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Substitution arises when new service providers enter the market and compete with traditional providers. This is reliant on buyer attitudes, ease of switching provider and the number of substitutes available. Substitutes could enter the veterinary industry for many services, both clinical and non-clinical services that practices offer.
‘There's a lot of comfort in new entrants: you know what they are. Substitutes, however, are like curve balls,’ it was stated as the groups discussed the threat of substitution in the industry. There was much discussion about what could actually be substituted, and the general feeling was that a vet's job could be split into two distinct areas: clinical work, which vets were trained in and, for some areas such as acute medical or surgical procedures, no-one could substitute; and all of the non-clinical aspects, which were highly susceptible for substitution. However, it was possible that some clinical services, such as preventive medicine, could be offered by substitutes.
As client attitudes change, mainly towards seeking convenience, other providers may start to gain in popularity. Pet shops have already started to offer non-healthcare services, such as microchipping, alongside their regular services. Coming from a retail perspective, these companies have the advantage of marketing and sales experience, and this could be attractive to clients. It was noted that, outside of the small animal market, there has already been a shift in some of the work that vets do and that substitutes are already there; for example, equine dentists and foot trimmers for large animals.
‘Boutique’ pet services offering grooming, ear cleaning, nail clipping and accessories have capitalised on the public interest in pets as accessories. In addition, some agricultural merchants are starting to offer health services. Although this was a worry to some of those taking part in the discussion, one group stated that vets might not want to do this kind of thing anyway; they had trained to do clinical work and, in their opinion, these other services hadn't brought clients to their doors.
‘We all have our costs, and they are not going to go away, so you're going to have to make your money’
An EU Directive on veterinary medicines is currently being discussed and may come into effect in 2017. One area which was of particular interest to the contributors was the possibility of decoupling the veterinary surgeon's ability to both prescribe and dispense veterinary medicines. Although it is by no means certain that this will happen, if it does, it will mean that clients will have to go elsewhere for their pets’ medicines and this could drive business away from the practice. There was a real worry in the discussions that decoupling could result in animals being brought into the practice less regularly, or in some cases not at all. As one contributor said, vets need to move themselves away from being a ‘distress purchase’, consulted only when an animal is very sick, and need to be considered as someone who should be incorporated into the full span of a pet's life. They cannot rely on medicines’ sales and booster vaccinations for repeat visits. If a vet cannot dispense, then internet pharmacies could capitalise on this and also sell the products at a reduced cost compared to the practice. Other practice ‘substitutes’ could add services such as home delivery and arranged monthly deliveries, which would add more convenience for the client.
There was a feeling in most of the groups that pricing in the veterinary profession would be to blame if substitutes took clients away from the practice; as one participant said, ‘We've allowed this to happen.’ It was pointed out that vets have relied too heavily on product sales to cover the costs of their services, and this had created a situation where the vet's time was not valuable in the client's mind. Clients should be paying for the expertise and service, not the product that was added at the end. There was a feeling that vets had been nervous about charging for their knowledge and had tried to cover the costs through product pricing. It was pointed out that with human medicine in the UK being, in the main, provided by the NHS, clients struggle with valuing a veterinary clinician's time, as for human medicine they do not pay for it. If vets were no longer allowed to dispense, they would have to start charging correctly for their time, although it was also pointed out that they should be doing this anyway. As one participant put it, ‘We all have our costs, and they are not going to go away, so you're going to have to make your money,’ and it was stated that this has to happen, regardless of whether the vet is dispensing or not.
From data considered in the five forces analysis, it had found that, in the past four years, there had been no real change in the frequency of visits to the veterinary practice, but there had been some differences in the spend while there, in particular in the case of pet food. From surveys, when asked where they buy pet care products from, consumers put supermarkets and pet shops ahead of veterinary practices. One participant commented that practices are trying to be everything to everyone, and that perhaps differentiation of the market was no bad thing.
Looking to the future, we don't know what lies ahead, contributors pointed out, and, with the rise in social media and technology, there were likely to be more non-traditional ways in getting veterinary care across. Overall, it was felt that substitutes could work together to increase the total number of animals having access to some form of treatment, which will in turn benefit everyone in the industry, no matter how fragmented that industry might be.
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