Retail purchasing power has been stagnant through the pandemic and market projections are showing that customers are holding their spending cash. Everything from inflation, higher interest rates and rising gas prices has the dollar weakened as we see prices in every industry rise.
While the world is getting more expensive, it is still projected that US pet owners will spend $109 billion (billion with a B!) on their pets in 2022. Consumer spending in pet categories is holding strong.
While customers understand everything is getting more expensive, keep your slice of the Billions pie by having a breakdown to explain to you customers Why your store is experiencing price increases. Honest communication with your customers opens the door to understanding and acceptance.
The main cause for higher prices is freight shipping costs. The pet products industry relies heavily on manufacturing hubs like India and China. These shipping routes have been adversely affected more than other ports of loading due to shutdowns, minimal workforce at ports of discharge, and container backlogs. 60% of containers have been stuck at the ports of discharge creating a domino effect of global container shortages.
While Costco and Walmart can buy a fleet of ships to keep their freight costs down and operations moving smoothly, small importers can not.
If I bring in a container of wet dog food for $50,000 I then have to add $25,000 for shipping, up from $4,000 in 2019, creating a price point that consumers are not familiar with. Many store owners are choosing empty shelves over paying new prices.
Domestic and local shipping costs are also seeing major increases. New formulas are being created by shipping companies that now include dimensional weight. Shipping rates are being calculated not only by weight but also the dimension of the package. This makes shipping to customers more expensive.
What many people also fail to see is that the shipping climate has also increased the costs of warehouse storage. Storage demand left a deficit in supply of 41 million square feet in the third quarter of 2021. Many distributors and retailers are holding more inventory to eliminate the risks associated with shipping. As supply decreases and demand increases prices will continue to trend higher.
Raw Material Costs:
The raw materials to make many pet products are up. For example, plastics have seen a 28%-70% price increase in its raw material cost.
Grain prices are near all time highs pushing the price of animal food higher as well.
Crude oil July futures are currently (as of this writing, May 17, 2022) trading at $114 per barrel – prices we haven’t seen since the recession of 2008.
Manufacturing and labor costs are up. The labor shortage in the US has had a major impact on hourly rates, labor demand and retail’s ability to keep their doors open to meet the needs of their customers.
A large majority of retailers rent their store location. Retailers are being charged higher monthly rents and seeing many utility services increase as well - electricity, phone, water.
Dog adoption rates:
The pandemic fueled dog adoption boom created excess demand for affordable goods is another source of the higher prices. It’s wonderful that so many animals are finding their forever homes but the cost is being felt by the pet industry.
Needless to say, times are challenging and unprecedented.
How does JoJo Modern Pets bring more value to our independent retailers?
At JoJo Modern Pets we keep a keen ear trained to follow the inputs that affect our business. We anticipated these cost increases to us as a manufacturer, importer, distributor and warehouse.
In 2020, we changed how we create our product lines. We saw our competitors augment their material cost by using lower quality and cheaper inputs. We went the opposite direction. We redesigned all our product lines with a primary focus being on quality.
What goes into our quality standards?
Durability. From the materials we use to the way we integrate multiple types of textures and products our primary focus in presenting a quality product is durability. We know every dog has their own unique way to chew or find comfort, but our goal is to make the product last longer than others, giving a greater amount of enjoyment to dogs and stretching their owner’s dollar further.
Increased emphasis on weight. To cut costs we have seen a lot of funny things done by those in our industry. Don't be fooled, customers notice cost cutting measures by reducing quality through weight. The weight of a product is important to how customers relate to its value. It should never be cut as products feel cheap and flimsy in the hands of customers.
Value Packs. We have created bundles to be marketed as Value Packs. No longer just for subscription boxes and club buys, our collections of kits and bundles have been a big source of driving higher sales through our products. When bundled correctly customers see more value in products when paired together.
Sustainability. Sustainable products command a higher price point because of the values it represents to the end consumer. Margins are typically larger on eco-friendly labeled goods. We have increased our manufacturing priorities to our factories who have committed to reducing their carbon footprint. The materials we use like jute and coconut fiber may be exotic for dog owners but major benefits include that these products offer non-toxic, eco-friendly alternatives over virgin materials. Customers are willing to support items they feel reduce negative impact on the environment.
The world is seeing increased costs and prices across all industries. Consumers are feeling the squeeze. We are here to help our customers maintain the quality and exclusivity of their products. We encourage independent retail to continue seeking their portion of the billions of dollars spent each year on pet products. For new pet owners and old alike, the love they have for their pets is undeniable and they still want quality products that will bring enjoyment into their homes.
We’re always glad to meet new retailers and look forward to hearing from you. For wholesale pricing from JoJo Modern Pets create an account on our website and click here to see our catalog. To schedule a phone call, click here to pick a time that works best for you.