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Karl Keller, right, and his son, Karl Keller II, are expanding the new Petsway name by adding stores in Springfield and St. Louis.
Karl Keller, right, and his son, Karl Keller II, are expanding the new Petsway name by adding stores in Springfield and St. Louis.

Business Spotlight: Power of the Pet

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It all started with a single guppy. Well, to be fair, the guppy was pregnant. There’s a story for that. Karl Keller has many stories to tell from his 53 years in Springfield-area business.

At 11 years old, Keller already visualized the potential for a pet empire, and he began buying and selling tropical fish out of his parent’s Ava home in May 1951. “The population was 1,373, and we were the three,” Keller says of his Ava roots.

When the Kellers moved to Springfield two years later, the fish inventory expanded, as it did with each subsequent move.

“I had fish in the basement, fish in the living room,” he recalls.

The home-based operation now at Cherry Street and Fremont Avenue, aka Karl’s Aquarium, expanded to Karl’s Aquarium and Pet, and his parents had all the pet business they could take. Keller kindly got the boot and in late 1956 signed a commercial lease at 1663 St. Louis St., a few doors down from the corporate office today in the Gilbreath Building.

The early days gave birth in 1989 to the Pet Warehouse name, under which Keller opened four stores in Springfield and one in Joplin. By the time Keller was adding a Poplar Bluff store in 2007, he had settled on a new moniker and opened as Petsway. The next story is being written by Karl Keller II, who runs day-to-day operations as vice president, and it begins with the corporate name change to Petsway Inc.

In late August, retail signs changed to the Petsway name as the company rolled out its $75,000 investment throughout its stores. “The trademark was in place and there was nothing to stop us other than making the investment,” says Keller II, who joined his father’s business in 2000, after a stint working for McDonnell Douglas Corp.’s F18 Super Hornet project. “Now, I’m driven to carry on the legacy of the family business.”

The first step is opening the company’s fifth Springfield store. Nesbitt Construction crews currently are infilling a shell building for an Oct. 1 opening on Glenstone Avenue across from Battlefield Mall and behind Rally House.

“We’ve wanted to be on South Glenstone for years. There just was never a location available that fit our needs,” Keller says, noting the next step is entering a new market. Petsway store No. 8 is slated to open by late October in St. Louis.

Pet parents
The elder Keller was on to something. Pet industry sales last year topped $55 billion nationwide and are on pace for $58.5 billion this year, according to the American Pet Products Association.

According to the association’s annual survey of pet owners, 68 percent of U.S. households own a pet, up from 56 percent of homes in 1988, the first year of the national survey.

The last two years, Petsway sales have bounced back from the recession rut that tightened disposable income, especially in such pet accessories as Harley Davidson collars and iSqueak bones on the store shelves.

Sales in 2009 and 2010 dipped by 3 percent and 4 percent, respectively. But last year, Keller says Petsway generated a record $8.3 million in sales, coming off of back-to-back years of roughly double digit percent increases.

While projecting $8.7 million in 2014 sales, the Kellers have noticed customers being more picky with their pet supplies. For example, they’re now reading labels.

“Natural, organic and holistic are all big buzz words in the industry now. People are looking for more natural ingredients,” Keller II says. Dog food sales take the cake at Petsway, representing 40 percent of receipts, followed by general merchandise and small-animal sales, including fish, birds and reptiles. Cat food makes up a small 4 percent of sales, he says, and that’s not the only difference between dog and cat customers. Keller II says cat customers are noticeably more frugal.

“When I say cat customer, I’m talking about the owner and the cat,” he says. “When you give a toy to your cat, it’s a different experience. The dog will give the owner instant satisfaction. … A cat, it’s a different story. You’ve got to make an appointment with the cat. They might and might not give you the pleasure of actually playing with the toy.”

Petsway stores dedicate about 35 feet of retail shelf space to collar and lead products purchased through Texas-based supplier Burns & Associates. Midwest Regional Manager Cathy Arnn says top sellers are American-made products.

“People are more aware of USA-made products,” she says, pointing to Ohio-based Coastal Pet Products, a popular brand at Petsway. “Eighty percent of Coastal is USA-made these days.”

With branding agreements with such companies as Remington, John Deere and Case, leather animal collars can cost up to $50, she says, while the Li’l Pals line for small dogs are in the $10 range. As for colors, pink is still trending.

Petsway buys product from some 200 manufacturers and distributors, including Nutro Co. and Wilson Pet Supply Inc. Through this network, purchasers have access to some 1,400 items, many of which are private labels.

Father knows best?
The Kellers plan to develop their own private label products under the Petsway name, with the end goal of creating a dog food line. They already have experience in wholesale pet supplies. A division under the General Pet Inc. name sold products to national retailers.

“We sold Sam Walton his first goldfish for Wal-Mart stores. We used to be a wholesale distributor for Wal-Mart,” Keller II says, noting the division peaked at $12 million of annual product sold to Wal-Mart Stores Inc. (NYSE: WMT).

The rise caught the eye of Meriwether Capital, a private equity firm managing the Rockefeller family funds, which bought out General Pet in 2012.

With their sights on a five-year growth plan, the Kellers are investing $300,000 to $400,000 in the new stores this year, with plans for a handful of others next year.

Within five years, founder and CEO Keller anticipates 50 stores in the chain. “My son will disagree with me on that,” he says.

The father knows his son.

“We’re getting our feet wet with these two stores,” Keller II cautiously responds. “We’ve got a third store we’re trying to nail down a location on, and next year we’ll follow up with additional stores.”

But the Petsway patriarch isn’t counting out any acquisitions. “My secret is I’m going to find a chain of about 12 or 25 stores, and I’m going to get to that 50,” he says.[[In-content Ad]]

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