Paws And Prosperity: Exploring The Growth Of Pet Services In The US And The Projected Increase In Annual Pet Spending From $980 To $1,292 By 2025 – Chewy (NYSE:CHWY), Amazon.com (NASDAQ:AMZN)

The number of US households with pets has been rising for decades, with more than 5 million more pets in the US than before the pandemic. Beyond the pandemic-driven boom, trends persist, driven by changing social dynamics as well as technological advances. According to Morgan Stanley, the pet services industry is set to grow at a compound annual growth rate (CAGR) of 8% over 2022-2030, reaching a projected total of $277 billion.

Average annual household spending per pet could grow from $980 in 2020 to $1,292 in 2025 and further expand to $1,909 in 2030, according to Morgan Stanley. This growth will be distributed across various categories, including pet food, veterinary care and several other services. Additionally, there is an emerging range of sub-sectors such as dog walking, pet sitting, grooming and training, underscoring the scale and scope of the industry’s growth. Amidst this vast expansion, this upward trend in sales is estimated by some to be as much as 50% higher by 2023 at $143.6 billion.

Market Factors Fueling the Boom

The growth of the pet services industry in the US can be attributed to several key factors. These range from the evolving perception of pets in our households to technological innovations that are shaping how pet care services are provided:

• Humanization of Pets: Pets are increasingly seen as members of the family, leading to increased demand for high-quality services. This shift is evident in 2023 sales of pet food and treats ($62.7 billion), veterinary care and product sales ($37 billion) and over-the-counter supplies and drugs ($32.1 billion). What’s more, nearly half of pet owners in a recent survey by Ally Consumer Research said they would cut back on spending on themselves or take out a loan before cutting their pet budget.
• Increase in Pet Ownership: The APPA National Pet Owners Survey revealed that 66% of US households own a pet. This translates to approximately 86.9 million households with pets, including 65.1 million dog owners and 46.5 million cat owners. Millennials and Generation X are the largest demographic groups among pet owners.
• Impact of COVID-19: The pandemic has accelerated the growth of the pet industry in several ways. With more people now working from home, there has been a dramatic increase in pet ownership, which naturally contributes to overall demand in the industry, but it also boosts e-commerce sales.
• Technological Advancement: Technology plays an important role in pet care, which more than half of Americans turn to Amazon.com Inc. (NASDAQ:AMZN) for pet products. Other online platforms like Target Corporation (NYSE:TGT), Walmart Inc. (NYSE:WMT) and Costco Wholesale Corporation (NASDAQ:COST) is also very popular with consumers. however, Chewy Inc. (NYSE:CHWY) is still the leader in the dedicated online pet shop segment. Overall, technology provides more variety and convenience to consumers looking for pet-related products.

Emerging Trends within the Industry

As the pet services industry continues to grow, several emerging trends are shaping its future. These trends reflect the changing needs and preferences of pet owners, as well as a broader social shift toward sustainability and holistic care:

• Premiumization of Services: The pet care industry is experiencing a significant shift toward premiumization, evidenced by the rising popularity of luxury pet resorts and advanced personalized nutrition options. Companies like it Freshpet (NASDAQ:FRPT) is at the forefront of this movement, with a focus on high-quality, specialty pet food products.
• Focus on Pet Wellness: There is a growing emphasis on holistic care in the pet industry, which goes beyond physical health to include mental well-being. This is reflected in the increasing provision of mental health resources for veterinary professionals and the incorporation of alternative pet therapies such as massage, acupuncture and chiropractic care into treatment plans.
• Subscription Based Services: The pet industry is witnessing a surge in convenience-based subscription-based models. This is particularly evident in the success of subscription services for pet foods and ongoing service memberships. Companies like Chewy and Amazon are leading this trend, with Chewy reporting a significant 18% increase in its vehicle sales, highlighting growing consumer preference for regular, hassle-free deliveries of pet products and services.​
• Maintenance: The pet industry is increasingly focusing on producing more socially and environmentally sustainable products, from organically grown pet food to ecological chew toys. The Pet Sustainability Coalition, in collaboration with the World Pet Association, found that 91% of industry professionals in 2021 expect demand for such products to increase rapidly. This trend aligns with a broader consumer shift toward sustainability, with more than 50% of pet owners willing to pay more for eco-friendly pet care products.

Latest Trends In The Pet Industry

Aside from these broader trends, there are also specific innovations in the pet industry worth focusing on. Companies like it Don’t! Group (NASDAQ:PET) and Inspire Veterinary Partners Inc. (NASDAQ:IVP) is using new strategies. Don’t! has partnered with Bright Horizons Back-Up Care Services to offer pet care as an employee benefit, aimed at adapting to the changing needs of the modern workforce and potentially improving work-life balance. Inspire Veterinary Partners, on the other hand, is moving away from traditional veterinary business models, focusing instead on employee and pet welfare while introducing different business structures and equity options for professionals in veterinary medicine – the company prides itself on being “employee-owned” due to its innovative equity model.

This strategy seems to be a response to the current industry trend, where large consolidators own approximately 50% of all veterinary hospital revenues in the US Acquisition of independent clinics is often driven of a desire for greater efficiency and the need for greater investment in technology, and by integrating into larger networks, these clinics can improve their workflows, boost productivity and potentially improve the client experience, which is increasingly valued by younger pet owners, such as millennials and Generation Z. These steps taken by Wag! and Inspire Veterinary Partners can be seen as aligning with evolving consumer expectations and a shift towards more client-focused and employee-friendly practices in the pet care industry.

Industry Evolution And Future Outlook

The expansion of the US pet services industry in recent years is a testament to the deepening bond between people and their pets. Driven by humanization, increased ownership, technological advancements and a focus on wellness and sustainability, the industry is adapting to the changing needs of pet and owner. Meanwhile, innovators like Wag! and Inspire Veterinary Partners Inc. is redefining standards in unexpected ways, emphasizing ethical and welfare-oriented practices for this ever-growing industry. While this steady growth has the potential to boost the economy, it also stands to enrich the human-pet relationship, symbolizing the long-term importance and potential of the sector.

Other companies innovating in the space include PetIQ (NASDAQ:PETQ), Trupanion (NASDAQ:TRUP) and Zoetis (NYSE:ZTS).

Featured image by Andrew S on Unsplash.

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