PETCO: Putting Pets First Earns Loyal Customers

PETCO Animal Supplies is the nation's number 2 specialty pet supply retailer with more than 850 stores in 49 states and the District of Columbia. Its pet-related products include pet food, pet supplies, grooming products, toys, novelty items, vitamins, veterinary supplies, and small pets such as fish, birds, and hamsters. It does not sell cats or dogs, however. PETCO strives to offer customers a complete assortment of petrelated products and services at competitive prices at convenient locations and through its website, www.petco.com, with a high level of customer service.

Most PETCO stores are 12,000 to 15,000 square feet and conveniently located near local neighborhood shopping destinations, such as supermarkets, bookstores, coffee shops, dry cleaners, and video stores, where its target customers make regular weekly shopping trips. PETCO executives believe that the company is well positioned, in terms of both product offerings and location, to benefit from favorable long-term demographic trends: a growing pet population and an increasing willingness of "pet parents" to spend on their pets.

Indeed, the U.S. pet population has now reached 378 million companion animals, including 143 million cats and dogs. An estimated 62 percent of all U.S. households own at least one pet, and three-quarters of those households have two or more pets. The trend to have more pets and the number of pet-owning households will continue to grow, driven by an increasing number of children under age 18 as well as a growing population of empty nesters whose pets become their new children. U.S. retail sales of pet food, supplies, small animals (excluding cats and dogs), and services grew to approximately $38.5 billion in 2006. PETCO was founded on the principle of "connecting with the community."

One of its most important missions is to promote the health, well-being, and humane treatment of animals. It strives to carry out this mission through vendor-selection programs, pet adoption programs, and partnerships with animal welfare organizations. The company is involved every year in a number of programs to raise money for local communities and local animal initiatives. Recognizing that between 5 and 10 million pets are euthanized in the United States every year, PETCO launched an annual "Spay Today" initiative in 2000 to address the growing problem of pet overpopulation in the United States.

The "Spay Today" funds come from customer donations at PETCO stores, where customers are encouraged to round up their purchases to the nearest dollar or more. In 2005, PETCO launched the "Think Adoption First" program, which supports and promotes the human-animal bond. It is a program that sets the standard for responsibility and community involvement for the industry. The "Spring a Pet" fundraiser encourages pet lovers to donate $1, $5, $10, or $20 to animal welfare causes. Donors received a personalized cutout bunny as a reminder of their generosity. In 2007, $1.7 million was raised, and each PETCO store selected an animal welfare organization to be the recipient of the money raised at its location.

The Tree of Hope program encourages customers to think of animals during the Christmas season. Customers visiting PETCO during the Christmas season can purchase card ornaments, the proceeds of which go to animal welfare charities. The PETCO Foundation also sponsors "Kind News," a humane education program that educates children about humane treatment of companion animals and fellow human beings. It features stories about responsible pet environmental concerns and issues as well as information on all types of animals. Like all companies, PETCO operates in an environment in which a single negative incident can influence customers' perceptions of a firm's image and reputation instantly and potentially for years afterwards.

Because pets engender such strong emotional attachments, it is especially important for companies that sell pets and pet products to be able to provide a rapid response to justify or to correct activities that may arouse potentially negative perceptions. The focus should be on a commitment to make correct decisions and to continually assess and address the risks of operating the business. All retailers are subject to criticisms and must remain vigilant to maintain internal controls that provide assurance that employees and other partners follow ethical codes. PETCO accomplishes this through an ethics office and by developing an ethical corporate culture.

PETCO also has developed and implemented a comprehensive code of ethics that addresses all areas of organizational risk associated with human resources, conflicts of interests, and appropriate behavior in the workplace. The code's primary emphasis is that animals always come first-PETCO insists that the well-being of animals in its care is of paramount importance. In the case of PETCO, a desire to do the right thing and to train all organizational members to make ethical decisions ensures not only success in the marketplace but also a significant contribution to society.

Questions for Discussion

1. How does PETCO's ethics program help manage the risks associated with the pet industry?

2. How can PETCO's social responsibility programs advance its marketing strategy?

3. Why is it important for PETCO to train all its employees to understand and implement its ethical policies?