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Time to Re-open the Door to Veterinary Product Home Delivery

By Pam Foster
January, 2017

There’s no question that pet owners are enjoying online ordering and home delivery. The reasons for this are obvious: convenience, avoiding crowds and traffic, getting just what they want, price breaks, saving time, no lifting heavy pet-food packages into the car, and so forth.Vet Advantage image: Online veterinary pharmacies such as VetSource and Vets First Choice can offer huge benefits to practices and their clients.

In recent years, home delivery of pet products has exploded in popularity.

The Forbes article, “Can A Box Of Dog Treats Become A Billion-Dollar Business?” reports on the stellar rise of BarkBox, an online business launched in 2011 and reported to have $40 million in sales as of last spring. 

In a PetfoodIndustry.com article: Top 10 Pet Food Brands, Websites for Online Sales, it states, “Consumers have really embraced the subscription model when it comes to purchasing pet food online. It’s a product that is much more convenient to have delivered to your doorstep. Subscription sales at Chewy and Amazon have nearly tripled from 2015 to 2016. Of the two sites, subscription sales now account for 22% of total sales, up from 15% last year.”

Ecommerce Trends 2016: Niche Products That Are Killing It: “Pet food + accessories: When you think about it, it makes perfect sense – instead of putting dog food on your grocery list every two weeks, you can save the effort subscribing for a box.”

So, if pet owners are leaping at the chance to order products online, why aren’t most veterinary practices embracing this trend — encouraging clients to order their pets’ prescription diets, medication refills, and preventatives through the practice’s online store?

Why haven’t ONLINE ORDERING and HOME DELIVERY caught on with most veterinary practices? 

We asked Clay Cass, a distribution sales professional with Merritt Veterinary Supplies, to help us understand why there’s still a major gap between home delivery’s potential and reality.

He said, “First of all… on the clinic’s side, they feel they will lose control and are not making as much profit if they switch to online ordering. A main roadblock clinics often mention is the accounting side of the home delivery business. Veterinary decision makers do not understand the simplicity an online service would offer. Instead, they feel they can’t compete against other online services with lower costs (the main example is PetMeds). If the clinic’s customer is a shopper doing price comparisons, she’d most likely just ask for a script to give to PetMeds.

On the DSR side, they’re afraid to give up the business to a home delivery service in fear of losing commissions.

Right now, home delivery compensation is a grey area, and most veterinarians and DSRs are skeptical about this.”

The good news is — home delivery suppliers such as VetSource and Vets First Choice have seen significant benefits for veterinarians and DSRs… so it’s worth taking another look.

Asa Pogrelis, director of sales and marketing at VetSource, told us, “Let me start with (the issue of) veterinarians embracing our services. Veterinarians historically have sold all medications out of their in-house pharmacy and this is what’s most comfortable for them, and a significant portion (25-30%) of their revenue is generated from these sales. Any change to that business is scary for many veterinarians.   

There historically has been fear that offering home delivery through services like ours will cannibalize their in-house business. Since there are of course fees for the services we provide, and many veterinarians don’t realize or acknowledge the labor and inventory carry costs (only think about the direct product costs), they think of it as ‘giving up margin’ when selling medications through our services.  

While we have always believed our services compliment the in-house pharmacy and actually grow the pie, we can now prove this with data. In a recent study of over 100 practices, including over 6,000 patients, we looked at the difference in purchase behavior over a two-year period between a pet owner using their veterinarians’ home delivery service (thru VetSource) vs. those just buying out of the in-house pharmacy. The results were clear: home delivery customers were 140% more compliant with parasiticides, brought $212 more per year per patient in total annual revenue, and drove 93% more profit in parasiticides.

These data points — along with a growing understanding from veterinarians that they need to provide these type of services to their clients to meet the growing need for convenience — are causing a shift in the acceptance of our services.

As for challenges with DSR engagement, it is usually a combination of two factors. Selling our solution is typically more complicated and involved than selling products/equipment into a practice. The DSR’s are asked to be the experts on 10’s of thousands of products, and thus they have many vendors asking for their time. Because of this, we need to do a better job simplifying the value prop to the veterinarian so this message is easier to deliver, and clearly resonates with the veterinarian. We have spent the past 4-5 months on this specific initiative, and hope to roll out new messaging and sales tools in 2017 to help our distribution partners. 

The second piece is related to compensation or a similar fear that veterinarians have, which is that home delivery will cannibalize their wholesale business. The same data points I shared above prove this doesn’t need to be concern. Regardless off those data, we have designed our contracts with distribution so rep compensation through home delivery is equitable to selling it into the hospital, and in many situations, is better. Our DSR partners need to know that if their customers sell product through our home delivery service, the DSR will get compensated just as if they sold it via wholesale into the practice… and the reality is they will actually sell more.”

Pat Panaia, Vice President, B2B Sales and Marketing at Vets First Choice, has also seen dramatic patterns of growth in clinics using the company’s prescription management platform and online services. She said, “For DSRs, we are able to expand the total pie by growing overall sales, including product sales in practice. The manufacturer reps have noticed, and we get reports of them asking practices, ‘What is going on — why have your sales increased?’

She continued, “Practices that have embraced our platform are fundamentally managing their businesses and practice differently, and are experiencing double-digit growth. This is across the board at the practice: total revenues, in-house inventory revenues, online revenue, and service revenues — they’re all growing. The big reason is that our platform allows a better way to manage prescriptions, to connect and reconnect with clients to enhance these relationships. So, clients are not going to PetMeds and are staying compliant.

 The DSRs really benefit from that. So, depending on which platform the DSRs get their clinics to adopt, the overall practices will grow. DSRs can simply look at what choice the practice has made and see the results.”

Given that home delivery is proving to be working wonders for many practices, why not open to the door to that conversation during your clinic visits? Here are some questions you can ask during sales calls.

  • What if you could improve compliance with prevention and treatment? Compliance should be brought up in discussions about home delivery. The special features that today’s platforms offer, such as the “Remind Me” program and “Sign Up for Automatic Refills,” will drive up compliance. Mention the growth Asa and Pat provided above.
  • What would it mean to increase your cash flow? When the doctor states that this would be great, open the door to a discussing the home delivery compensation model and how their practice will benefit… because clients won’t be as likely to go somewhere else if their own vet offers convenient online ordering. 

It’s time to steer more of the online pet-product buyers toward their veterinarians, so everyone wins. 

 

Topics: Home Delivery

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