According to John Gibbons, president of A GPS for Pet Businesses, spending on veterinary services was $20.67 billion in 2017.
For years, Veterinary Services prices have had high inflation. This has resulted in CU income becoming the most dominant factor in spending behavior and a reduction in visit frequency. Consumers paid more, just used Veterinary Services less often. The high inflation and prices also resulted in consumers trading Veterinary $ in reaction to big spending changes in other segments, primarily Pet Food.
We have noted that 2017 was different. It was a year of Value. This was also true in the Veterinary segment. While prices did not deflate, inflation hit an all time record low rate. Consumers reacted by spending $2.56B (+14.1%) more on Veterinary Services. The best news was that half of the increase came from an increase in frequency of visits, +7.2%.
Let’s see which groups were most responsible for the bulk of Veterinary spending in 2017 and the $2.56B increase. The first chart details the biggest pet Veterinary spenders for each of 10 demographic categories. It shows their share of CU’s, share of Veterinary spending and their spending performance (Share of spending/share of CU’s). The differences from the product segments are immediately apparent. In order to better target the bulk of the spending we have altered the groups in three categories – income, occupation & age. Another big difference is the performance – 7 of 10 groups perform above 120%. This down from 8 in 2016 but is more than Supplies – 6 and Food – 5. This means that these big spenders are truly performing well but it also signals that there is a far larger disparity between the best and worst performing segments. Income is clearly the biggest factor in Veterinary Spending. The categories are presented in the order that reflects their share of Total Pet Spending which highlights the differences of the 7 matching categories.
- Race/Ethnic – White, not Hispanic (90.0%) down from (92.0%) This group accounts for the vast majority of spending in every segment., but a 90% share is extraordinary. The 131.4% performance rating ranks #3 in terms of importance in Veterinary Spending demographics and reflects the spending disparity. Hispanics, African Americans and Asians account for 31.5% of U.S. CU’s, but they only spend 10% of Vet $. Asians and African Americans have significantly a lower percentage of pet ownership and African Americans have the lowest average CU income.
- # in CU – 2+ people (84.1%) up from (79.4%) They had a big gain in share and their performance increased from 112.9% to 118.0%. The performance increase moved them up in importance from last to 8th. The gain in share was driven by increased spending by 2 and 3-person CUs while the performance increase came from a spending drop by Singles. This widened the disparity between segments.
- Housing – Homeowners (82.5%) up from (81.7%) Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to increased Veterinary spending, the 131.2% performance rating keeps homeownership in 4th place. Both the share of market and performance increased slightly in 2017. This was driven by a big increase in spending by Homeowners without a Motgage. We should note that Homeownership is not as important to Veterinary Spending as it once was. In 2015 their share was 88.4% with performance of 141.8%.
- Education – Associates Degree or Higher (73.8) down from (74.1%) Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Market share was down slightly as was performance, which dropped from 143.2% to 137.4%. However, it is still the 2nd most important factor in Vet spending. The drops were primarily due to a 27.6% increase from HS Grads w/some College – largest in the category.
- Age – 45>74 (66.7%) up from (63.3%) Although the younger groups have made Veterinary Spending more of a priority, in 2017 a slight drop by the 35>44 yr olds combined with a lift from the 65>74 group resulted in a change in age range for the big group. This along with a big spending lift from the 45>64 age range generated the increase in share. The performance had an even bigger increase, going from 121.0% to 129.8%. This moved the importance of Age in increased Veterinary Spending up from 7th place to 5th.
- Occupation – I’m the Boss (65.9%) up from (64.4%) –“I’m the Boss” includes Mgrs & Professionals, Self-employed and Retirees and has a bigger market share than all wage and salary earners. In 2017, all of the “regular” workers spent more but Mgrs/Professional and Retirees drove the increase. The share gain was minimal due to a spending drop from Self-employed. Even with 129.0% performance. They fell from 5th to 6th in importance.
- # Earners – “Everyone Works” (65.9%) down from (69.2%) In this group, all adults in the CU are employed. Even with a loss, the market share of Veterinary $ is the largest share for this group in any segment. Performance fell to 115.0% from 120.1%, which dropped them out of the 120% club. The drop came as a result of a huge increase from 1 Earner, 2+ CUs, with some help from No Earner, 2+ CUs.
- Income – Over $70K (65.0%) up from (63.0%) We changed this group from over $50K because Veterinary Spending is so affected by CU income and the $70K level is where the behavior changes. Although the $50>69K had a 27.3% increase, the Over $70K produced 79% of the increase ($2B). The 169.1% performance clearly shows that higher income is THE most important factor in increased Vet spending.
- CU Composition – Married Couples (63.8%) up from (61.3%) Married couples have a big market share and 120+% performance in all segments. They gained share due to a big increase from Couples only and a drop from singles. Other categories did better so a performance of 128.9% caused them to fall from 6th to 7th place in importance.
- Area – Suburban (62.9%) up from (62.3%) Suburban CU’s are the biggest spenders in every segment. They gained in share– taken from Central Cities, but fell a little in performance to 113.1%. due to a 41% increase from Rural Areas.
We changed 3 of the spending groups for Veterinary to better target the biggest spenders. Higher income is by far the biggest single factor in Veterinary spending. We see the impact of this in many groups as it often contributes to the big spending disparity between segments. The most notable changes were that the # of Earners became less important and spending skewed a little older.
See the full report here.