Future-proofing your veterinary practice revenue
Two smart data wonks in the animal health industry recently shared market information at an exclusive event in Kansas City. Heres the skinny on what they see coming down the pike for veterinary practices like yours.
Have you considered the financial health of your practice lately? (shutterstock.com)Who's making money in animal health? Two industry insiders-Chris Ragland, CEO of research group Animalytix, and David Sprinkle with data firm Packaged Facts-shared details with animal health industry executives at the 4th Annual Market Insight Seminar as part of a multiday event in the Kansas City Animal Health Corridor. (The event was helped with support by Animalytix, dvm360 and NAVC.)
Here are highlights that apply to veterinary hospitals today.
Where your revenue comes from now
In the first half of 2019, year-over-year revenue for small animal veterinary care was up 5.5%. Some of that growth was in rescues and shelters (they saw 2.5% growth), but Ragland said reports of their larger impact are exaggerated so far.
“I hear a lot of complaints [about them from private practitioners],” he said, “but the shelters remain a very, very small percentage of overall care in the veterinary medicine space.”
Digging deeper with the Vetalytix data product-which looks at 237 discrete marketplaces nationwide and offers monthly benchmarks on patient growth, new client acquisition and revenue-Ragland said spending on a select basket of products in its Veterinary Consumption Index (all veterinary care except food, grooming, parasite preventives, life vaccines and nutraceuticals) has remained unchanged from Dec. 2016 to June of this year. That's roughly 2% per year zeroing out the effect of inflation.
“Earlier, we saw big growth in canine core vaccines, and that has stopped,” Ragland said. “We have been steady as a rock, measuring every six months.”
This has Ragland concerned for two reasons: 1) Vetalytix data mirror AVMA findings that while revenues are flat or up, client visits are down; and 2) while some practices are doing well, others are markedly underperforming. “Twenty percent of the practices are driving 50% of the volume and showing double-digit growth,” he said.
What can poorer-performing hospitals do? Ragland left the question open to the company executives and representatives in attendance to consider.
“This is the terrifying part, [that] fees outpace the real growth of patients,” he said. “What can be done by companies to help people on the bottom half of this curve participate in what should be a lucrative business opportunity [veterinary medicine] for them?”
Who wants to take your revenue in the future
Following Ragland's economic overview, David Sprinkle, with the pet-owning consumer survey giant Packaged Facts, laid out the basics of encroaching competition for pet care dollars today.
“You need to be aware of how these people are encroaching on your turf,” Sprinkle warned veterinary practice owners, as he considered the big sectors of pet food, e-commerce and pharmacies.
Pet products. First, in case you didn't know, e-commerce is king now. In 2012, 6% of pet owners said they strongly agreed that they buy more pet products online than they used to. "In 2018, that was 24%,” Sprinkle said, “so we'll stop asking this, because it's become the norm.”
What will this mean for veterinary hospitals as a pet product shopping channel? In 2010, 16% of pet owners bought pet products (not counting medications) at veterinarians, down to 9.4% in 2019. That's not a big change,” Sprinkle said, “but you can see where the winds are blowing.”
Sprinkle's team asked pet owners in the past three months where they've bought nonmedication pet products:
- 23% said Amazon.com
- 22% said Walmart
- 20% said Chewy (owned by PetSmart)
- 15% said pet specialty retailers
- 12% said third parties through Amazon
- 9% said a veterinarian's website
Pharmaceuticals. Don't panic on the online pharmacy front quite yet, Sprinkle said: “It's not that veterinarians have massively lost market share, but other competitors are growing in number and intensity.”
Fifty percent of pet owners said they bought parasite preventives in the past 12 months from a veterinarian. Sales are still happening in hospitals, he says: “Just explain why the products you're prescribing are the best.”
Where are hospitals' biggest threats to consider? Sprinkle outlined some common factors that pet owners said affect their pet medication sales channel: 76% emphasized convenience, 57% said cost was an issue, 43% wanted to get all their pet products in one place and 38% specifically valued sales at the veterinarian. (If you aren't making purchases super convenient and you aren't competitive on price at all, are you in danger?)
Sprinkle showed off website marketing images for online pharmacies Chewy Pharmacy and Walmart PetRX and how veterinarians in hospitals clearly figured. The expertise of veterinarians is selling, even when veterinarians aren't involved with the sale (beyond the prescription).
Pet food. This topic is fraught with emotion. Pet owners are buying into slick marketing, strange ideas and internet hearsay when it comes to what they should feed their pets.
But you can't duck those questions and leave it to the pet food companies, or your place as the most important expert in veterinary medicine for clients could suffer: “Think about whether you can disregard the ways your customers are thinking,” Sprinkle said. “It doesn't mean any veterinarian needs to answer every random question that comes up, but they need to be able to … share reputable sources.”
If clients get the friendliest, most authoritative-sounding (not actually authoritative) answers from the big-box pet store employee, those big-box pet stores may steal your veterinary clients with the clinics inside their buildings: “This will be an encroachment on mind share about how and where they get veterinary care,” he said.
It's a new world out there, Sprinkle said, full of “omnimarkets” in which everyone is competing with everyone else across all sectors and markets of pet care. “It's across human and pet lines, across product and service lines, across medical and nonmedical,” he said.
Sprinkle said he imagines a future coming sooner rather than later where veterinary clinics are adaptive, multifaceted, consumer-trend savvy and client-attentive pet wellness centers, no longer the traditional sick-pet-only hospitals of today.
It's just another reminder to ask where you are, what you're doing and what you want to do that fits with good veterinary medicine, good business and, yes, catering to what your clients are interested in right now.