Why Lowe’s is opening Petco shops inside its big box stores

January 27, 2022, 4:43 PM UTC

In its latest move to drum up more store traffic and new customers, Lowe’s announced on Thursday a partnership with Petco Health and Wellness that will see the home improvement giant test small Petco shops inside its own mega-stores. The “shop-in-stores” will offer shoppers items like dog food, kitty litter and vaccinations for their pets.

Lowe’s and Petco said the first shop-in-store location will open in the San Antonio area next month, with another 14 in Texas and the Carolinas following in March. The Petco shops will be 1,100 square feet in size, only 1% of the size of a typical Lowe’s. But the potential payoff for Lowe’s comes from adding more categories for customers to shop for—categories that are connected to the home but that Lowe’s itself doesn’t specialize in. The hope is that the partnership will bring more shoppers to its large network of stores.

“It gives us another way to deliver on our larger total home strategy,” Lowe’s chief brand and marketing officer Marisa Thalberg told Fortune in an interview. “We aspire to make homes better for all, and that includes pets in what we’ve really seen as these two concurrent booms happening in the past couple of years through the pandemic.”

Lowe’s, like its larger rival The Home Depot, has indeed been riding a wave of home improvement spending. It recently said it expected comparable sales, which strips out the impact of newly closed or opened stores, would be up 33% for the fiscal year about to end compared to 2019, before the COVID-19 outbreak. At the same time, Lowe’s projects comparable sales could fall as much as 3% in 2022 as shoppers return to more normalized spending behavior with the pandemic finally easing, prompting it to look for new sources of growth.

Petco, along with rivals PetSmart and Chewy, have benefitted from the pet spending surge stoked by the pandemic. It stands to benefit from more exposure to potential new customers, given Lowe’s large network of 1,700 stores. (Lowe’s has not said how much it might expand the Petco shops beyond the pilot.) The American Pet Products Association has forecast industry sales growth of 6% this year.

In recent years, Lowe’s has amped up efforts to cast a wider net in winning over shoppers, vastly expanding its holiday season assortment to include items like exercise bikes, to name but one example. At the same time, while it sells some pet-related items, notably carpet cleaners, Lowe’s acknowledges it is not known for pet products. “Petco is true expertise,” says Thalberg. “So I think it loans immediate excitement and credibility.”

The idea of teaming up with another retailer with deeper inroads and experience in key product categories is a growing trend among big box retailers. Most notably, last year Target began opening Ulta Beauty shops at its stores; Macy’s opened some Toys ‘R’ Us shops; and Kroger announced it will sell Bed Bath & Beyond items.

Each Petco shop within Lowe’s will prominently feature the pet retailer’s logo. Each will sell some items from Petco’s WholeHearted line of pet food and treats, and each will offer in all 700 items, along with some basic health services such as vaccination, microchipping, prescription pest prevention, and mobile grooming.

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