The online pharmacy space for pets is growing at a strong rate and that's good news for Chewy (NYSE: CHWY). The company operates the go-to e-commerce platform for pets. Most investors are likely aware that it generates billions of dollars of sales annually from retail products. But fewer realize that pet health is a big business for Chewy as well.

In 2023, Chewy Health was a business worth more than $3 billion, according to management. But that's just the tip of the iceberg. The company believes the pet health market is worth $47 billion in just the U.S., and it's still growing.

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When thinking of this from an e-commerce perspective, the outlook is even more optimistic. According to a 2022 article sponsored by Chewy, 30% of pet medications are expected to be purchased online by 2025. That's a substantial shift.

For perspective, 70% of pet medication sales are through a vet, according to a 2022 report from market research company Packaged Facts. The remaining 30% is split between retail stores and online channels. Therefore, if a full 30% of sales were just on online channels, that would be a big deal.

The point is that spending for pet health is a large market opportunity and it's increasingly moving online.

Many of Chewy's latest initiatives are designed to capture the shifts underway in pet health. But investors may be shocked to hear that Tractor Supply Company (NASDAQ: TSCO) just positioned itself to enjoy the same boost to its own business.

The surprisingly slick move by Tractor Supply

Tractor Supply is a retail chain with nearly 2,300 locations of its namesake brand. The company also owns a chain called Petsense with more than 200 locations. But don't let the small size of the Petsense brand deceive you. Petsense is just a small component of Tractor Supply being a major player when it comes to pets.

Tractor Supply had total sales of over $14.5 billion in 2023. And according to the company, 25% of sales were for products related to companion animals -- pets. This places it among the top players in the pet space. And if management has its way, it's going to become an even bigger player.

On Oct. 24, Tractor Supply announced its all-cash acquisition of online platform Allivet. Allivet is an online platform selling both prescription and over-the-counter medicines for animals. Tractor Supply's management says that it expands its addressable market by $15 billion.

I find this deal particularly interesting because of the dynamics of Tractor Supply's business. The company had 37 million customers in its loyalty program at the end of its third quarter of 2024. And these are truly loyal and important customers. In 2023, 77% of Tractor Supply's total sales were to loyalty club members.