Petco: Capturing the Pet Economy - [Business Breakdowns, EP. 18]

Today, we will be breaking down pet care giant, Petco. Founded in 1965 as a mail-order business, Petco has evolved into a one-stop-shop pet care solution across its nearly 1,500 locations.

To help break down Petco, I am joined by Greg Kamstra, current CEO of pet care provider, Riverdog and former private equity investor. We will discuss how Petco evolved into its current big-box model, how pet care store economics differ from grocery economics, and what impact e-commerce has had on the industry. It’s always fascinating to learn about secular growth stories, and the pet care industry falls into that category. I hope you enjoy this breakdown of Petco.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:19] - [First question] - What is Petco?

[00:03:06] - How much of their business is solely eCommerce

[00:03:40] - The scale of the market today and what that space looks like

[00:05:24] - Pet ownership in the US and how much it’s grown over the decades

[00:06:28] - The spend-per-pet metric and how it continues to grow

[00:06:49] - Sales channels for Petco and the big players in this industry

[00:07:31] - When and how Petco started and unique insights that led to starting the business

[00:09:09] - Unit economics for specialty brands versus generic brands

[00:09:42] - General thoughts on the economics of Petco

[00:11:03] - Viewing their revenue and customer base through the lens of a single-store

[00:13:15] - How they drive same-store sales growth and customer frequency

[00:16:22] - The ways they’ve invested in services to incentivize return customers 

[00:18:13] - Conventional retail strategies and how they’ve performed for Petco

[00:20:42] - Ways they are trying to compete with their eCommerce competitors

[00:23:50] - What their eCommerce growth could look like over the next few years

[00:25:20] - Early days of a mobile app and working on their digital-first footprint

[00:26:18] - How good of a deal Chewy was for Petsmart

[00:27:48] - Other big deals Petco has made and why they’ve mattered

[00:28:52] - Unique private equity aspects of Petco

[00:31:07] - What happened to their business during the pandemic and what trends might be here to stay 

[00:32:03] - How many non-pet owners became pet owners because of COVID-19

[00:33:11] - Reasons why their market cap could double in the next five to ten years

[00:34:19] - Reasons why their market cap could be cut in half over the coming years

[00:35:10] - Lessons for builders when studying Petco’s story

[00:37:14] - Lessons for investors when studying Petco’s story