A Quick Guide to Pet Store Profit Margins

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To stay afloat, your business has to make a profit.

The profit margins earned by small businesses vary depending on their industry, inventory, and location. Luckily, the pet industry tends to have relatively high profit margins. In fact, yearly revenue generated by pet stores continues to grow — so much so that it’s increased during periods of general economic decline.

As the owner of a small pet store, you can capitalize on this potential — but only if you take advantage of strategies to maximize profits. In this blog, we share what you need to know about pet store profit margins, and give tips on how you can increase your margins for greater success.

Understanding Profit Margins

Profit margin refers to the portion of revenue that you’re left with after subtracting costs. This amount is usually written as a percentage. For example, a 20% profit margin means that 80% of your revenue is associated costs, and the other 20% is profit.

Understanding what your profit margins are (and why they shift) is essential to your pet store’s success. Let’s take a closer look at pet store profit margins and what affects them.

Gross Margin vs. Net Margin

Gross margin and net margin are both important metrics in understanding how profitable your business is.

Gross margin refers to the percentage of remaining revenue after subtracting the cost of goods sold (COGS). When calculating gross margin, you only subtract the cost of producing goods or providing services. This metric helps you understand how profitable your products or services are on their own.

Net margin, on the other hand, is the percentage of remaining revenue after subtracting all business expenses. In addition to the COGS, this includes rent, utilities, marketing, and any other business expense. This metric tells you how profitable your business actually is.

Average pet store gross margin is estimated to be about 30–50%, while average pet store net margin is approximately 5–20%. While net margin is a more important metric for the overall health of your business, increasing gross margin on products and services helps your net margin and improves your business’ profitability.

Managing Business Expenses

To calculate your net profit margin, list all of your business’ expenses.

These items include:

Rent
Inventory
Labor
Store Equipment
Utilities
Marketing

All businesses have different needs, and you may have additional costs that are unique to your store. Look over your expenses and consider if there are any areas where you can cut costs. Are you ordering too much of any products? Do you have more employees than you need to run your store?

If you bring your costs down, you improve your profit margins. However, try not to compromise on quality — if you do, you may lose customers.

Routinely look over your costs and be aware of changes. If your rent or the cost of inventory goes up, make sure you’re still turning a profit. If not, you may need to raise prices in response. Produce high profit margins by keeping a pulse on your business’ expenses.

How To Increase Profits at Your Pet Store: 5 Tips

There are a variety of strategies you can use to increase profits at your pet store. While some seem obvious, others are more outside the box. Here are five ideas for boosting profits.

1. Choose Your Ideal Location

Location has a major impact on sales. Stores located in busy urban areas tend to see more sales than stores in quiet rural areas. The more people that see your store, the more people who walk in and become customers. But keep in mind — denser areas, like big cities, come with higher rent costs.

Whether you already have a pet store or you’re picking a location for a store you want to open, research local competitors. If there are pet stores close by, try to differentiate your store to make it stand out — you can specialize in a different kind of pet or offer services that other local stores don’t. If your store is too similar to one that’s nearby, it can negatively impact your sales.

Make sure your pet store is easy to access for customers.

Pro tip: Choose a location that’s close to main roads and has sufficient parking. If your store is accessible, more customers will roll in.

2. Negotiate With Suppliers

Most small businesses work with wholesale suppliers to stock their inventory. The rates you pay for your inventory and how much more you charge your customers determine your gross profit margin for those products. The lower you pay for the products you stock, the higher profit margins you earn.

Many suppliers are willing to negotiate with you on price depending on your pet store’s needs. If you place large orders for dog food or dog toys, for example, you can arrange a bulk purchase discount. It’s important to have strong relationships with suppliers that are built on trust. Keep your word, communicate clearly, and pay for your orders on time. This trust you build helps you negotiate better prices in the future.

3. Stock High-Margin Items

Not all pet products are created equal — some have higher profit margins than others. Customers want a one-stop shop that serves all their pet needs, so it’s important to stock a variety of pet products. Try showcasing products with the highest profit margins to get the biggest bang for your buck.

Pet products with some of the highest margins are chew toys and premium pet food. Many pet owners are willing to pay a little extra for high-quality pet food, including organic options. Research unique products to add to your shelves that interest pet owners.

Remember: Look at sales for different products at your store. Determine which products are selling the most and which products earn you the most profit. Push more of these products to increase profits.

4. Diversify Product and Service Offerings

If you want to increase revenue and profit, adding a variety of new products and services to your business can help. Try offering services like grooming and training to make money. To assess demand, you can start by conducting surveys with your regular customers to see if they have an interest in these services.

When setting up grooming or training, be sure to hire qualified individuals who can provide excellent service to customers. Pay them fairly, but make sure you can make a profit off of these services.

You can increase sales by adding new, trending pet products, too. GPS pet trackers, smart pet feeders, and dog car beds are all examples of trending products to sell to boost interest among pet owners.

5. Promote Your Online Presence

Selling pet products online helps you increase revenue and profit by allowing you to reach a wider audience. Create an engaging website that matches your brick-and-mortar store in design, colors, and the products you sell. You can maximize your website’s potential by marketing it on social media platforms like Instagram, Facebook, and TikTok.

Make content that showcases your products and directs people to your online store. Posting this content reaches new customers who may not live close to your store.

Increase Pet Store Profit Margins With eTailPet

Knowing what your pet store’s profit margins are and what factors affect them helps you keep your pet store in business. By implementing strategies to cut costs and increase revenue, you can keep your profit margins high, leading to long-term sustainability for your business.

As you work on increasing your profit margins, remember to negotiate with suppliers, find and bring in high-margin items, stock diverse products, and offer a variety of services. Don’t forget to create a solid online presence with a great website and engaging social media content, too.

To keep profits high, you need a point of sale (POS) system. eTailPet is an all-in-one POS solution specifically designed for pet stores. Our system gives you access to pet suppliers, offers website design and e-commerce features, and helps you manage your inventory. With its full suite of features, you have everything you need to run your business.

To see what eTailPet does for your pet store, schedule a demo today.