The 2009 economics for pet-related small businesses will be dominated by the impact of the recession on consumer spending and attitudes. It has long been thought that pet-related spending is recession proof; however, we believe this assertion will be tested in 2009.
The trend will be toward value for money, which doesn’t necessarily mean spending less, but less frivolously. Pet-related spending will level off somewhat in 2009 as pet owners keep an eye on how the downturn affects them personally. Trends include:
1. Pet Parents Spend but More Thoughtfully
Spending on pet supplies and over-the-counter medicines was projected to increase 5.1% in 2008 from $9.8 billion to $10.3 billion according to the American Pet Products Association (APPA) and while that expects a slowdown from the 6+% increases of the recent past, it likely does not take into account the unprecedented decreases of spending in the 4th quarter of 2008. We would not be surprised to see more modest increases in the range of 2% in 2008, continuing on to 2009.
People will continue to spend above and beyond on their pets as the population ages and pets take the place of children at home; however, pet parents will not be rushing to purchase luxuries, but rather focusing their dollars on quality necessities, such as food, leashes, and bedding. High-end specialty pet stores are going to feel the pinch as the casual shopper won’t be dropping in as much. These stores will have to tighten their budgets while crafting a unique shopping experience to keep their loyal regulars happy.
2. Pet Services for your Pets Continue to Grow
More than $3 billion dollars will be spent on pet services in 2008 according to the APPA, which will likely continue to grow in 2009, but at a lower rate than in prior years. Pet parents are including their pets in their own lifestyles so visits to the spa, exercise regimes, and hotel-quality day care accommodations have become more common in urban areas. In the suburbs, Wal-Mart continues to expand its pet section and has even been testing grooming stations in some of its stores. Expect to see Wal-Mart roll out grooming to more of its stores in 2009, taking on PetSmart’s dominance in this area.
3. Dog’s Star on the Rise for 2009?
One of the more human aspects of the Presidential race has been the huge interest in the “First Dog” and what he or she will turn out to be. The passionate discussion certainly draws attention to all aspects of dog ownership, and where the Obama family goes, the American public will surely follow. The number of cats in the US have long dominated dog numbers (according to the American Veterinary Medical Association, there are more than 72 million pet dogs in the U.S. and nearly 82 million pet cats) but the Obama dog may inspire people with pet allergies to reconsider bringing a dog in-house.
4. Growing Interest in Pet Health Care
Pet parents are taking control of their pets’ health care as they do their two legged children. Online resources continue to improve in quantity and quality and educated pet owners are arming themselves to guide their pets’ care (Wikipedia is a good place to start but other sites are now appearing).
Technology from the human world continues to make its way into the veterinary tool kit including non-invasive surgeries, human medical devices and services being applied to pets, super-premium foods aimed at specific ailments, and alternative therapies, such as acupuncture, massage, and behavioral therapies. High end diagnostics, such as MRIs, are becoming more widely available for pets and now stem cell therapy for arthritis has crept into the pet world.
Online veterinary pharmaceuticals continue to grow but veterinarians are fighting back by dropping their own drug prices. Pet lovers want, and are demanding, the same treatment options for their pets as they can get for themselves.
5. Pet Insurance Edges Towards the Mainstream
We estimate the size of the US pet insurance market to be $271 million in premium in 2008, up from approximately $220 million in 2007 (a 23% increase) and we expect 2009 premium to reach $328 million. We project that the market will grow to $500 million by 2012. There are 11 pet insurance companies in the US selling under 15 brands. Two new companies arrived on the scene in 2008, including the Purina Pet Insurance brand underwritten by AIG.
New entrants with money is good news for the industry as bigger marketing budgets means increasing awareness for pet insurance in general. It appears that some of the largest big box non-pet retailers have backed off from plans to jump on the pet insurance bandwagon but watch for Petco to relaunch its pet insurance partership in early 2009.
6. Hybrids Take Center Stage
If you see a rather “woolly” Labrador playing at your local dog park, it is more likely to be a planned hybrid called a Labradoodle than from an accidental litter. Hybrid dogs are muscling in on the purebred scene, much to the chagrin of some and the delight of others, and they are garnering a lot of attention from pet parents looking for something that might be the best of two breeds. Recent years saw the popularity of hybrids grow rapidly (Puggles, Maltipoos and Golden Doodles are some examples) and, as predicted last year, 2008 saw the growth of the puppy farm hybrid to take advantage of the inflated prices people are paying for these dogs. 2009 is only going to get worse in this respect.
The business environment has become much more challenging in 2008. Not only has the economy put pressure on discretionary income (what discretionary income, we ask?) but larger players are pushing into the market, looking for revenue growth. Savvy small businesses will take advantage of change to successfully place themselves uniquely in the market. Trends here include:
7. Increased Competition from Larger Players
Larger companies are beginning to recognize the economic potential of the pet industry. Target and Wal-Mart are both expanding their pet selection and using pets in their advertising. Big box pet specialty retailers, Petco and PetSmart, are going to start to feel the pressure of the low cost alternatives breathing down their necks if they haven’t already. PetSmart has slowed its new store openings and its push into pet hotels in 2009 and has seen a drop in 2008 growth of their higher margin goods and services over 2007 due to the poor economy. These companies will rely heavily on their loyalty programs to keep their core customers from straying to the competition.
8. Large Companies Hold off Buying Smaller – Just When Prices are Right
Some might say that right now is the perfect time for consolidation in the pet industry because of the incredibly low valuations but don’t expect much to happen in the first half of 2009. Not that the recession won’t have bottomed out by then but those that have cash will keep it close at hand for the time being; for those that don’t have cash, it won’t be pretty. For 2009, it’s heads down to keep the ship sailing on course; there will be very little in the way of distracting partnerships or alliances forged until the end of 2009.
9. Increased Online Sophistication from new Pet-related Businesses in Ecommerce, Design, and Usability
Traditionally, small business sites have been set up by pet lovers with little thought on design, target audience, and content (yes, we still hear woofing and meowing on some sites when we log on!) In 2008, a whole slew of new “WebMD for pets” websites appeared, such as WebVet, PetMD, and PetDoc, and we’ll see them battle it out for the lead position in 2009.
Newer players are more sophisticated in design and ecommerce, reaching their target audience via web-site usability, SEO, paid search, and word of mouth. These websites are still in the minority of a largely fragmented pet marketplace but gives a savvy small business an opportunity to stand out from the crowd.
10. Pet-related Blogs Continue to Grow their Influence
The power of pet-related blogs really showed up during the pet food recall in the middle of 2007. Blogs such as Pet Connection, Pet Sit USA and Dolittler continue to provide high quality commentary on all aspects of pet news and issues. The number of quality pet bloggers is growing but at a slow rate, showing perhaps that many passionate pet parents haven’t found their blogging voices yet.
And one final bonus trend that indicates the direction of pet health …
11. The Divergence of the Veterinary Clinic
On the one hand, the advent of advanced human medical tests and treatments in the pet world has led to the growth in private specialty clinics. These clinics offer anything from comprehensive cancer treatment programs to advanced surgical techniques to correct knee ligament tears. The costs for these clinics are very expensive to cover the high tech equipment and staff needed but customers appear willing to pay their prices so far (likely supported more and more by pet insurance in the future.)
At the other end of the spectrum, there is good money to be made by a single veterinarian in a practice focusing on pet wellness, without the need for fancy equipment and more than a handful of support staff. You will see this divergence between wellness and accident/illness care in veterinary clinics grow noticeably over the next five years.
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About the author: Laura Bennett is the CEO of Embrace Pet Insurance. Over her career working in the insurance industry in Dublin, Ireland, and Toronto, Canada, she eventually landed in the United States where along with Alex Krooglik, the two of them founded Embrace Pet Insurance to combine their love of pets, the desire for entrepreneurship, and Laura’s expertise in the insurance industry. Laura also writes a blog on pet-related issues, the Embrace Pet Insurance blog.
Great article at just the right time for me. I’ve been looking into starting up another website and have thought of a great idea for a Pet Blog. I wasn’t sure about the need for one at this time (with economy the way it is) but have been doing quite a bit of research and have found that regardless of the economy people who love pets are still going to read and want to buy certain items for their pets. There are plenty of those “Pet Blogs” that have the cats meowing and dogs barking but I have yet to see any that really speak (no pun intended) to the pet people of the world. Plenty of good info. here in this article.
As cat fan, I am glad to hear that the cats outnumber the dogs. I know that people in North America is spending plenty of money on their pets. Could you compare it with other parts of the world?
For a look on our cat, Morris, click “Martin Lindeskog” Says. Some simple video clips on your. As I said before, Morris the cat will be taking more photos with Mr. Lee Cat Cam and we will follow his route by his GPS tracker system sometime in the future.
Laura,
You have outdone yourself, this year. I agree with you about the Hybrids. {My 1st thought nowadays when I see the word Hybrid is a Toyota Prius, but that is just me}
All of these “Doodles” and “Puggles” are spurring growth in an industry that is ugly to begin with:
Puppy mills.
The Franchise King
Laura,
I want to add one more trend to your list:
12. The increase of people using the internet to post photos of their beloved pets.
Like this-http://www.thefranchiseking.com/the-franchise-king-has-protection.html
The Franchise King
I agree with your first point (As well as your other observations. . I always love these pet trend articles you do!). I’m still spending on my pets but as you stated, more thoughtfully. I want more bang for my buck.
The Obama’s are considering a Labradoodle are they not?
Pet insurance is taking off, too. I believe one of the big players is even covering your pets medical expenses if they are in the vehicle and involved in an accident with you. The coverage is automatic.
I’d have to agree that I’ve seen a growing number of pet realted blogs popping up recently. I really don’t mind that since they seem to usually be humorous. One of my favorites is http://maxthegoldenretriever.com/, which is written from the dog’s perspective.
Joel, that’s a nice picture of your dog Winston. Dogs bring us such joy, don’t they?
TJ
Hi Laura,
I always enjoy your yearly trends/review post. I have a couple of clients who serve the vet market and so i always forward your work to them!
Keep it up.
TJ
This is one of the best articles online for business trends in the pet industry. Of course, it would be — Laura Bennett is a top-rate pet industry professional. I trust her insight and advice more than almost anyone else’s.
I’m glad to see Pet Health Insurance is edging towards mainstream. Shouldn’t we be able to assure our beloved pets the best in health care, just as we do for our children and ourselves? One company not mentioned here is Purina – which started offering Pet Health Insurance in 2008. We help them with their blog at http://www.purinacareblog.com .
I believe we, the community of pet lovers and citizens of this good country, will weather this economic storm…and that come summer, we will begin to see a turn to good news. For all of us – our families, and our pets.
PizzaForADream.com
As a part-time pizza delivery guy in my neighborhood, I’m floored how many people have pets!!!! In my unscientific assessment, I’d say 75% of the homes that I deliver to have at least 1 pet if not more. Being that I don’t have the time for a pet, I’m floored by this! I’d say that there will be lots of other things that get cut back before “fluffy” has to resort to cut backs!
@jj-momscashblog: make sure to send me your new site when you get it up – I’m always interested in quality pet sites (same for anyone else)
@Martin Lindeskog: I haven’t done much work to internationalize these trends. My gut feels that much of it will extend to the UK, the EU, and Australia but unsure of beyond that. Anyone else have any thoughts?
@Joel Libava: agree that more and more people are sharing pictures of their pets just as they would their two-legged children. It seems to be more socially acceptable than before so even respectable bloggers are doing it 🙂 You’ll have to do a guest post in my “Me, My Pet, and I” series
@Staci: Obamas are reported to be looking at a Labradoodle and/or a Portuguese Water Dog. I’m sure we’ll find out pretty soon what the new First Pet(s) will be given Inaugaration is the day after tomorrow.
@Amanda: thanks for the tip – I’ll have to start reading that one
@TJ: thanks for the encouragement – I’m glad you and your clients find them helpful
@Yvonne DiVita: blush! I would like to point out though that the only pet insurer mentioned specifically is Purina. You’re welcome 🙂
@PizzaForADream: you aren’t far off the national average there. It depends on whom you read but in the range of 63% (APPA data). There’s bound to be some areas higher than others.
As an industry veteran who has been manufacturing quality pet products since 1997, I am a bit concerned about Walmart, Target and other big box stores taking a larger slice of the pie and I know that many pet boutiques, who are my customers, are very worried. However, in fairness, I do believe that mass-market retailers have helped to expand the customer base for pet products and improve the overall treatment of pets in this country. Just by exposure to the products in stores, more people are now aware that some dog breeds really do need protective clothing in colder climates. Consumers are also learning the importance of regular dental care for dogs and how it can improve their longevity, (practically unheard of 15-20 years ago), as well as the need for toys and chews to lessen a pet’s anxiety, etc. Taking good care of our pets is becoming a more mainstream obligation.
Compared to twelve years ago, very few people snicker or laugh these days when they see my Maltese (who has hair, not fur) dressed in a dog sweater or fleece coat.
Pet boutiques may not be able to compete with big box prices, but there is no competition when it comes to the service a consumer receives in a specialty store. In a boutique, trained staff members know how to fit a harness or a collar on a pet properly, which can be a serious safety issue. They can also discuss your pet’s diet and recommend the right food and supplements for our four legged friends and most important, they know when to refer consumers to a vetinarian. Specialty store personnel can also suggest the best toys to keep pets occupied and exercised. The products in specialty stores may not be the cheapest, but are probably safer, more long lasting and hence, a better value. With a revolving door of part-time employees, big box stores have never been able to compete with the services offered by dedicated professionals in specialty stores.
Jane Knittle, President
A Pet’s World
Manchester Center, VT
http://www.apetsworld.com
Jennifer
Hello Laura,
Thank you so much for this yearly, very informative article. I have been reading it since 2007. I am considering buying a pet service franchise (dog walking, pet sitting, boarding, overnights…) this year. I am wondering what your thoughts are on the trends for pet owners spending on these particular services. Part of me thinks this is a great time to buy this franchise and the other part thinks perhaps I am insane.
Any thoughts are much appreciated.
@Jennifer Thank you for keeping up with my trend reports. On your question, I recently interviewed a sole proprietor of a pet sitting company for a full-time position at Embrace Pet Insurance so she mustn’t think her business is going to turn around any time soon – but that’s NE Ohio. Pet sitting and boarding businesses, like many businesses, are very sensitive to the location they are based in and some areas are definitely going to be hit more than others by the current downturn. If you can leverage the current uncertainty into a better price for a business you think you can do better at (awful to have to benefit from someone else’s tough circumstances but times are what they are) then that’s worth thinking about but if it were me, I probably wouldn’t be running to invest right now.
I’m going to ask my friend Therese over at PetSitUSA to add her thoughts too. She’s much more of an expert in this topic than me.
@Jennifer,
I’m getting a wide range of reports from pet sitters throughout the country. I talked with one yesterday who is struggling and is losing her house due to foreclosure, and today I heard from another who is considering going back to some type of office work because things are so slow. On the other hand, I’ve talked to many others who say they’re having their best year ever…and one of those people is in Vegas! Still others are either slower than usual or doing about as well as they did last year. So, it’s really hard to say how a new pet sitting business may do right now. I would try to find out what business is like where you are for pet sitters, and for business in general. Many cities have pet sitter networks – groups that meet in real time to discuss the business of pet sitting, refer to each other, etc. Groups like this can be an excellent resource for everyone in the business – newcomers as well as veterans. Listen to what they have to say and then look at the general economic situation.
I’m curious as to why you’re considering buying into a franchise as opposed to starting something up on your own. There are some good franchises out there, but it’s also quite possible to start something of your own and be just as successful. Of course there are advantages/disadvantages of both, and you may have already gone through an exercise of evaluating both options, but that may be worth revisiting. I tend to agree with Laura about investing. With the economy like it is, it may be your best bet to revisit the option of starting out on your own rather than making a huge investment.
Feel free to contact me directly, if you’d like.
I’ve been selling pet supplies on line since 1998 (i-pets.com) and was very concerned that we’d fall in sales for 2008. It was a pleasant discovery at year end to see that we are continuing to grow and prosper.
It’s helping a lot that shoppers are so well informed about the benefits of USA manufactured products and that we are one of the few sources for USA rawhide chews.
TJ McCue
Hi Julie
I hope the same happens this year. If you didn’t see Laura’s post for 2008 trends, it is interesting to compare.
https://smallbiztrends.com/2007/12/pet-industry-trends-for-2008.html
Rachel
Great article, Laura.
One trend I think you missed is international pet travel and transportation. As people continue to move and travel around the world for their careers and in search of better economic opportunities, pets are going global! PetRelocation.com, an Austin-based startup, is providing door to door pet travel services for people moving around the world, including pickup at their residence, delivery to the airport, climate-controlled pet-friendly flights, and customs clearance and delivery. We recently launched a newly designed site (http://www.petrelocation.com) with how-to videos on pet travel crates and more, as well an “Ask Our Experts” section which has been getting tons of questions. Additionally, we launched a social network for people moving and traveling with pets called MyPetMove.com.
The big question I have is: When will you be launching pet travel insurance? We’d love to offer some suggestions.
Cheers,
Rachel Farris
Director, PR & New Media
PetRelocation.com
MyPetMove.com
rachel@petrelocation.com
http://twitter.com/petrelocation
Anne
Wow what a great article and it soo true! I’m still amazed at all of the pet products that are available out there! I try to buy the high quality while still as inexpensive as possible, as we all do! A product that i’ve found and love is Fur-Zoff for removing pet hair. It has a lifetime guarantee and is a “green” product! You can find it now at http://www.FurZoff.net. Thanks for a great article once again!
DogSmith
A growth in the pet industry indicates that more and more people value their pets. Hopefully this trend will grow and more people will become educated on responsible pet ownership and this will impact the lives of those animals not quite as fortunate as the pets currently benefiting from the consumer spending right now, there owners. I would like to see more people investing in caring for their pets education and mental health, a trained dog is a retained dog!
We are currently working with many canine charities assisting them in raising funds via our charity affiliation programme, so therefore this article was very encouraging.
I recently heard Toyota is considering recalling some vehicles because of gas pedal malfunctions . My uncle owns one, should the Toyota be driven before it’s replaced?
Huxley
I recently was told Toyota is definitely recalling all vehicles because of braking issues . My uncle drives a Toyota, should the vehicle be driven before the repair?
Ric
Very informative thank you!