Big Box Pet Specialists Dominate On Celebrity, Entertainment Licenses Via DTRs, Exclusives
Entertainment- and celebrity-licensed pet products are increasingly being dominated by Petco and PetSmart, as the country’s two largest pet specialty chains battle for direct-to-retail (DTR) and exclusive agreements that can give them an edge in attracting loyal customers.
To be sure, pet owners are more often seeking food when they venture to the specialty stores rather than a licensed toy, t-shirt, bandana, collar or leash. But licensed brand names, especially those that are either exclusive or a DTR are an attractive option as pet specialty chains seek to separate themselves from grocery, drug, mass and other retailers that typically carry non-licensed items.
Sales of supplies, (a category which includes hard goods such as toys and leashes) are forecast to increase 4.9% this year to $14.98 billion, trailing only food ($24 billion) in the $60 billion pet market, according to the American Pet Products Association.
The emphasis on DTRs and exclusives is apparent in the big specialty stores. For example, PetSmart currently has a large display (above) dedicated to all things Martha Stewart from dog harnesses and collars to a reindeer sweater and a hot dog hoodie. Petco this week has an endcap dedicated to Dr. Seuss-related products, and has Star Wars items from apparel to collars scattered throughout the store.
The goal, says a store manager at one of the chains, is to mix DTR fan collections that have appeal across generations and can be changed quarterly, with capsule displays that are “a little more trendy” to attract a different customer. DTRs give the chain more control in both areas, says the manager. The capsules can be matched with movie releases such as NBC Universal’s recent Trolls film and The Secret Life of Pets last summer, both of which had DTR programs at PetSmart.
The DTRs are an outgrowth of both PetSmart and Petco setting up sourcing operations in China to speed product development and help deliver better margins. And with much of the focus of the DTRs being on products that can be sewn together rather requiring manufacturing molds, “the barriers to entry aren’t so extensive,” says Jakks Pacific’s Tony Lawlor.
“Every retailer wants exclusivity or a DTR these days, but it is much more intense in the pet industry,” says Lawlor. “Petco and PetSmart want the DTRs because they want to build customer loyalty base around their products. And from where I sit, it is a question if I can get one big retailer behind me to carry a line for 12 months, is it better for me and the licensor I am representing to take that opportunity? Or do we try to get 3-4 SKUs in multiple stores, which isn’t really a statement? And with pet, it is all about making a statement.”
The proliferation of DTRs among the two largest pet products chains is giving some licensees pause for thought as to which brands they bring to market, say industry executives. It also is making licensees more cautious in negotiating minimum guarantees. In the case of securing new licensees for Grumpy Cat and Boo: The World’s Cutest Dog, Jakks was able to get “reasonable” minimum guarantees and royalty rates and “non-painstaking” approval processes that quickened the pace of bringing products to market, says Lawlor.
“I am going to wait on seeking new licenses until I see how the landscape shakes out” with retail DTRs, says Lawlor. “Those that I sign will have to be very strategic and they will have to serve a purpose beyond just a character” in terms of making brand statement. “The risk of licensing now comes to minimum guarantees and the days of overpaying for pet licenses are gone because the DTRs have diluted that.”
A brand statement is especially important in pet products where retailers can carry hundreds of collars, leashes, toys and other products that all tend to blend together absent a recognized name.
And much of the licensing in pet products revolves around toys, apparel, beds and other hard goods, given entrenched brands in pet food such as Purina, Meow Mix, Milk-Bone, Blue Buffalo and some long-time celebrity deals, including Rachel Ray, whose Nutrish premium gourmet dog food has been on the market for eight years and is sold through Walmart and Target.
The focus on licensed brands appears to land squarely on the big box specialty retailers. Major mass chains tend to carry only a smattering of licensed goods and for the most part deploy private label and more generic brands to ensure a lower price, say industry executives.
From toy aisle to pet aisle
For example, Target and Walmart carry an
extensive array of Gramercy Products licensed Nerf Pet items. But Nerf pet
products largely found a home in mass retailers because of the brand’s sizeable
presence in the toy aisle, says Gramercy’s Daniel Troiano.
In addition, the pet products are seeking to carve out niches by delivering products in categories relatively untouched by licensing:
•Jakks Pacific will launch a 24-SKU assortment of Grumpy Cat-licensed toys, beds, collars and other items exclusively through PetSmart in March. The line targets cats, which tend to have fewer licensed products than dogs. Jakks also signed a pact for Boo: The World’s Cutest Dog with plans for introducing a line of 36 SKUs of apparel, leashes and collars aimed dogs weighing less than 20 pounds. Jakks, which is re-entering the licensed pet product business after several years’ absence, also introduced Disney character-based products at Meijer in October drawing from six Disney movies, including Toy Story and Monsters Inc.
•Gramercy’s Nerf Dog tennis ball blaster Pets will start sales through 100 Toys R Us stores later this month as part of a display that will feature other Nerf products. The Nerf Dog items are among the few pet products Toys R Us carries. “The goal is to get a permanent home next to the other Nerf products,” says Gramercy’s Daniel Troiano. Gramercy also is seeking to extend the license into other products such as leashes and collars, says Troiano.
(For its part, Toys R Us since 2011 has licensed its own name to PetSmart for a range of branded pet products.)
•Pets First is readying an NFL Players Inc.-licensed line of t-shirts leashes, collars, shirts, hoodies, bandanas, toys and other product, says Pets First’s Mark Sok. The items will be introduced at the Sports Licensing and Tailgating Show in Las Vegas in January. The company also signed a license with RealTree and will launch camouflage-themed collars, leashes, t-shirts and other products in 2017.
•Fetch...for Pets!, which sells a range of pet products under such brands as Arm & Hammer (oral care), Glad (training pads, waste bag dispensers), Shout (stain and odor removers), Peeps (toys, apparel, treats), has its Fresh Step (licensed from Clorox) litter boxes, liners and odor eliminators featured in an end cap at the Meijer’s chain alongside Clorox’s kitty litter.
The display is part of an effort by Clorox and Fetch...for Pets! to cross-sell their products, says Fetch... for Pets’ Steven Shweky. The companies also have joint promotions aimed at gaining more shelf space for the Fresh Step Pet brand.
“It is really channel specific and we are finding more success for the brands we license in food and mass retailers than in specialty pet.” Fetch... for pets! also has Chi dog shampoo and other grooming products at PetSmart under a licensing agreement with Farouk Systems, better known for its line of products sold through human hair salons.
•Discovery Communications’ Animal Planet Pets brand found its way into a holiday display at the rear of a Connecticut Kohls store where licensee MerchSource was promoting sport dog tennis balls, auto-flow pet fountain and other products.
While much of the focus of DTRs and exclusive deals has been on the top pet specialty chains, some licensees also are tailoring their lines for smaller dealers as well. While Gramercy sells 10-12 Nerf Dog SKUs through mass retailers, it redesigns the products with different features for local and regional dealers, says Troiano.
Yet in appealing to millennial and baby boomer pet owners, licensees and licensors are developing products seen as an extension of the family lifestyle. Pets First has licenses for pet apparel with the Major League Baseball and the National Football League, even having released some pink New York Giant jerseys for female dogs.
Celebrities have long been part of the mix. Ellen DeGeneres partnered with PetSmart for a line of dog products that will start sales in early 2017. Singer Lady Gaga and former model/lifestyle mogul Kathy Ireland also have ventured into pet products. On the food side, companies also are weighing lending their brands to pet nutritional products and supplements, with PetSmart said to be readying a DTR program to address the category.
“We are seeing a continuation of pet owners treating their pets as an extension of the family and its interests,” says Dr. Seuss Enterprises’ Susan Brandt. “The expansion of licensed products into home décor, furniture and tabletop leads naturally to licensed pet products in the home.”
(Source: Inside Licensing, published by the International Licensing Industry Merchandiser's Association)