The Supply Side: Analysts say Walmart’s pet services expansion is timely amid growing number of adoptions

The pet category has long been an important one for retail giant Walmart, from the early launch of Ol’ Roy private brand dog food — affectionately named after founder Sam Walton’s beloved bird dog — to the launch of PetRx and animal care clinics in select stores in mid-2019, to now further expansion of pet insurance and other services with two new partnerships.

Walmart said it understands pets aren’t just pets. They’re family. That’s why it has continued to expand products and services for customers through a new web portal, Walmart Pet Care. The retail giant is now offering a complete omnichannel pet care offering for the 90 million pet owners who shop at Walmart each week.

“Especially as adoption rates soar as a result of the pandemic and more people become pet owners, this was the perfect time to launch expanded services in Walmart Pet Care for our customers. As the most-shopped omnichannel retailer for pet products, our new pet care services and support offer our customers trusted, convenient services that provide the exceptional care their pets deserve,” said Melody Richard, merchandising vice president in the pet category.

Jason Goldberg, chief commerce officer at Publicis, said during the pandemic, as consumers have spent more time at home, there have been more than 1 million pet adoptions. He said there are now 1.6 million new pet owners in the country for retailers to serve. The category has grown its share of online sales by 10% through the summer.

Scott Benedict, director of retail studies at Texas A&M University and a former Walmart executive, said it has taken time for the pet category to move online. But like grocery, e-commerce pet sales accelerated in recent months as more weekly grocery and consumable sales shifted online. That’s a trend he does not see reversing once the pandemic has subsided. Benedict said pets are an essential growth category for Walmart, and new services like pet insurance are likely to resonate with millions of pet owners.

Walmart opened about a dozen in-store pet clinics beginning in the summer of 2019. The clinics are operated by third parties, including Essentials Pet Care and VetIQ. Walmart is evaluating new locations for up to 100 in-store clinics over the next year. The retailer said the latest expansion is Walmart’s attempt to offer a turnkey suite of services for its customer base, accessed online through one central site.

Richard said 98% of pets in the U.S. are uninsured even though one-third of Americans cannot cover an expected medical bill over $100. Walmart has partnered with Petplan to offer pet insurance at an affordable price.

She said Walmart customers could save up to 10% on their policies over traditional costs. The plans provide coverage for veterinary fees due to accident, injury or illness of pets, including chronic or hereditary conditions.

Walmart said millions of pet owners were already using the retailer for pet prescriptions and to purchase food and suppliers. The new offering is another step to provide services that can help customers save money. Walmart pet insurance also allows customers to file claims and schedule appointments online through Petplan’s digital service. Each policy includes access to $1,000 worth of online virtual vet appointments at no additional charge.

Walmart is also offering pet sitting and dog walking services through a partnership with Rover, a network of 30,000 providers throughout the U.S. that can be accessed with the Rover mobile app. Walmart said that customers who book services through Rover would receive a $20 Walmart gift card for their first complete service. The retailer will give another $20 gift card if customers complete five services within six months.

Rod Sides, vice chairman of retail and distribution at Deloitte, said pet spending is relatively recession-proof as families have a history of showing pets take priority even when budgets are tight. Deloitte expects families will spend an average of $90 on their pets or for others.

Walmart already had a considerable share of overall pet product sales in the U.S. in brick-and-mortar stores. Packaged Facts, a market research firm, estimated in 2018 that Walmart had roughly $9.4 billion in U.S. pet sales (in-stores), excluding Sam’s Club, or about 86% of pet product sales through mass merchandisers, and a 19% share of U.S brick-and-mortar pet sales overall.

E-commerce provider Edge by Ascential reported in October that Walmart had the largest household and pet care sales at $32.8 billion annually pre-pandemic, with sales expected to reach $37.6 billion by 2025. Amazon ranked second with pre-pandemic sales of $16.1 billion, expected to grow to $27.2 billion by 2025, a gain of 11%. Pet specialty retailer Petsmart, which includes Chewy.com, had sales of $12.2 billion pre-pandemic and are expected to grow to $20 billion over the next five years.

“The sector will see rapid growth for e-commerce retailers in particular. E-commerce currently accounts for 19.2% of household and pet care chain retail sales globally and will increase to 26.9% by 2025. The U.S. is set to experience a 6% growth rate between pre- and post-COVID-19,” according to the report.

Analysts have applauded Walmart’s recent focus to grow its share of the booming pet products and pet care services. Keith Anderson, director of strategy at Profitero, told the Northwest Arkansas Business Journal that Walmart’s latest move into services is a good fit with the vet clinics and pet pharmacy launched last year.

“I am not sure insurance/dog-walking will have a discernible impact on shares, but it certainly reinforces Walmart as a convenient ‘pet solutions’ provider in ways that may put pressure on specialists like PetSmart and Petco and Chewy. More than that, I think it will help Walmart increase customer value with loyal customers that own pets,” Anderson said.

Carol Spieckerman, CEO of Spieckerman Retail, said Walmart’s expanding pet portfolio mirrors its expansion into people’s services and healthcare.

“If anything, ignoring the pet opportunity would have created a gaping hole in Walmart’s growing suite of services,” she said. “The only challenge is one of awareness and integration. As Walmart extends its tentacles into new businesses, getting the word out and articulating benefits and a clear value proposition is of utmost importance. Easy navigation and optimized search within the Walmart.com environment will be critical to making this happen. It’s a tall order to present a massive portfolio of products, solutions and services with easy navigation and clarity. Yet, if customers don’t know about these services, they might as well not exist.”

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