Bunnings looms as 'category killing' threat to small pet businesses

Bunnings can bank on the pet category, with spending on food and other supplies booming in recent years. (Source: Reuters/Stephen Coates) (REUTERS)

The dust has yet to settle after news broke of Bunnings expanding further into pet supplies, but many small business owners are already fearing they'll be forced to shut their doors once the Aussie hardware giant becomes a big player in the industry.

Bunnings, which made the announcement late last month, is trying to break into a booming market that has increased, on average, 7.4 per cent per year since 2018. Thanks to the coronavirus pandemic, pet ownership in the country ballooned to 69 per cent - roughly 28.7 million pets - within two years from 2020, a jump from 61 per cent in 2019.

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Pet food and supplies, which followed suit, had the biggest growth in online orders during the height of the pandemic at 68 per cent, outpacing even the sports and outdoor category's growth of 14 per cent, Australian e-commerce platform Shippit revealed.

"In terms of the growth in the volume of orders, pet supplies was by far the biggest. Essentially, Aussies love their pets; it's a booming market," a spokesperson for Shippit told Yahoo Finance.

Pet market a no-brainer for Bunnings

Australia's high pet-ownership rate, coupled with the whopping $33 billion Aussies spent on pet services and products last year, provides an opportunity a company like Bunnings would find hard to pass up.

"As a category-busting lifestyle brand, Bunnings' expansion into the pet category is formulaic," marketing professor Jana Bowden of Macquarie Business School told Yahoo Finance.

"The potential in the pet and pet supplies retail category is obvious. The market size is expected to grow at 5 per cent in 2023 alone. This is underpinned by extraordinary levels of pet ownership."

Even as the cost of living rises, people prioritise their pets' well-being, and Bunnings is well-placed to cash in on this need. (Source: Getty) (Getty Images)

In a period of economic uncertainty and in a cost-of-living crisis - when consumers are cutting back - pet spending is "guaranteed", Bowden explained.

"Expansion of its pet supplies business is a sure bet for Bunnings. Whilst real household discretionary income is set to fall in 2023, spend on pets isn't. It isn't seen as a luxury, it's recession-proof. Even when consumers are financially stressed, pets are a category of spend that Bunnings can bank on."

'Category killer'

Bunnings has the distribution, immense geographic pull and buying power to have a massive impact in the pet retail category, and the retailer's latest move had independent pet retailers quaking in their boots, Bowden said.

"Small pet retailers typically take pride in their more local, personal, relationship-oriented connection with their consumers and, for many, this along with their niche product and service offerings have been their point of differentiation to date," she said.

"However, what they lack is breadth of product assortment and range, as well as the ability to deliver on convenience and value – and that's exactly the opportunity that Bunnings - as a big-box retailer - is capitalising on."

"Consumers are already accustomed to shopping for their home lifestyle products from Bunnings and they know it delivers on assortment and value. It's cornered the market with a consumer base that are brand believers. On top of that, it has already established itself as a pet-friendly store with its open-arm policy on pet visitors.

"Consumer sentiment is positive. Offering 1,000 new pet products gives Bunnings the chance to entrench itself in consumers' lifestyles, and cements itself even further as a one-stop-shop, life-solution category killer."

Bowden acknowledged this would be a very challenging period for independent pet stores, who would no doubt feel the impact of Bunnings' expansion into their industry. However, she said these smaller specialty retailers would have to focus on niche products and value-add pet services - which Bunnings wouldn't offer - in order to survive.

"It will also mean thinking more carefully about store location, to fill the geographic gaps that Bunnings can't reach easily with its location pull," she added.

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