The Supply Side: A $65 billion market draws more retailers into pet services

by Kim Souza ([email protected]) 1,739 views 

The pet business is a competitive one. And the $65 billion pet services market is drawing the attention of more non-pet retailers as a way to increase revenue streams as traditional retail margins are pressured.

About 90.5 million U.S. families own a pet, or about 70% of U.S. households, according to the American Pet Producers Association (APPA). There are 48 million households with a dog generating a cumulative $44.5 billion in veterinarian services each year, including routine visits, immunizations, surgical procedures and grooming. Another 46.5 million households own a cat and annually spend $21.25 billion on veterinary services, APPA reports.

After pet ownership soared during the pandemic, more retailers are expanding services intending to become one-stop shops for pet owners. The American Society for the Prevention of Cruelty to Animals (ASPCA) reports that more than 23 million U.S. households adopted a pet during the pandemic triggering a flood of new patients at veterinary hospitals.

Texas-based grocery chain H-E-B recently announced it was delving into the pet services business through a partnership with Thumbtack. The home services platform provides consumers access to pet care services. The retailer said Thumbtack had opened 300 displays in H-E-B stores featuring a QR code that customers scan to access third-party pet care services such as dog grooming, dog walking, pet sitting and training. Thumbtack said that is the company’s first move into physical retail.

Walmart jumped into the pet care services business before the pandemic with a partnership with Rover in 2020 that allowed customers to book dog walking and sitting services at a discount. The retail giant opened its online and in-store pet pharmacy business in 2019. Walmart said it operates over 60 veterinary clinics in stores across the U.S. in collaboration with VetIQ Petcare. The retail giant said it has plans to add more clinics based on need. Walmart also has pet daycare or grooming services in about 10 stores.

Walmart said it provides a shopping and pet care experience with comprehensive services and quality products at low prices, helping it to become a one-stop shop for pet needs at a value. The PetRx business provides prescriptions from more than 300 brands to treat dogs, cats, horses and livestock. PetRx provides service online and in-store pharmacies.

Walmart’s move into pet services aligns with the company’s plan to grow revenue through services. Given Walmart’s scale, with stores within 10 miles of 90% of the U.S. population, executives said it makes sense to use the stores to add more services consumers need, from healthcare clinics to dog grooming and phone repair.

“For an increasing number of customers, Walmart will be seen more like a service,” Walmart CEO Doug McMillon said.

Tractor Supply Co., the farm specialty retailer, is also in the pet care business dating to early 2021. Tractor Supply announced in late 2022 expanded pet care services that would put its self-serve pet wash service in 150 to 200 stores and open 75 pet wellness centers. The retailer also began offering pet prescription services online and on-demand professional veterinary advice through chat, call or email.

“Tractor Supply is the clear destination for this on-trend category,” CEO Hal Lawton said in a recent earnings call. “Given the strong trends we’re seeing in our companion animal categories and the recent growth in pet ownership, we are focused on being a more complete resource for pet parents.”

Lawton said that Tractor Supply has vet services in about 1,600 stores through mobile vet clinics.

Nielsen IQ said there’s an opportunity for retailers to take share in a category experiencing demand, with traffic at veterinary clinics up 6.5% in 2022 and 4.5% growth in the prior year. The steady demand and rise in pet ownership are why retailers continue accelerating their pet care services.

Offering health services also allows retailers to gain access to comprehensive data around pets’ overall well-being, said Brad Jashinsky, director analyst at Gartner.

“The more that they know about the pet, the more they can offer additional services and products,” Jashinsky added. “As dogs, cats and other pets age, health services become a huge business and a part of that recurring business.”

Traditional pet-care retailers are also upping their game. Online pet pharmacy PetMeds wants to become the destination for all things pet and wellness, having recently acquired PetCareRx and now offering telehealth visits through Vetlive.

Health services are typically seen as a stable revenue stream as consumers pull back on discretionary spending. Nielsen said the average unit price for CPG pet products rose 11% in January, with some retailers reducing assortments to avoid excess inventory as recently as March.

Petco’s core business is pets, and the retailer has long embraced the services model to better connect with customers, something Walmart and Tractor Supply are also trying to achieve.

“This 360-degree health and wellness strategy enables you to certainly buy your dog food and buy your dog bed or your cat tree, but we also make it seamless for you to take care of your animal in all the other ways that you need to take care of them,” said Darren MacDonald, chief customer officer at Petco. “So we have vet vaccination clinics, and if you’ve gone to a vet vaccination clinic, we seamlessly pass off that information to our vets and to our groomers.”

Petco said nearly 1.9 million pets went to Petco’s hospitals and clinics in 2022. The retailer has grown its veterinary business from 10 clinics in 2018 to 247 in early 2023.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.