THESE are interesting times. The last few years have seen enormous change in veterinary. But really, you ain’t seen nothing yet … the most dramatic changes are still to come.
You see, I believe we are headed for a perfect storm. There are a number of factors coming together right now that will permanently change the way British people think about and use their vets.
I believe this because of my past experience in another sector – optics. The UK’s independent opticians have been battling increased competition and a declining share for nearly 30 years, since optical deregulation in 1984.
Today, the current Mintel figures show independent opticians have just 41% market share. And that’s in decline. Every week, two more UK optical practices close down or flip into franchise.
My belief is the veterinary sector is 15 years behind optics in its development, based on the RCVS relaxation of the ownership rules in the late 1990s.
The corporates already have 12.5% of the veterinary market. Could we get to a point in a decade’s time where independent vets receive less than 50% of all veterinary spend?
Maybe, or maybe not. No one can predict the future. But we can see that there are four Cs which are coming together to create the perfect storm. They are:
1. Changing economy
We’re no longer in recession but we’re still in a depression. The public is now used to feeling they have less money; and that their jobs are less secure. Their houses are worth less (outside London and the south anyway) and it’s certainly harder to sell them than it was pre-2008.
All of this affects the way they think and act. Consumers are pushing for a deal more than ever before. Some are less loyal, and more willing to switch vets if they perceive it will save them money.
So you can see why something like Vac4Life promoted by Vets4Pets is appealing. In fact, that promotion is very clever. Someone who hands over £99 to the practice for a lifetime’s routine vaccinations will feel a deep pull to stay with that practice.
And of course, we know that some corporates operate front end/back end pricing.
Their front end (visible) prices, such as vaccines and bitch spaying, are less than their local competitors; whereas their back end (less visible) prices for procedures are higher than local competitors, because few clients ever price check these procedures.
2. Competition
In most areas there are more practices and more vets than there have ever been. More choice for the consumer. More budget vets, and more corporates. This will continue.
Pets at Home has declared its intention to open 200 more retail stores, most with a practice inside (the smart money says they’ll be called Vets4Pets, not Companion Care. Vets4Pets is simply the better brand … and the public doesn’t have the same interpretation of the word “companion” that we do).
In many areas, vet-led businesses are responding by launching new branch surgeries into neighbouring areas. Basic economics says that increased supply and steady demand drives down prices. Lower prices means profit margins will be eroded.
3. Consolidation
There will come a point where all of this choice will force the weaker players out, and the market will start to consolidate. I believe big players like CVS will reach a stage in the next few years where acquiring three or four surgeries at a time is not fast enough for them and they start to look for groups of 20-plus surgeries.
In optics, Specsavers today has 23% market share and Vision Express 11%. It’s likely that in the future we will see the big corporates – CVS, Vets4Pets – gaining dramatic increases in market share through consolidation.
4. Commoditisation
If a consumer can get a vaccine elsewhere for £9.99, that’s very tempting. It’s why in some areas clients go to one vet for their vaccines and another vet for other treatments. Price wars commoditise veterinary healthcare.
And the internet is a great price leveller. The online meds market is in its infancy right now … as more of the public realise they can save money online, they will happily do so. For most people, the internet is no longer perceived to be the risky place to buy goods that it was 10 years ago.
By the way, if you think your practice’s online shop can compete, it can’t. So long as someone out there is willing to sell something for a £1 less than you, you will lose the sale. On the internet there is little loyalty among buyers.
Is there hope?
So, what’s to be done? Is there hope for independent vets?
Of course. But only if you take action now. Don’t wait five years till things get worse.
The only way to see off the challenge of this perfect storm is to grow your business and make it more robust. Make it more profitable.
The more net profit you make, the more resources you have available to you (and the higher your personal income can be).
- Next month I’ll give you five key activities I recommend you focus on during your business development time.
