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Business Observer Friday, Jul. 19, 2019 3 months ago

Scent of success: Vet lives entrepreneurial dream with Walmart deal

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A veterinarian risked a steady, safe career to become an entrepreneur and develop a different animal-care model. That includes partnering with a retail giant.
by: Brian Hartz Tampa Bay Editor

As far back as high school, Douglas Spiker aspired to be a veterinarian, which he accomplished. The industry innovation goals came much later. Those, in partnership with a global retail behemoth, are a work in progress.  

After finishing veterinary school at Auburn University in 2005, Spiker went to work for Bluffs Animal Hospital in Belleair Bluffs. He practiced there for 14 years and became a co-owner of the clinic in 2009.

But the longer he worked in the profession, the more aware he became of a major problem with the traditional veterinary clinic business model: Large numbers of people cannot access health care for their pets because of cost and/or location.

“Nearly 30% of pet owners are not able to provide any care for their pet, even basic care,” Spiker, 40, says.

That means some 29 million dogs and cats, nationwide, aren’t getting the health care they need, according to a December 2018 study published by the Access to Veterinary Care Coalition and the University of Tennessee.

With Essentials PetCare — the veterinary business Spiker launched in 2015 in Port Richey — Spiker, along with co-founder Bruce Newman, COO Christine Battista (she and Spiker are married) and support from private investors, has set out to solve that problem. His quest recently added one of the most powerful allies anyone could ask for: Walmart. 

The retail giant signed a deal with Essentials PetCare that will see the low-cost, walk-in veterinary clinics open in dozens of Walmart stores in the Dallas-Fort Worth area of Texas over the next year. Three are already open — in Kaufman, Royse City and Anna — and Spiker says that number will jump to five by the end of July.

Walmart, moving fast and in high-volume like it normally does, seeks to open Essentials PetCare clinics in 100 stores over the next year. That gives Spiker and his team an opportunity boxed in a challenge: How will they meet that demand?

A NEW MODEL

Essentials PetCare isn’t a one-stop shop for veterinary services. The clinics provide routine vaccinations, lab work and treatment for a variety of minor illnesses, such as ear infections, common skin conditions and urinary issues. Pets with more serious illnesses or need emergency treatment are referred out to local full-service clinics.

That tight focus on its namesake, the essentials, is a key ingredient of the company’s secret sauce.

“Veterinary medicine continues to evolve just like human medicine,” Spiker says. “The neurology and care that’s available for both pets and pet owners now is unbelievable.”

That means full-service animal hospitals have to add more advanced equipment and highly trained staff to operate it, which translates into higher overhead. That doesn’t mean it’s a bad business model — far from it, Spiker says.

“Most full-service veterinarians have a wide range of expertise and skills, and they have very sophisticated equipment in their hospital. … It's a great business model," he says. "But for the most part, the majority of veterinary clinics are independent. So as an independent small business, you have to be very mindful of your costs and pricing structure to stay profitable.”

Translation? Ever-escalating costs.

"Walmart’s been extremely supportive of us from the beginning. They loved our model as we pitched it." Doug Spiker, co-founder of Essentials PetCare

Pet owners, though, are usually more than willing to pay whatever it takes to keep Fido and Fluffy feeling their best. According to data gathered by the American Pet Products Association, for example, pet care spending has gone up every year in each of the past 25 years, rising from $17 billion in 1994 to a projected $75.38 billion in 2019. Of that number, nearly $19 billion will be spent on veterinary services.

But a slice of that $19 billion pie isn’t essentially what Essentials PetCare is chasing. That’s why Spiker and Battista think their model will work: It appeals to a vast, untapped market, which is part of the reason why they opened the first Essentials PetCare clinic in Port Richey, a small Pasco County community of mostly moderate- to low-income families.

“We wanted to target a certain demographic,” Spiker says. “And we felt strongly that that demographic would be trusting of Walmart. They would be regular customers of Walmart, and they would understand the value proposition that Walmart brings to the table.”

MUTUALLY BENEFICIAL

Spiker and Battista characterize the business relationship between Essentials and Walmart as strictly “landlord and tenant” — Walmart doesn’t get a cut of Essentials PetCare’s revenue — but that doesn’t mean there's no connection between the two companies.

Mark Wemple. Essentials PetCare COO Christine Battista, left, and co-founder Doug Spiker with Annie, their rescue dog that inspired them to start the company.

First, the clinics bring additional patronage to Walmart stores. “Also, we make recommendations for items for pets inside the store,” Spiker says. “Walmart really likes that symbiosis of a tenant space that can drive traffic into the store.”

Spiker says Walmart asked for no conditions that would cause Essentials PetCare to deviate from the business model it established in Port Richey. All clinic employees, including veterinarians, are Essentials PetCare employees, and the company pays for its own print and digital marketing campaigns, though Walmart helps promote grand opening celebrations of new clinics. 

“Walmart’s been extremely supportive of us from the beginning,” Spiker says. “They loved our model as we pitched it. Every conversation with them has essentially revolved around how we can best work together to drive traffic to the clinics.”

Spiker says the experience of doing business with the retail giant has also been much more hands-off than he’d imagined.

“They have not placed any restrictions on us, and they have not asked us to do anything different than what we pitched to them,” he says. “We're in a little bit of a different situation, where we’re operating a service at Walmart instead of selling a product through Walmart. And so they really have had nothing to say about our business model except to offer support, encouragement and assistance.”

Marilee McInnis, Walmart’s director of corporate affairs, says the company’s relationship with Essentials PetCare has been a win so far. 

“We are thrilled to be working with Essentials to expand veterinary care at Walmart stores,” McInnis says in a statement. “Pets play an important role in many people’s lives, and making sure families have easy access to high-quality, affordable veterinary care is in-line with helping our customers save money and live better, including their four-legged family members.”

MISSION-ORIENTED

Convenience is another reason for the retailer and the vet clinic to join forces. About 90% of the country’s population lives within 10 miles of a Walmart store, Spiker says. That helps Essentials PetCare fulfill part of its mission: to improve access to veterinary care.

Likewise, the clinic’s business model makes it easier for Walmart shoppers to plan their visits, which makes it more likely that their pets will receive routine preventative care. The technology side of the model is also key to rapidly expanding the store location count. “We’ve developed an online check-in system,” Battista says. “It’ll give them an estimated wait time. If there’s no one waiting in the lobby, it’ll say, ‘Come on in.’”

Despite the fast start, Spiker and Battista know they have a challenge to keep pace with Walmart’s desire for more stores with walk-in vet clinics. Spiker says the retailer is so enamored with the model that it has turned to a rival company, publicly traded PetIQ Inc., to put similar clinics in its stores. That’s given Essentials PetCare extra incentive to recruit the best talent available via competitive wages and generous benefits, including stock options, which the company is able to offer because of its low overhead.

“We want people who are mission-oriented, just like us, to be part of this company and help it grow, so we really felt strongly about offering stock options,” says Spiker, who declines to disclose the company’s revenues because of its startup status. “I think we have a unique model that will help attract the type of people that we’re looking for.”

Citing terms of the company’s deal with Walmart, Spiker also declines to say how much Essentials PetCare pays to lease space within the retailer’s stores. The size of the clinics range from 720 to 1,500 square feet, depending on how much space Walmart has available. Locations are staffed by one veterinarian and three support staff members.

Spiker and Battista still have much to figure out about their business model — such as how to adjust pricing if they open clinics at Walmart stores located in more affluent areas — but their early success has instilled confidence they’re onto something big.

“We were extremely passionate about the model, but we had no idea which way it would go,” Spiker says. “We had no guiding light — this is the first time anybody has tried anything like it — but we were driven to be a national walk-in vet chain within Walmart stores, so it’s extremely rewarding to see the model expand.”

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