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The Wild World of Pet Retailing

In 1978, longtime animal lover Marc Morrone opened up Parrots of the World, an importer and exporter (and later breeder) of exotic birds, mammals, and reptiles from Central and South America, Africa, and Asia. From his Rockville, N.Y., shop, Morrone became a real-life Dr. Doolittle, dispensing advice on how to train a cockatiel, care for a hedgehog, or raise a ferret. Soon, he was hosting a local cable show on pets.

Eight years ago, Morrone caught the eye of Martha Stewart, who invited him to be a guest on her nationally televised show. And in 2003, Martha Stewart Living Omnimedia gave him his own twice-weekly, half-hour syndicated program -- Petkeeping with Marc Morrone, boasting more than a million viewers nationwide.

BusinessWeek Online reporter Stacy Perman recently spoke with Morrone, about the proliferation of pet offerings, the latest doggie and kitty fads, and the continued rise of giant pet companies in a traditionally entrepreneurial industry. Edited excerpts of their conversation follow.

Q: According to the American Pet Products Manufacturers Assn., spending on pets and pet-related products now tops $34 billion, up from $17 billion a decade ago. What's fueling such growth?

A: The fact is that dog and cat food was sold mostly in grocery stores. Now, there's a whole lot more stuff to buy for our pets. When I opened my store in 1978, my bird-toy section was four feet long. Now, it's 40 feet. And when I was a kid, I could only buy one cat collar. Now there are a million things to buy for cats. People have always loved their pets, and they have the money to buy things.

Q: Well, this expanding menu of products has items like dog sunglasses, sunscreen, and low-carb pet food. Is there a real need, or is this just clever marketing?

A: Before there were sunglasses, dogs hung their heads out of car windows and burned their eyes, and white dogs got sunburned. These products are manufactured because there is a real need for them. Now, mink dog collars is a separate issue.

Q: Since you mention mink dog collars, pets seem more pampered than ever. Why are there so many high-end luxury pet offerings today?

A: Again, people have always bought that something extra for their pets. When I was a kid, you could buy a regular dog bowl or one that said D-O-G on it. The dog can't read, but people would spend the extra 50 cents to buy the one that said D-O-G because they wanted to show how much they loved their dog.

Q: Many contend that this kind of spending is because more and more people -- empty-nesters, baby boomers, and those delaying marriage and childbirth -- consider their pets a member of the family, or even a substitute child. True?

A: I would agree 100% with that. It's the same thing -- whatever makes people happy. If someone wants to think their pet is their baby and the pet is happy and a manufacturer comes up with toys for that pet, then it's a win-win-win situation. I would never judge someone for thinking that about their pet that way.

Q: But aren't some of these items vanity products, benefiting the owner more than the pet?

A: Yes and no. I might not have thought someone would have paid $300 for a collar, but they do. But a lot of the products coming out have a function. I sell a glow-in-the-dark dog leash that might be considered a luxury item, but it is serves a functional purpose.

Look at the boom in small hamsters. There are balls for them and whole circuses. As odd as that may seem, it actually keeps children, who are so easily distracted, more involved with their hamster. They interact with the animal. There is a purpose. This is not just a mink collar. Also, a lot of these toys prevent animals from destroying the house. It gives them something to do. Animals are supposed to compliment your life, not complicate it.

Years ago, people would say, "I wish there was a way to keep my birds from scattering their seeds all over." And now there is. Or they would say, "I wish there was a way for my sick dog to be able to climb up in my bed." Now there are ramps to help arthritic dogs, and puppy stairs.

Q: Now that we have Burberry raincoats and leather bomber jackets for pets, do you think we may hit a saturation point? In what direction is the industry heading?

A: It's hard to say. Some things happen that you couldn't predict. Who knew that someone would spend $300 on a collar? But for items that enhance an animal's life, there will always be a market.

For instance, I sell a product called the Poop-Off. It is an enzymatic cleaner that cleans bird poop. You throw it on the perch, it fizzles, and there's no poop. There wasn't a Poop-Off 10 years ago. Who knows what there will be 10 years from now?

Q: How has this trend directly affected your own pet-shop businesses?

A: When I started this store, it was 15 feet wide by 40 feet long. Now, it's 10,000 square feet. I probably sell $1 million a year in dry goods -- toys and supplies.

Q: How are the big companies like Petco (PETC) and Pet sMart (PETM) affecting the industry?

A: It's like Home Depot (HD) -- they come in and places go out of business. There are some things, like price, where you just can't compete with the big boxes. Coming down the road, you see a lot of small companies are being bought up by the big ones. They are more aware of what the public wants.

Q: How does that affect your business?

A: Price is everything, and the big boxes are always cheaper. People come here, they look at the animals, and go to Petco to buy supplies. But they can still find things here that are unique, that they aren't going to find at Petco. There will always be small suppliers who can't gear up their inventory or payment patterns for the big stores, so they make unique items that you will find here.

Our store has a nice environment and our employees are knowledgeable. Retail is a balance between traffic and inventory. We always have traffic, so then we increase the amount and kind of inventory available to the traffic. So, even with the big boxes moving in, we've been growing 10% a year.

Q: What advice do people ask you the most?

A: It's uniformly consistent: Why, why, why? People don't understand how animals think. We don't view our world from their eyes. We assume that animals have the same values that we do. If a dog chews on our shoes, we think he did it to spite us. But he has no concept of money. How does a dog know that shoe is worth something and a chew toy is not?

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