April 2011, Cover Stories
Taking care of Fido
A troubled economy hasn’t slowed pet product sales at Drs. Foster & Smith
“In a down economy, people are still going to take care of their family, and for a lot of folks that dog, cat, bird, gerbil or fish is part of their family,” says Gordon Magee, Internet marketing and analysis manager at Drs. Foster & Smith, a nationwide Internet and catalog pet products retailer that employs more than 500 people at its Northwoods Wisconsin location.
While the country averaged a 2.4 percent annual decrease in real U.S. Gross Domestic Product since 2009, the pet product industry saw a 5 percent annual increase instead. Foster & Smith’s business story seems to support this fact. Founded in 1983 by veterinarians Race Foster, Rory Foster and Marty Smith, the Rhinelander, Wisconsin, company has experienced rapid growth, expanding from two employees and $30,000 in sales in 1983 to more than 500 employees and $250 million in sales in 2010.
“The key area of growth for us as an indicator that people are still buying for their pets has been in our pharmacy area,” Magee says. “While we don’t reveal the exact figures, I can say we saw double-digit growth in 2010 that is continuing in 2011.”
Clearly Americans place high value on their furry companions.
And when these loved ones need care, many people are turning to Foster & Smith’s catalog and Internet retail business, which stocks more than 15,000 different products for pets ranging from dogs and cats to gerbils, lizards and fish. “We probably have the broadest selection of pet supply products in the industry,” says Magee. “There are things we have available that no one else stocks.”
Pushing Pet Education
A smart marketing strategy based on customer education and satisfaction guarantees have helped the company compete in a market saturated with big-box pet supply retailers such as PetSmart and PetCo. Though these firms corner the market on in-store sales, seeing $4 billion and $2 billion in annual sales respectively, Foster & Smith captures the lion’s share of the online market.
Though the company operates a small retail store in Rhinelander, the majority of its business comes from its Web site, which attracts 1.5 million unique visitors per month, and through mail-order catalogs, sending out more than 60 million annually. “We are the number one online and number one catalog seller of pet supplies in the country,” Magee says.
A strong educational component sets the company apart from its competition. Early on, cataloging experts told its owners that their catalogs devoted too much space to education. But Foster & Smith forged ahead anyway, devoting 10 to 15 percent of every catalog to education. Today all of the company’s online and print catalogs feature extensive product information and how-to guides.
“As a result, we have become a trusted source for pet supplies and information,” says Magee. “You can buy products from the company and know that they are safe and have been looked at by veterinarians or expert technical staff.”
In recent years, the company expanded its educational efforts to the Web, launching peteducation.com, a non-commercial information resource devoted to educating pet owners. The Web site, which attracts 1 million unique visits per month, features “Focus Topic” primers on various aspects of pet care, encyclopedia-style articles, a medical dictionary, and technical material for veterinarians. Foster & Smith veterinarians write the informative articles, with a significant portion being contributed by the owners themselves.
The company furthers its educational efforts on its commercial site by offering more than 400 videos to help customers care for their pets. Approximately 25 percent of the videos are how-to guides created in response to customer questions, with the other 75 percent being product videos. Covered topics include everything from how to care for your dog or cat in warm weather, to vaccinating your pet at home, and more. The product-related videos showcase product offerings and demonstrate how the products are used.
There’s even a set of videos devoted to medications. These clips show what a medication is for and how it is administered as well as discuss contraindications and side effects. This helps customers feel comfortable ordering pharmaceuticals online. “There’s a talking head saying: ‘Here’s what this is for, here’s how you should use it, and here are the potential side effects,’” Magee says.
Being Social
Foster & Smith has also entered the social media space. The firm hosts a company blog, Facebook pages for various pet types, and employs folks to Twitter about pets.
Social media is a logical companion to the company’s educational bent. “It provides us with an opportunity to interact with people who are very passionate about their pets in educational and personal ways,” says Magee, “It allows the customer to get to know us as a company. Video fits very well into that piece so we also put video on our Facebook pages and blog.”
He calls social media “a focus group that goes on all the time” but stresses the space should not be used to push products but to showcase a corporation’s personal face. “Social media should not be heavily promotional,” he says. “That’s not what it’s for. People have enough marketing messages thrown at them.”
Foster & Smith personalizes its online presence by putting a face to the people writing its Facebook, Twitter and blog messages. Employees posting company material go by their first names: DFS Ellen, DFS Melissa and DFS Jackie. “These are the real names of the people in our department writing the messages,” Magee says. “These individuals share things about their own pets too in an effort to get people talking about theirs.”
Though these employees are also responsible for other tasks, they update the company’s social media messages daily. Melissa works on the company’s fish Facebook page and Twitters that information as well, while also serving as a designer in its Web site e-mail program. Jackie heads the firm’s Facebook efforts but also manages all e-mail sends (Foster & Smith sends out millions of e-mails annually). Ellen handles search engine optimization but also writes the blog and occasionally works on Facebook.
The big three: Amazon, Netflix and
Drs. Foster & Smith
Its social media and online presence has helped earn it a spot in Foresee Results’ list of companies with the best customer satisfaction nationally. Commissioned by Internet Retailer to rate the top 100 Internet retailing companies for customer satisfaction, Foresee Results annually surveys 20,000 online shoppers incorporating the science behind the University of Michigan’s American Customer Satisfaction Index (ACSI). In the years since this ranking began Foster & Smith has made the list, each time ranking in the Top 5. “Though we were 105th in size this year, our customer satisfaction scores placed us tied for third,” Magee says. “The only two Web retailers that ranked higher than us were Amazon and Netflix, so it’s very clear that our customers are satisfied.”
Magee attributes this recognition to the company’s 100-percent satisfaction guarantee, where if customers are not satisfied with a product they can return it for a full refund – no questions asked. Even with this policy in place, Magee says returns are less than three percent when the national average for Internet and catalog retailing hovers around 15 percent. “This shows customers are getting what they want and that it’s not broken when they get it,” he says.
Foster & Smith ships as many as 10,000 orders daily from its 240,000- square-foot warehouse, which houses its entire inventory. The company handles nearly every business task in-house including product development, marketing, warehousing, software engineering, building construction and maintenance, giving it a high level of control over its operations. As a result, 95 percent of orders ship within 24 hours.
Two shifts fulfill orders using an automated pick-to-light order fulfillment system to ensure order accuracy. As totes (bar-coded to match a specific order) move down the fulfillment line, pickers, or shoppers as the company calls them, grab the products the customer ordered.
“A solid light means they are done filling that tote. If it is still blinking it means they need to look for more items,” says Magee who points out that the tote will not move down the line until the shopper has picked all necessary products from their area of responsibility.
The online pet business continues to thrive with Foster & Smith setting the bar today and for the future. Says Magee, “Our product line is for those warm, fuzzy animals that people love and want to take care of. We’re going to help them do that, and we will continue to strive to excel as we do.”
A Few Facts About Drs. Foster & Smith
The company employs a team of veterinarians and certified pharmacists to ensure products meet strict veterinary requirements. These professionals are licensed in all 50 states.
Its online pharmacy is one of only a handful of pet pharmacies to achieve Vet-VIPPS (Verified Internet Pharmacy Practice Site) accreditation from the National Association of Boards of Pharmacy. It is one of only two Vet-VIPPS accredited pharmacies that have also achieved accreditation from the Pharmacy Compounding Accreditation Board.
Foster & Smith operates one of the largest aquaculture centers in the United States where it grows live saltwater coral and saltwater fish.
Cornstarch packing peanuts are manufactured on-site and are used instead of Styrofoam. This packaging material is safe for pets and biodegrades quickly.
The company’s aquaculture center is one of only two in the world that has successfully bred McCulloch clownfish in captivity.
Owners Race Foster and Marty Smith had a show on Animal Planet called Drs. Foster & Smith’s Faithful Friends for two years.