Vet clinics have a moat (exactly as you're implying): the customer relationship. That relationship, plus optimization on the fixed costs, gives an incentive to acquire the practice, maintain the staff as employees, and collect the operating margin. It's not like you really care if your favored pet doctor works for Brand A or Brand B, and -- let's be honest -- you're price sensitive. No matter what you say, there's a limit to how much you'll pay in order to follow your favorite vet, because veterinary services are a commodity, and your pet doesn't know the difference. So there's price pressure as well.
You're right that vet clinics aren't like software in the variable cost structure, but that just makes the software business more attractive for consolidation, not less. Bigger players will have the customer relationship, lower fixed costs, and high margins, with little threat of competition.
As you’ve pointed out, people are price sensitive. One of the substantiated gripes of PE owned vets (and many other things) is that they are more expensive, not cheaper. Price pressure is working against your argument here, not for it.
That is what happens in the later stages of monopoly. In any case, my point wasn't about vet clinics, it was about the business financial properties that lead to monopoly. Even a business model as mundane as the local veterinary practice is undergoing industry-wide consolidation.
Any profitable software business is vastly more interesting for consolidation than a vet practice.
Right, but the nature of veterinary practice don’t lend themselves to monopoly, nor is the excess cash even close to artificially achieving that. This is just what you see in an irrational market as well. All this stops when PE won’t overbid on practices, or when the vet pay is low enough that it makes sense to open your own practice. Many forms of software do favor monopoly. Rolling up all of the gov tech startups has network effects in addition to being an industry that operates on large fixed costs and low variable costs.
Vets aren’t like that, one vet has a limit to the number of dogs they can see in a day. I think it is mostly PE trying to mimic their success with doctors offices (which have massive network effects via insurance), and assuming that it will work the same.
It is very hard to have any monopoly power in an industry where there is no barrier to entry for your most valuable employees, and where, as you pointed out, customers are sensitive to price.
Also increasingly discoverability. New customers must be able to find you. And how online advertising and SEO is going established player which has resources to waste will beat you.
Anecdotally, all of my friends across multiple friend groups found their vets via word of mouth. The only vet that I’ve visited that wasn’t word of mouth was an emergency vet (googled), although I later discovered that office was the one my vet recommended for after hours anyway.
In my area, the non corporate vets are turning new customers away and recommending other offices.
You're right that vet clinics aren't like software in the variable cost structure, but that just makes the software business more attractive for consolidation, not less. Bigger players will have the customer relationship, lower fixed costs, and high margins, with little threat of competition.