Streetwise for Friday, January 1, 2021
It should come as no surprise that it is easier and often more profitable to invest in companies whose products you know and understand.
To that end and having a substantial collection of horses, donkeys, dogs, cats, goats, not to mention a parrot, I know and understand companies whose product lines are pet oriented.
Retail sales fell 1.1% month-over-month in November during a month that saw many Black Friday shopping events pushed to earlier on the calendar in a pandemic adjustment, which impacted the month-to-month comparison. However, the non-store retailer category sparkled, with sales up 29% year-over-Year. That means more market share for companies virtually totally dependent on the Internet, such as Amazon, Etsy, Wayfair, and Chewy.
While most Internet oriented companies direct their marketing towards products for human consumption, other on-line suppliers of pet products are on a mission to be the online destination for pet products. The idea being to transform the pet industry via the core tenets of ecommerce: speed and convenience.
The potential for the on-line suppliers in the pet industry derives from three key factors. First, the number of pet owners is increasing. Second, people increasingly view their pets as family members. Finally, pet product purchases are rapidly moving to the Internet.
While any one of those factors could make for a great investment thesis, Internet based pet suppliers try to take advantage of all three. To earn the trust of pet owners their goal is to achieve a name branding comparable to that of Amazon. Suppliers are continually battling an increased market share of what used to belong entirely to the brick-andmortar pet stores.
While the Retail Sector has been battered this year due to COVID-19, the Internet-Retail for pets has been thriving because of the disruption. For example, Mario Marte, Chewy’s CFO was quoted as saying, Chewy wants to build out the company's online catalog so pet owners do not need to shop elsewhere to find the products their animal might need, while also increasing the average amount they spend.”
One area important to on-line pet stores is its pharmacy numbers. To promote the sales of pharmaceuticals, companies are considering or have instituted a program that is linked to an on-line veterinarian. This is a telehealth service aimed at providing recommendations to pet parents from contracted and licensed veterinarians.
These veterinarians are unable to diagnose or recommend treatments. Nonetheless, they can determine whether a matter is urgent and provide notes for the pet parent's veterinarian, which should help save customers money over the long run, as they will not need to go to typically more expensive urgent care with their pets for non-pressing issues.
The service offers peace of mind, and an immediate solution if pet parents are concerned or wondering what is going on with their pet.
This move will likely become an industry standard because it could potentially lead to both increased customer retention and further increases in auto-shipments, where customers automatically receive product every month.
It is like what Amazon has done with its Prime offering, where the main benefit of the membership was free two-day shipping. However, Amazon bolstered the offering with ad-free Prime Music, Prime Gaming with free games and in-game content, and Prime Video, with several movies available that you cannot find on Netflix.
Note to readers: Note to Readers - I will be teaching Advanced Investment Analysis, beginning Monday, January 13, for Ringling’s Osher Lifelong Learning Institute. Call 941-309-5111 for registration/information. Unfortunately, my 10th annual talk has been cancelled due to the CORONA19 virus.
Lauren Rudd is a Financial Advisor with Raymond James & Associates, Inc., member New York Stock Exchange/SIPC, located at 1950 Ringling Blvd #401 Sarasota, FL 34236. You can contact him at 941-706- 3449. This market commentary is provided for information purposes only. The information provided is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results.
Raymond James is not affiliated with and does not endorse, authorize or spnder Mr. Rudd's activities with Ringling's Osher Lifelong Learning Institute.