Please ensure Javascript is enabled for purposes of website accessibility

2022 Mid-Year Update: U.S. Pet Services Spending (Non-Vet) Nears $11B

By Pet Age Staff//August 7, 2023//

2022 Mid-Year Update: U.S. Pet Services Spending (Non-Vet) Nears $11B

By: Pet Age Staff//August 7, 2023//

Listen to this article

John Gibbons, the Pet Business Professor, saw strong growth in pet food and supplies spending in the second half of 2021, which sent pet supplies to a record high and returned pet food to near its pandemic “binge high.” Both categories had continued but slowed growth in early 2022. According to Gibbons, strong inflation may have been a factor.

Now Gibbons is turning his attention to the Pet Services category. The mid-year numbers show that spending in this segment was $10.87 billion, up $3.43 billion (+46.2 percent) from the previous year. Up until 2018, this segment was known for consistent, small growth. In 2018, increased outlets and competitive prices brought on a wave of new users and spending increased +$1.95 billion.

Spending in this segment remained near this new high normal until 2020. Closures due to the pandemic drove spending down $1.73 billion by the end of 2020, essentially returning to the level of 2017. In 2021, things opened up and spending began to rebound. Gibbons is giving this a closer look, and the following chart looks at the history of Services spending since 2014.

(click to enlarge)

Here are the 2022 mid-year details:

Mid-Year 2022: $10.87 billion; ↑$3.43 billion (+46.2 percent) vs. Mid-Year 2021

Jul > Dec 2021: ↑$1.66 billion

Jan > Jun 2022: ↑$1.77 billion

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Pet Food and Pet Supplies has been on a roller coaster ride during that period. Pet Services spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6 percent. Spending in the Pet Services segment is the most discretionary in the industry and is more strongly skewed towards higher income households.

Prior to the great recession, the inflation rate averaged 3.9 percent with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+ percent range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2 percent and continued down to 1.1 percent by the end of 2017. This was primarily due to increased competition from free-standing businesses but also an increase in the number of pet stores and veterinary clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the second half of 2017 spending turned up again. More consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95 billion, the biggest annual increase in history. Prices turned up again in the 1st half of 2019, +2.8 percent from 2018. However, Services spending inched up $0.09 billion. In the second half of 2019 consumers value shopped again so spending fell -$0.19 billion. Then came 2020 and the pandemic. Many of these nonessential businesses were forced to close and spending fell precipitously, -$1.73 billion to $6.89 billion, about the same as yearend 2017. In 2021 things opened up again and spending bounced back, +$0.55 billion vs the first six months of 2020. Unlike the Pet Food and Pet Supplies categories, the increase continued to accelerate even into 2022, despite an inflation rate of 6+ percent. This produced a record 12-month increase and a new record high, $10.87 billion.

Gibbons dives into some key spending demographics, Age and Income.

In the graphs that follow, he compares spending for the 12 months ending June 30, 2022 to the previous 12 months. The graphs also include the 2021 year-end spending, which reveals spending changes in the second half of 2021 and the first half of 2022.

The first graph is for income, the single most important factor in increased Pet Spending, especially in Pet Services.

Here’s how you get the change for each half using the Over $70K group as an example:

Mid-year total spending change: $8.41 billion – $5.04 billion = Up +$3.37 billion (Note green outline = increase; red outline = decrease)

  • Second half of 2021: Subtract Mid-21 ($5.04 billion) from Total 2021 ($6.81 billion) = Spending was up $1.77 billion in second half of 2021.
  • First half of 2022: Subtract Total 2021 ($6.81 billion) from Mid-22 ($8.41 billion) = Spending was up +$1.60 billion in first half of 2022.

(click to enlarge)

With the Over/Under $100K measurement, you see how Services Spending is definitely skewed towards higher incomes. The halfway spending point is about $141K so about 20 percent of CUs spend 50 percent percent of Pet Services spending. However, spending in both the under and over $100K groups grew in both halves.

  • All groups $70K> had steady growth. The <$70K groups had basically 2 different patterns. Surprisingly, the <$30K had growth in both halves. The $30>70K groups had decreased spending despite a 2022 lift by $30>50K.
  • The $50>70K group had the worst performance. They had the biggest decrease, -20.9 percent and decreases in both halves. In fact, they were the only segment with decreased spending in the first half of 2022.
  • The over $150K group has 16.7 percent of the CUs but accounts for 46.2 percent of Pet Services spending. This is actually a much larger share than the 37.6 percent that they had in pre-pandemic 2019. The pandemic has increased the importance of this group.
  • Income, especially when it is over $150K, is by far the biggest factor in the discretionary spending in the Pet Services segment so Pet Services spending is more unbalanced in regard to income. The highest income groups are more driven by convenience than value so high inflation rates are likely to actually increase spending because of higher prices.

Now, Gibbons examines Pet Services spending by different age groups.

(click to enlarge)

  • Basically the <25 -year-olds spent less while everyone else spent more. Their spending fell slightly in both halves.
  • The 55>64-year-olds group had the biggest increase, up +$1.17billion (+85.4% percent) and held on to the top spot in Services spending.
  • The 35>44 year-olds spent +$0.79 billion more (+50.3 percent) and held on to the second spot in spending.
  • The 45>54-year-olds had a small increase despite a drop in the second half of 2021. They are No. 3. In mid-2021 they were No. 1.
  • Although their lift was small this year, 25>34-year-olds are the only group with consecutive mid-year increases.
  • The 65> groups were up $1.1 billion (+80.3% percent) with lifts in both halves, including a +$0.65 billion increase in the first half of 2022. The 65>74-year-old Baby Boomers led the way, which is no surprise to Gibbons.
  • All groups but <25 had a spending lift in the first half of 2022, a big change from Food and Supplies.

Gibbons next takes a look at what is happening in Pet Services spending at the start of 2022 across the whole range of demographics. In his final chart, he will list the biggest spending moves, up and down by individual segments in 12 demographic categories. Remember, the lift in the first half of 2022 was +$1.77 billion vs. 2021 and +$2.32B billion vs. 2020.

(click to enlarge)

The year 2022 started even better than 2021 as spending continues to grow. In five categories, all segments spent more. Last year, only all income segments spent more. In 2020, there were four categories in which all segments spent less on Services. Also, the spending changes from the winners are overwhelmingly larger than the negatives of the losers. The +$1.77 billion increase in Pet Services came from 74 of 82 demographic segments (90 percent) spending more. Last year it was 78 percent. In 2020, 88 percent spent less. The strong recovery has become a growth tidal wave, +58 percent from 2020 and even +23 percent from 2019.

The usual winners have overwhelmingly returned with only two minor surprises:

  • The South
  • Tie: 55>64-year-olds and 65>74-year-olds

Virtually all of the Losers were also expected. Here are the surprises:

  • Gen X
  • Northeast

The older groups, specifically Baby Boomers are driving the first half lift. The 55>74-year-olds are essentially all Boomers. Most Boomer CUs are two people, with no kids. The younger groups had the best performance in the first half of 2021 and 2020. It appears that the Baby Boomers have at least briefly “taken back the torch.”

Pet Services spending is at a record high and, according to Gibbons, it’s growing. He review how the pet industry got to this point while speculating on what comes next.

Except for the trauma caused by the Great Recession, which hit Services in 2010>2011, the pet services segment had slow but consistent growth from 2000 to 2016. The number of outlets also was increasing. Services were gaining in popularity, and many retail pet stores were looking for a competitive edge over the growing pet product sales of online retailers. After all, Gibbons points out that you can buy product, but you can’t get your dog groomed on the Internet.

By 2017 the number of outlets offering pet services radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value-conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the first half of 2017. The segment started to recover in the second half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start.

In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Pet Services started a deeper penetration into the market, especially in the younger groups. The <45 groups spent $1.47 billion more on Pet Services in 2018, 74 percent of the total $1.95 billion increase in the segment. After such a big lift, a slight downturn in 2019 was not unexpected and it happened, -$0.1 billion. Then came 2020 and COVID. Although the consumer use of Pet Services was becoming increasingly widespread, many pet service outlets were deemed nonessential,  and they were subject to pandemic restrictions and closures. Pet Services spending fell -$1.73 billion (-20.1 percent) in 2020 and nearly wiped out the big gain made in 2018.

In 2021, things opened up and Services spending began to rebound with a +$0.55 billion lift in the first half. This lift accelerated in the second half and even the first half of 2022. Spending reached a new record high of $10.87 billion, with an annual growth rate of 7.3 percent since mid-year 2019. That’s 43 percent higher than the 5.1 percent rate from 2009 to 2019. Pet services have become an important option that is exercised by an increasing number of pet parents. However, according to Gibbons, much of the growth is increasingly being driven by higher incomes.

There is some good news in this trend. Higher incomes are less negatively impacted by strong inflation. They buy the same amount, and they choose to pay more. As Gibbons sees it, this means that services spending is likely to continue to grow.