Are Pet Doctor Bills Really ‘Expensive’?
In January 2020, Euromonitor International released the '2019 China New Consumption City Index Report,' which used innovative data indicators to assess China's cities' ability to meet consumers' new demands in the context of new consumption. The data indicators were divided into two main aspects: economic performance and new consumption personalization. In the area of new consumption personalization, the indicators were divided into four aspects: health consumption, convenient consumption, trendy consumption, and psychological comfort consumption. The data focused on implementation, including the number of pet examination shops, the number of gyms, and the number of articles on popular spots on Dianping (a Chinese review platform).
Regarding psychological comfort, Euromonitor International focused on the new lifestyle spurred by the 'lonely economy' – pet ownership. They selected pet hospitals as one of the measurement indicators due to their offline needs.
This article focuses on the development of pet hospitals. Euromonitor utilized desk research and industry interviews, and through communication with consumers, discovered the price issues in the development of pet medical care. Through Euromonitor's observation of the supply and demand sides, they found a significant difference in the perceptions of price between consumers and pet hospitals – pet hospitals did not operate at a high profit margin and, in some cases, experienced losses.
Euromonitor combined in-depth corporate interviews and desk research to analyze the reasons behind consumers' perception that pet care is expensive, and the truth of pet hospitals' losses, which were completely opposite to the 'greedy' image.
So, what are the reasons behind the need for consumers to pay expensive medical fees?
Firstly, pet hospitals have a high labor cost. Considering the current number of veterinary students and the number of job positions in pet hospitals, the demand for veterinary professionals exceeds the supply, leading to high personnel costs. According to data from platforms like Hunt and Pet Talent, for example, the average monthly salary for a bachelor's degree-holding pet doctor in Beijing ranges from 8,000 to 12,000 yuan.
Euromonitor obtained the number of pet hospitals nationwide from Baidu Maps as of December 27, 2019, totaling 34054. Assuming an average of 6 doctors per hospital, this equates to 204324 doctors nationwide. According to the '2019 China Pet Industry White Paper' (Consumer Report), the number of pet cats and dogs nationwide reached 99.15 million. Therefore, on average, one doctor covers approximately 486 pet cats and dogs, which shows that pet doctors are still in short supply.
Secondly, the high cost of pet care is also related to the equipment. Because pet care is frequent, the single use cost of equipment is high. In addition, a large number of equipment and medicines rely on imports, which also increases the cost.
Why do pet hospitals incur losses?
On the one hand, the products and services offered by pet hospitals are homogeneous and lack competitive barriers. The services provided by pet hospitals are mainly divided into two categories: professional pet medical services and relatively frequent, traffic-generating pet grooming and product sales. Medical services include sterilization, vaccination, physical examinations, deworming, and dental care.
On the other hand, the cost structure is unreasonable, and large investments have not resulted in corresponding income. The personnel cost of pet hospitals can account for 30%-50%. When the cost is high, the increase in transaction volume is limited, and the competition between industry players is increasing. When the supply increases, the demand doesn't increase, which leads to the income being lower than the cost and incurring losses.
Furthermore, chain hospitals compared to single-store hospitals require higher compliance costs and personnel expenses, so, overall, chain hospitals' losses are likely to be more severe than those of single-store hospitals.
How can pet hospitals break through the losses?
Euromonitor believes that the main reason for the losses is that pet hospitals' market is currently fragmented, and they mainly use a community-store layout model, which can lead to the duplication of medical resources and inefficient use of resources.
The recommendation is for chain pet hospitals to conduct a graded configuration of medical resources, for example, the '1+P+C' model adopted by Pengao Holdings, which consists of a central hospital for medical resource emphasis configuration within a serving area, multiple specialized hospitals set in the coverage range of the central hospital, and multiple community stores for routine needs.
In this way, according to the severity of the disease, the resources will be allocated to different levels of hospitals, avoiding the situation where all stores are uniformly configured, which will lead to the single use cost of some equipment being too high.
In addition, pet hospitals can also consider collaborating with third-party diagnostic centers. High-end pet disease detection is carried out through professional third-party diagnostic laboratories, which share equipment and services at a lower cost.
