Surprising Pet Powerhouses: Chewy and Tractor Supply Compete for Dominance in the Booming Online Pet Health Market
In 2023, Chewy Health generated over $3 billion in revenue. Yet, this number barely scratches the surface of the market’s potential. With the U.S. pet health industry valued at around $47 billion—and still growing—Chewy is positioned to capture a significant share.
A 2022 Chewy-sponsored report estimated that 30% of pet medications will be purchased online by 2025, signaling a transformative shift. To put this into perspective, current market data from Packaged Facts shows that 70% of pet medication sales happen through veterinarians, with the remaining 30% divided between brick-and-mortar stores and online platforms. If this 30% fully shifts online, it will unlock enormous growth potential.
Chewy is actively capitalizing on this momentum with new initiatives that align with the broader industry shift toward online pet healthcare. However, there’s an unexpected new player on the scene: Tractor Supply Company (NASDAQ: TSCO), a retail chain typically known for its agricultural and rural products, recently entered the online pet healthcare space with a strategic acquisition that positions it as a formidable competitor.
Tractor Supply’s Savvy Acquisition Strategy
Tractor Supply operates a retail network of nearly 2,300 locations across the U.S., in addition to its PetSense brand, which specializes in pet products and boasts over 200 locations. While PetSense may seem like a small component of Tractor Supply’s business, it’s a strategic asset in its quest to expand into pet health. In 2023, Tractor Supply’s sales exceeded $14.5 billion, with approximately 25% stemming from companion animal products. This positions Tractor Supply among the leading players in the pet sector, and the company plans to increase its share further.
In a bold move on October 24, Tractor Supply announced the full acquisition of Elevate, an online platform that sells both prescription and over-the-counter medications for animals. This acquisition expands Tractor Supply’s market reach by approximately $15 billion. What’s particularly notable is that this acquisition aligns with Tractor Supply’s robust loyalty program strategy.
As of Q3 2024, Tractor Supply’s loyalty program boasted 37 million members. In 2023, 77% of total sales were driven by loyalty club members, 75% of whom own pets. This strong correlation suggests ample opportunity to introduce Elevate’s online pet healthcare services to a loyal customer base already primed for pet-related purchases.
Why Tractor Supply’s Move Could Be a Game Changer
Historically, mergers and acquisitions often face scrutiny, as companies sometimes overpay and struggle to realize projected synergies. However, Tractor Supply’s acquisition of Elevate is an exception for several reasons. First, the undisclosed deal terms suggest a relatively modest purchase price. Additionally, Tractor Supply’s management has stated that Elevate is expected to boost the company’s profits in its first year.
For investors, Tractor Supply has long been a robust long-term investment with a well-established revenue stream. Still, some might wonder if this giant, with nearly $15 billion in annual revenue, has room to grow. The acquisition of Elevate signals that Tractor Supply still has room for expansion, particularly by tapping into the lucrative pet healthcare market with products and services designed for its loyal customer base.
The strategic alignment between Tractor Supply’s loyal customer base and Elevate’s pet health services could provide a long-term growth driver, positioning both Tractor Supply and Chewy as the top contenders in the online pet healthcare market.
