Pet-related Small Business Trends 2010

Here's my fifth year of writing about pet industry trends over at the Small Business Trends blog.

In summary:

Surprise, surprise - the impact of the recession on consumer spending and attitudes will continue to dominate economics for pet-related small businesses in 2010. It has long been thought that pet-related spending is recession proof and 2009 certainly tested that theory. As a result, I think we can certainly say the pet category is at least recession resistant, with pet-related sales growing slightly in 2009. There aren’t too many categories that can say that in this difficult economic environment!

Trends include:

1. Pet parents continue to spend on supplies and OTC medicine thoughtfully

The American Pet Product Association (APPA) showed spending on pet supplies and over-the-counter medicines turned out to be more modest growth of 2% to $10.0 billion compared to the 6+% increases of the recent past [editors note - as I predicted last year]. I would not be surprised if it bounced a little higher in the range of 4%.

2. Pet services for your pets continue to grow

According to the APPA, $3.2 billion dollars was spent on pet services in 2008, projected to grow over 6% to $3.4 billion in 2009, a rate of growth likely to continue for several years to come.

3. Growing interest in pet health care

While growth in pet supplies might be “languishing” in the 2% range, veterinary services are projected to grow 9.9% in 2009. I wouldn’t be surprised to see actual growth a little lower (veterinary inflation slowed significantly in late 2009 according to the US Bureau of Labor Statistics from about 7% early in 2009 to just over 4% 6 months later) but I still expect growth in the 6-8% range.

4. Pet insurance continues to move towards the mainstream

We estimate the size of the US pet insurance market to be $332 million in premium in 2009, up from approximately $272 million in 2009 (a 22% increase) and I expect it to reach $400 million in 2010. We project that the market will grow to $600 million in 2013. See more about this topic on the Embrace Pet Insurance pet insurance trends page.

5. Teacups join the tea party

If 2009 was the year of the “hybrid”, 2010 will be the year of the “teacup”. Puppy mills are turning their attention to “miniaturizing” certain breeds or passing off genetic misfits as a one in a million dog rather than the sickly pet they no doubt will be. 

The business environment continues to challenge in 2009. Pets have drawn the attention of large retailers and institutional investors who have been expanding into the pet space. Savvy small businesses will take advantage of change to successfully place themselves uniquely in the market. Trends here include:

6. Pet businesses and non-profits thrive socially

Social networking was not new in 2009 but the successes of the early adopters such as @PetsitUSA and @petrelocation are driving more and more pet businesses online. Many rescue organizations are using social networking as part of their funding drives such as the ASPCA and The Humane Society.

7. Larger players get larger

Target and Wal-Mart are both expanding their pet selection and in the case of Wal-Mart, their services.  If PetSmart is feeling any pinch from Wal-Mart’s entry into pet grooming, there is no evidence of it at this point.

8. Customers tell it like it is, whether you like it or not

Pet products and services are now catching up with the growing popularity of review sites such as www.petinsurancereview.com, product reviews on Amazon.com, and instantaneous feedback on Twitter. 

9. Increased online sophistication from pet-related businesses in ecommerce, design, and usability

Overall, newer websites are more sophisticated in design and ecommerce, reaching their target audience via web-site usability, SEO, paid search, and word of mouth.

10. Pet-related blogs continue to grow their influence

Blogs such as Pet Connection, Pet Sit USA and Dolittler continue to provide high quality commentary on all aspects of pet news and issues, and are expanding their reach and depth across the pet web. The best pet bloggers can be found on the blog list website Alltop pets.

And one final bonus trend…

11. Pets and taxes

There are a few initiatives involving pets and tax.

• the HAPPY Act, the Humanity and Pets Partnered Through the Years Act, a proposal to allow taxpayers to deduct up to $3,500-a-year in pet care expenses.
• California would seriously love to tax veterinary services, something it considered in 2009 but removed in the final budget.
• Finally, the Pet Health Consortium has a primary goal to include pet health insurance as an optional pre-tax benefit provided to employees through Section 125 cafeteria plans.

For the details on the article, go over to the Small Business Trends blog and check out the full article Pet Industry Trends 2010.

Bio:

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.