Retail Channel Monthly $ Update – May Final & June Advance

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from May and then move to the Advance Retail Report for June. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

We’ll start with the May Final report. The Retail Market was beginning to recover after hitting bottom in April. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $2B more than the Advance report projected a month ago. Although Relevant Retail was $2B less than expected, the Auto segment was $3B better. Restaurants also were $1B more than the early numbers but Gas Stations’ $ were the same. $ales were up vs April across the board but down for all but the Relevant Retail group vs 2019 and YTD.

The Spring Lift usually begins in late March and peaks in May as consumers focus on the outdoors. Closures and “staying at home” pushed that back. Things began to open up in May, but except for Relevant Retail, $ were down vs 2019.

Now, let’s see how some Key Pet Relevant channels were doing in May.

  • Overall – Strong recovery from April as all channels, but Drug Stores had increases, 7 of 11 with double digit %.
  • Building Material Stores – This group typically has their biggest annual lift in Spring. This is unchanged and even amplified. Farm Stores are doing especially well with spectacular increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. You can see that consumers really opened up to sports/recreation activities in May.
  • Food & Drug – Supermarket sales continue with strong growth. Drug Stores also had a March sales rush on essentials that ended in April and the decline continued into May as sales for both months were down vs 2019.
  • General Merchandise Stores – Sales in $ Stores and Clubs/SuperCtrs show continued strength with $ Stores showing the most growth. Some Discount Department stores were closed and shopping in others was often limited to essentials. You can see that they began to recover in May but are still down vs 2019.
  • Office, Gift and Souvenir Stores – Most of these stores were closed. In May they began to slowly open up.
  • Internet/Mail Order – “Stay at home” has further accelerated this channel’s growth. This will likely continue as the crisis has introduced many new consumers to online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores account for 22 to 24% of this group’s total sales. Pet Stores were generally deemed essential, but most stores were not. The others began reopening in May so there was a big lift from April. They were up 21% through February which is why they still have 4.9% YTD increase.

After a disastrous April, May saw the beginning of a slow recovery. As businesses began to re-open the numbers started to move in the right direction. Driven by the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm the Relevant Retail Segment turned positive in all measurements. June brought even more widespread re-openings. Let’s see how the situation is progressing. Here are the Advance numbers for June.

April was the biggest spending drop in history. May was $97B better but still the second worst decrease in history, -$40B from 2019. In June, monthly sales turned positive for the first time since February as Total Retail was up $12B vs 2019.

Total Retail – Total Retail spending increased $12B, +2.3% vs 2019. It was the smallest increase since June 2019 but more importantly, the first since February. Sales through February 2020 were up $60B, +6.6% versus 2019. Then came COVID-19. Hopefully, we bottomed out at -$113B in May. We are still down -$100B YTD and -$170B from February.

Restaurants – Spending increased $6B over April but was still down $18B vs 2019. The year started out good, up $9B (+8.1%) through February. Then mandates forced many restaurants to close. Delivery and curbside pickup couldn’t make up the difference. Even the gradual re-opening in May and June was not enough as spending is now down $86B YTD.

Automobile & Gas Stations – If you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car was definitely less of a priority. Auto Dealers, both new and used, have been combating this with some fantastic deals and a lot of advertising. In June they turned the corner as sales were up $10B versus 2019. In terms of Gas Stations, May is traditionally the beginning of the vacation travel season but not in 2020. Although sales increased in May and June, they are still down -$42B YTD. People are still not driving as much, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. Then came April. With a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began a slow reopening so spending began to move in the right direction. Nonstore, Grocery and SuperCenters/Clubs & $ Stores continued their growth. The spring lift in the Hardware/Farm channel got even stronger and Sporting Goods stores got on  board. In June, these big drivers couldn’t quite match their May numbers, but the openings became more widespread and the Relevant Retail group now has posted positive numbers versus last month, last year and year to date for 2 consecutive months.

Now let’s look at what is happening in the individual retail channels across America. In June, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

 

The increase over May was driven by re-openings. The increase vs 2019 and YTD came from essential businesses.

Observations

After a full month of stay at home and widespread closures there was surge in May. Things truly opened up in June which fueled an increase over May. However, the essential channels are responsible for the lift vs 2019.

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Sporting Gds/Hobby/Books – Stores re-opened and consumers began to return to outside recreational activities.
  • Bldg Materials/Garden/Farm – A bigger than usual Spring lift continues as consumers focus “on their home”.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April, but they came back strong in May and it continued in June. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Regular Department stores began reopening and Discount Department stores held their ground, so this cut the losses for Department Stores. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. In May and now June we saw consumer spending return to a more normal pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 10.5%, +$6B. Sales in the Health, Personal Care group are up slightly from May but remain down overall. Many Personal Care stores are now slowly reopening but Drug Stores sales are essentially flat.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – More and stores are reopening, producing a spectacular increase in sales over May. However, June $ were still down from 2019. They all had the same pattern, with Clothing Stores being the most extreme. Their sales were up 84% from May but still down 24% vs 2019 and 39% YTD. These channels have a long way to go to recover.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. The shelter in place rules caused many consumers to turn their focus to their needs at home, including house and yard repair and improvement. This has accelerated and extended their Spring lift. Sales are up across the board, including +9.9% YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores which had been closed are now open. Sporting Goods stores had generally been open but organized sports were on hold, parks closed, and non-essential travel was discouraged. In May things began to open up and this expanded in June. Consumers again sought outdoor recreation. Sales doubled from April to May and grew 31% in June. June $ even beat 2019 by 22%, but YTD they are still down 6%.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. The closures hit this group particularly hard. May sales were up 27% from April as the reopening began and grew 12% in June. However, they were still down 5% vs June 2019 and are down 7% YTD. In February they were up $2.6B, +14.1% YTD. Now they are down -$4.7B – a big turnaround.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. Compared to 2019, NonStore was up 16.3% in March, 22.5% in April, 25.3% in May and 30.3% in June. Since April they have been the leader in all sales measurements either in $ or % increase. As you can see, their lead is growing. Also, their YTD sales are up 18.4%, exceeding their 12.9% annual increase in 2019. This early year lift bodes well for 2020 as much of their annual increase is usually driven by Christmas.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – After a record drop in spending in April, the situation improved slightly in May, but it still was the 2nd biggest year over year monthly retail sales decline in history. Restaurants, Auto and Gas Stations all had big sales increases in May and now June, but they are still struggling. The Relevant Retail segment has provided the only true positive as sales are up in all measurements for 2 consecutive months. However, for many segments in this group there is still a long way to go. In June Total Retail turned positive for the first time since February and Relevant Retail appeared to be moving towards a more routine pattern – a new normal. However, we are now seeing a resurgence of the virus and retail restrictions are being re-implemented in many areas and are likely to become more widespread. This is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates as the situation evolves.

 

 

The Impact of COVID-19 on Small Businesses – 6/27 Update

Small Businesses are at the core of our nation’s economy and the challenges they face are important to everyone. To better understand the impact of COVID -19 on these businesses and aid decision makers in serving their urgent needs, the U.S. Census Bureau directly reached out to small businesses. For the Survey, the Census Bureau defined a small business as a single location business with employment between 1 and 499 and receipts of at least $1,000.

Consisting of 16 questions, this 5-minute survey reached close to 1 million businesses split across a 9-week rotation to reduce burden and lessen survey fatigue. The survey included small businesses in every area of the U.S. Economy. This initial survey began in the week ending 5/2/20 and was completed in the week ending 6/27/20 so we are able to track the evolution of the COVID-19 impact over 8 full weeks.

The results are first categorized by major, 2 digit NAICS code classification. Slightly more specific data (by 3 digit NAICS code) also became available so that we are able to more closely track elements which are relevant to the Pet Industry. Here are the 14 “pet relevant” groups for which we have compiled data:

  • National Avg: Covers All Major Areas with a few Exceptions like Agricultural Production and Religious Organizations
  • Product Related Groups:
    • 31-33: Manufacturers – All manufacturers
      • 311 – Food Manufacturers (Both Human & Animal)
    • 42: Wholesalers/Distributors – Wholesalers/Distributors of any type products
      • 424 – Distributors of Nondurable Goods (Includes food and nondurable supplies)
    • 44-45: Retail Trade – This includes everything from gas stations to Pet Stores (#453910). No restaurants
      • 444 – Building Materials/Hardware/Farm
      • 445 – Food & Beverage Stores
      • 452 – General Merchandise Stores
      • 453 – Miscellaneous Retailers (includes Pet Stores)
      • 454 – Nonstore Retailers
  • Services Related Groups:
    • 54: Professional, Scientific and Technical Services – Legal, Advertising Agencies, etc… and Vet Clinics (#541940)
    • 81: Other Services – Funeral Homes, Barber Shops, Auto Repair, etc … and Pet Care Services (#812910)
      • 812 – Laundry & Personal Care (includes Pet Care Services)

The data from each group has been bundled into 3 charts showing the group’s responses to 8 particularly relevant questions about the impact of COVID-19.

Here are the charts and the questions that will be answered on each:

Chart #1: Impact of Covid-19 on Your Business

  1. Overall, how has this business been affected by the COVID-19 pandemic?

Chart #2: Key Business Elements – Weekly Changes

  1. In the last week, did this business have a change in operating revenues?
  2. In the last week, did this business have disruptions in its supply chain?
  3. In the last week, did this business temporarily close any of its locations for at least one day?
  4. In the last week, did this business have a change in the number of paid employees?

Chart #3: Government Assistance & Your Outlook For The Future

  1. Since 3/13, has this business requested/received financial assistance from Paycheck Protection Program (PPP)?
  2. Since 3/13, has this business received any financial assistance from any Federal Program?
  3. In your opinion, how much time will pass before this business returns to its usual level of operations?

We are not going to review each group in this report. We will take a closer look at the Overall Retail Trade (NAICS 44-45) and 3 retail subchannels – Miscellaneous Retailers (includes Pet Stores), Nonstore Retailers and Hardware/Farm Stores. We also will review Personal Care Services which includes Pet Care. At the conclusion of the report we will make the data for all 14 groups available for you to download. You can then pick the ones that are most relevant to your particular business.

A word of caution: Remember, this data is only for the small businesses in any particular classification. It doesn’t include the big chains, which could be impacted differently because of their size, capabilities or resources.

Let’s get started with the Retail Trade

  • There is a big negative impact on the retail trade,76.0%. However, it is still faring better than the overall market which stands at 82.7% negative as of 6/27.
  • The negativity has moderated but the readings for all response groups have basically plateaued since 6/13.

  • Every measurement on this chart began moving in the right direction but most have plateaued since 6/13. In terms of revenue, 40% still showed a decrease which is still better than the national average, 42.6%. Retail outlets are also doing better than the Nation overall at generating increased $ – 29.1% to 19.7%.
  • Supply chain problems are high but stable. Much of the country was opened up in June so temporary closures only affected 15.3% of businesses – a big drop from 43.7% eight weeks earlier.
  • The employment situation has improved, especially in terms of businesses decreasing the number of employees. However, that situation has also become static, with the same number adding as cutting and 80% maintaining the status quo.

  • 97% of retail trade businesses that applied for PPP funds have received payment. In fact, 79% of all small retail businesses have received some form of government assistance.
  • In terms of outlook, although the number of businesses now expecting little or no effect by COVID-19 has grown significantly from 5.1% to 13.3%, this is a small segment. The most popular forecast (40.8%) is over 6 months for a return to normal. When you combine that with the 10.3% who believe that things will never be normal again you get over half, 51.3% who think that recovery will take considerable time. However. This is better than the overall national average of 53.6%

Now let’s drill a little deeper – Miscellaneous Stores, which includes Pet Stores

  • While Pet Stores were generally deemed “essential”, most stores in this group, like gift shops, art dealers and used furniture stores were not, which explains the high initial negative impact. It did moderate slightly in May but turned sour in mid-June.
  • After peaking at 16.7% on 6/6, the number of businesses reporting a positive or little no effect on their business fell to 13.2% by 6/27.

  • The change in revenue started in the right direction but has basically plateaued. Although businesses reporting decreased revenue have actually increased since 6/13.
  • Supply chain problems remain a big factor and they too have gotten worse since 6/13.
  • Closures have been cut in half but still affect almost 1/3 of the group (31.8%)
  • The employment situation has gotten significantly better but there are still twice as many businesses losing employees (14.9%) as those adding employees (7.4%).

  • The PPP funds have been distributed. 96% of businesses who applied have received funds. In fact, 81.5% of this group have received some form of federal aid.
  • This group’s projected recovery time has gotten worse since mid-June. Now 49.1% say that it will be over 6 months until a return to normal and 14.6% say normal will never return. That is 63.7% of these businesses.

Next, let’s look at Nonstore Retailers

  • Although the negative view is less than at the beginning, it is trending up. However, so is the positive view, The biggest decrease occurred in little/no effect which fell from 14.2% to 8.7% in the week of 6/27.

  • The revenue situation improved in May but has plateaued in June. 22-24% are posting increases. 35-37% report no change and about 40% are seeing decreased revenue.
  • Supply chain problems increased in mid-June but improved by 6/27, Closures improved in June but were up and down on a weekly basis.
  • The employment situation generally became more stable in June as hiring and layoffs both slowed. Although there was a little more turmoil in the week of  6/27.

  • 98% of businesses that requested PPP have received funds and 72% of the businesses in this group have received some form of government assistance.
  • Their overall projection for recovery grew worse in June. By 6/27 43.3% said it would take over 6 months and 9.7% said normal would never return. That’s 53% which is about equal to the National Average (53.6%) but worse than Total Retail (51.3%), which is somewhat surprising for a nonstore group.

Our final Retail Trade group is Hardware/Farm Stores

  • Except for an uptick in negativity during the week ending 6/6, their impression of the impact of COVID-19 on their business has steadily improved. By 6/27 their negativity score (55.6%) was the lowest of any retail group that we measured, including Food & Beverage Stores at 59.4%.

  • Their revenue began moving in the right direction and by 6/13 the number with increases exceeded the number with decreases. It has become relatively stable – about 33% up, 30% down and 37% with no change.
  • Supply chain problems are stable, but high at 56+%. Closures are down dramatically and were only 6.7% as of 6/27.
  • Hiring has slowed, after peaking during the week of 6/6 but still exceeds layoffs. 81.4% are now showing no change in the number of employees.

  • 99% of businesses that have applied for PPP have received their money and 75.4% of the group has received some form of federal assistance.
  • This group projects a speedier recovery than any other retail group. 38.3% expect a return to normal in 6 months or less but 26.6% say that there has been little or no effect on their business. That totals 64.9% which is much better than the National Average of 46.4% and 48.9% for Total Retail.

Finally, let’s look at the Personal Care Services Channel, which includes Pet Care Services

  • This segment was hugely impacted by closures but even opening up has not much improved their assessment of the situation. The negativity is still extraordinarily high at 91.5%. Although it has moderated slightly, almost 2/3 of the businesses, 65.2% still see the situation as extremely negative.

  • The revenue situation has gradually improved but 50.6% of businesses are still reporting a decrease in $ as of 6/27.
  • Supply chain disruptions are improving and are lower than many other channels. Closures have decreased by 54% since May 2nd but still affect 3 in 10 businesses (30.8%).
  • The employment situation is still negative – 7.8% hiring; 19.5% laying off, but it has reached its highest level of stability as 72.7% maintained the status quo in the week of 6/27.

  • 94% of businesses that applied for PPP have received funds and 84.4% of the group has received some form of federal assistance, which is better than the National Average, 77.0% and the Total Retail Trade, 78.7%.
  • Their outlook is rather bleak and almost the exact opposite of Hardware/Farm stores. 47.9% project over 6 months for a return to normal while 19.0% say normal will never return. That totals 66.9%, two thirds of all personal care outlets.

As you can see from our examples, the specifics can vary widely by business category. As the economy began re-opening the situation was generally improving. However, we have seen a resurgence in the virus. This is leading to reimplementation of some business restrictions and has produced an overall feeling of uncertainty among consumers. Until we have a stability in health, a return to normalcy in business will be greatly slowed. COVID-19 has had an especially negative impact on U.S. Small Businesses. Even small businesses in channels that are showing overall growth during the crisis, like Hardware/Farm and Nonstore, are having serious problems. The overall national growth in these channels is being driven by the “big guys”, like Home Depot and Amazon. The overall projection for a return to normal for small businesses is increasingly over 6 months, which would put it in 2021.

That concludes our analysis of this initial survey. As you can see the situation is far from over. Hopefully the Census bureau will conduct periodic future surveys so that we can fully monitor the progress of small businesses through this crisis.

Finally, as we said, more data is available for you. Files with the specific data/charts for all 14 business categories that we identified as relevant to the Pet Industry (including those used in this report) are available for download. Each file is a 1 page word document with 3 COVID-19 impact charts for a specific business category. There is no commentary – just data. Pick the ones that are most relevant for your business and share them with your associates. STAY SAFE!

National Average & Major Business Categories

More Defined Supply Chain Categories

Drilling Down into the Retail Trade

Finally, Personal Care Services (includes Pet Care)

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Pet Services Spending (Non-Vet) $8.81B (↑$0.95B): 2019 Mid-Year Update

The US BLS just released their Mid-Year Update of the Consumer Expenditure Survey covering the period 7/1/2018 to 6/30/2019. In our analysis of Pet Supplies Spending we saw a 24 month lift come to an end. Tariffs drove prices up and Spending turned sharply down across virtually every demographic segment in the 1st half of 2019 . Pet Food Spending also turned down, but in the 2nd half of 2018, in reaction to an FDA warning on grain free dog food. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $8.81B, up $0.945B (+12.0%) from the previous year. This segment is known for consistent, albeit small increments of growth. In 2018 that changed. The 1st half saw a $1.1B increase followed with an additional $0.85 lift in the 2nd half. This annual $1.95B increase was by far  the biggest $ increase in history. In the 1st half of 2019, Services spending plateaued, but at this unprecedented, elevated level. This deserves a closer look. First, we’ll review recent Services spending history since 2013.

Here are the 2019 Mid-Year Specifics:

Mid-Year 2019: $8.81B; ↑$0.945B (+12.0%) vs Mid-Yr 2018

Jul > Dec 2018: ↑$0.85B

Jan > Jun 2019: ↑$0.09B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, by far the biggest annual increase in history. Prices turned up again in the first half of 2019, increasing  2.8% from 2018. However, Services essentially “held their ground” as  spending inched up $0.09B. With an annual growth rate of 8.2% since 2000, Services have become more prominent in the Industry.

Let’s take a closer look at some spending demographics – Age and Income.

In the graphs that follow we will compare spending for the Mid-year 12 months ending 6/30/19 to the previous period ending 6/30/18. In our graphs we will also include the 2018 yearend $pending. This will also allow you to see the spending changes in the 2nd half of 2018 and the 1st half of 2019.

The first graph is for Income, the single most important factor in increased Pet Spending, especially in Services.

Here’s how you get the change for each half using the Over $70K group as an example:

Mid-yr Total Spending Change: $6.43B – $5.62B = Up $0.81B (Note green outline = increase; red outline = decrease)

  • 2nd half of 2018: Subtract Mid-18 ($5.62B) from Total 2018 ($6.31B) = Spending was up $0.69B in 2nd half of 2018.
  • 1st half of 2019: Subtract Total 2018 ($6.31B) from Mid-19 ($6.43B) = Spending was up $0.12B in 1st half of 2019.

  • Both the Over and Under $70K groups had a 12-month spending increase. However, Over $70K was responsible for 86% of the $0.94B national lift. The Under $70K group decreased spending in the 1st half of 2019 so their overall increase was produced solely by a lift in the 2nd half of 2018.
  • The individual groups over $70K all showed growth in both halves, but it was minimal in the 1st half of 2019. The Over $100K groups were responsible for 81% of the total Services increase.
  • The lower income, $30>50K group had a spending pattern similar to the highest income groups but their percentage increase was more. Spending was up 47%. The lift in this group was driven by Retirees (Avg Income: $42K) as they chose to fulfill their real need for Pet Services. This group is the only reason Under $70K registered an increase.
  • Spending in the Under $30K group was essentially flat. The lower middle income, $50>70K group had the biggest decrease and it came from a big drop in the 1st half of 2019, following a small lift at the end of 2018.
  • Income is the biggest factor in choosing the discretionary convenience of Pet Services. However, we can’t ignore “need” as was demonstrated by the retiree driven performance of the $30>50K group.

Now, Services’ Spending by Age Group.

  • The spending lift in both halves by the 65+ yr olds and the highest income 45>54 age group mirrors what see saw in the income category. Plus, their major lifts came in different halves.
  • The 55>64 yr old Boomers had the only overall decrease. It was minor and spending was flat in the 1st half of 2019.
  • All groups under 45 had the same pattern with a spending lift in the last half of 2018, followed by a drop in the first half of 2019. The size of the drop grew with age and spending. The 25>34 yr olds were flat. The others spent more.
  • It’s obvious that the biggest positive movement in Services Spending in the 1st half of 2019 came from oldest groups.

Now let’s look at what is happening in Pet Services spending at the start of 2019 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the lift in the 1st half of 2019 was $0.09B, much less than the $0.85B in the 2nd half of 2018.

The first thing that is readily apparent is that the $ changes from winners and losers in each category tend to cancel each other out. This is similar to a pattern that we saw in Food, which also had a minor increase in spending during the 1st half of 2019. The $0.09B increase in Pet Services came from 46 of 80 demographic segments (58%) spending more, just 2 more than the 44 in Pet Food.

The positive impact on Services spending in the 1st half of 2019 by older Americans is obvious from theses 6 winners:

  • 65+ Yrs
  • $30>49K
  • Retired
  • No Earner, Single
  • Homeowner w/o Mtge
  • Silent/Greatest Generations

Like the Food and Supplies segments, Single CUs also had a good start to 2019 in Services spending, winning in 3 demographic categories. However, for Services, the “driver” was No Earner, Singles.

It wasn’t all older groups as 3 “usual” winners came to the top – White, Not Hispanic, BA/BS Degree and Suburban.

On the “losing” side we see evidence of the slight downturn in spending by the younger groups in the performance of these segments:

  • 35>44 Yrs
  • Gen X
  • 3 People
  • Married, Oldest Child <6
  • Renter
  • Central City

We should also note that Gen X (-$0.06B) barely beat out Millennial/Gen Z (-0.057B) for the “losing” spot so the decline was basically universal in the youngest groups. 2 Earner CUs are also more common in these groups.

In 2018 the Services segment reached a new level of prominence in the Pet Industry. However, in 2019 growth seems to be slowing. How did we get here and what comes next?

We have noted that by 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1st half of 2017. The segment started to recover in the 2nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The <45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. As such, a slight downturn in 2019 is not unexpected. They may just have been value shopping. However, the oldest groups did seize the opportunity. They have a real need for Pet Services. Now they are convenient and more affordable.

Will this continue? What can we expect in the 2nd half of 2019? We can’t say for sure, but inflation could be a factor. In the 1st half of 2019 Services prices were up 2.9% vs 2018. This also may have contributed to the reduced spending by some segments. However, the rate slowed to +2.2% in the 2nd half. This is historically a more typical inflation rate for this segment. It probably signals a return to slow, consistent growth for Services. We’ll see when the full year spending data for 2019 is released in September.