot of the time. They’re a big company. The thing is it doesn’t change; it’s still the same – look after your customers. It’s very difficult with a large chain, but it’s still looking after your customers is the most important thing. That hasn’t changed.
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