As many shoppers begin spending less on physical items, Petco is betting on pet parents to keep splurging on services.
The company already offers an array of pet services to complement its product assortment, including veterinary services, grooming, training and pet sitting. And this April, the company expanded its services further by adding “clean grooming” to the list, where customers can easily identify products without parabens, phthalates and chemical dyes. The company also has been expanding the growth of its veterinary hospitals, opening 175 over the last two and a half years.
Despite consumer spending being down overall, services have been a bright spot in retailers’ earnings reports as it brings in sustainable cash flow and gives people a reason to visit stores. In Petco’s case, customers that use its services are one of its most valuable shoppers, with 65% of grooming customers also buying pet food with the company and veterinary customers having the highest net spend per average customer. Its services revenue was up by double digits in the first quarter and it saw a 50% year-over-year growth in recurring customer revenue.
One of Petco’s biggest priorities in its service business is to build out its veterinary hospital network and grow its capacity. The company plans to have 300 hospitals by the end of the year with a goal of reaching 900 hospitals in the future. The company has also been focused on retaining talent on its service teams.
Jason Heffelfinger, Petco’s chief services officer, spoke to Modern Retail about why the company is investing heavily in pet services and how it delivers growth to the overall business. This interview has been edited for length and clarity.
How would you describe the strategic direction of Petco service business?
Over half of the pet parents that we talked to wanted to do the right thing for their pets and they wanted to do it in a one-stop-shop kind of verbiage. They want to do it with one partner. We think about services as being the opportunity to really satisfy all those needs from a 360 perspective.
We are solely focused, as a health and wellness company, on delivering the needs of pet parents through our vet hospital ecosystem expansion, and really making sure we continue to deliver quality care in our core services like grooming and dog training as well.
What would you say are some of the most sought-after services at Petco at the moment?
The competitive advantage that we have from a veterinary perspective is we have really two distinct verticals. We are building out the general practice full-service hospital network in our pet care centers. To go along with what we have already established, [which] is… more of a low-cost preventative care mobile model.
When we think about things that have really accelerated, during some of the financial headwinds that we’ve seen, our lower-cost mobile vaccination clinics have really flourished over the last 18 months.
When we talk about services that our pet parents are really utilizing, our grooming business has been fantastic. During [the first quarter], we launched a new campaign called “Clean Grooming,” really to help coincide and reinforce our health and wellness brand. That program was launched to make sure that we could align with our nutrition standards around no artificials and no chemicals within our grooming products, and our pet parents loved it.
What are some of the ways you adjusted your operations to meet demand for your service business?
Our role is to make sure that we continue to grow the capacity for as many pet parents to have those services within our ecosystem as possible. We’ve spent the last couple of years really making sure that we tighten up and hone in our what we call our employee value proposition.
We have the most groomers we’ve ever had, and so we’re super proud of that. We increase what we call our retention. So we lowered the turnover of our groomers in [the first quarter] by over 500 basis points, which is the best we’ve ever done. Quite honestly, those inputs led to this output of growing grooming by the largest market share gains we’ve ever had in [the first quarter].
We hired or brought into the ecosystem, we’d like to say, more veterinarians in [the first quarter] than we ever have. So we on boarded 375 new veterinarians into our ecosystem in [the first quarter], that’s a 65% year-on-year growth.
How has your service business helped boost other areas of the Petco ecosystem?
Our grooming and our services customers come to our PCCs [pet care centers] more often, they spend more money on PCCs and they are what we like to call stickier. So we retain those customers much longer.
One of the things that we’ve learned is that the better retention we have of our pet stylists and our grooming partners, the more frequently those pets come to our PCCs for grooming because they build that relationship.
If a vet sees a pet, they talk to them about their nutritional needs. And then, we can carry products [for their] Rx and prescription diet. Once we have those [vet] hospitals open, it’s easier for the veterinarian to walk [customers] into the center store and just make sure they have the right food to go home with.