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V. Business Environment Analysis
Following the same trend in other developed countries, the pet market in Taiwan is fast growing and gradually moving towards a highly segmented business. Giving the fact that pet owners are willing to spend more and more on their beloved dogs and cats, the upscale customer segment in the pet market is growing exceptionally in Taiwan.
External environment
With the decreasing birth rate and increasing percentage of the older generation, raising a pet has become a trend for modern urban people.
The cost of raising a pet is definitely much lower than raising a child. Compare to the average of NT$5 million spent in a child’s education until he is 24 years old, the cost of raising a pet is less than 10% of that amount.
Nowadays, pets have become substitutes of children. From a social standpoint, pets play a significant role in many lonely people’s lives.
The mindset of having pets is also changing; people don’t see dogs or cats as animals, instead, they treat them like humans. Dogs and cats are not requested to fulfill tasks like guarding a house or catching mice anymore. On the contrary, pets are now more expected to provide emotional benefits, like healing, accompanying, and pleasing.
Another set of data can explain the situation from a different angle. According to the data retrieved from the Executive Yuan, Taiwan, from 1996 to 2006, the ratio of population of age over 60 in Taiwan had increased from 11% to 13.5%. On the other hand, the ratio of population of age under 5 had shrunk from 7% to 4.8%. The numbers imply not only possible growth of the customer base in the pet business for there are more and more aged customers, but also the needs for having a dog or cat for mental
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* Source: 2006 Executive Yuan, ROC
Overview of the Pet Market in Taiwan
From the species’ point of view, household pets refer to dogs and cats. In Taiwan, the proportion of pet dogs is much higher than that of pet cats (see Table 1).
TABLE 5.2PET POPULATION IN TAIWAN Source: 2006 Council of Agriculture, Executive Yuan
If we focus on dogs, in the aspect of regional market distribution, the dog
DOG CAT
Household 7,282,350 Population (No. of Pets) 1,141,521 (72%) 439,174 (28%)
Household Penetration 12.4% 6%
# of Pets Per Household 1.54 1.67
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
under 5 (%) over 60 (%)
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population distribution in Taiwan is North: 46%; central: 26%; south: 23%; others 5%.2 The top three cities with the largest number of dogs per household are Taipei county (15% of island wide dog population), Taipei city (13% of island wide dog population), and Taoyuan county (7% of island wide dog population).
Region
City/County
Number of Dogs per Household
Ranking Ratio
Northern Keelung City 23,455 18 2%
Northern Taipei County 169,238 1 15%
Northern Taipei City 142,863 2 13%
Northern Taoyuan City 83,908 3 7%
Northern Hsinchu County 43,345 10 4%
Northern Hsinchu City 19,603 19 2%
Northern Miaoli County 37,087 13 3%
Central Taichung County 78,409 4 7%
Central Taichung City 30,651 14 3%
Central Changhua County 65,481 6 6%
Central Chiayi County 30,318 15 3%
Central Chiayi County 9,496 22 1%
Central Nantou County 39,523 12 3%
Central Yunlin Countu 42,581 11 4%
South Tainan County 50,276 9 4%
South Tainan City 24,916 16 2%
South Kaoshiung Country 70,849 5 6%
2 Based on a 2006 research by Council of Agriculture, Executive Yuan and Zoology Institute, NTU.
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South Kaoshiung Country 57,203 8 5%
Others Pingtung County 62,825 7 6%
Others Yilan County 12,263 21 1%
Others Hwalian County 24,868 17 2%
Others Taitung County 18,395 20 2%
Others Penghu County 3,968 23 0%
Total 1,141,521 100%
TABLE 5.3PET POPULATION DISTRIBUTION Source: 2006 Council of Agriculture, Executive Yuan
Since dogs are outdoor animals, the facilities and the derived services provided to dogs are much more than those to cats. The annual spending on a dog is NT$8,676 and it does not include the costs from first time purchase and the funeral. 40% of the total spending is on food, while 30% is on health and 30% on others: clothes, entertainments, etc.3
In the global pet accessory market, it is also observed that the pet market is going to be more diversified and service-intensive with time. Products are designed for from puppies to senior dogs, including from simple food, treats, to exclusive pet restaurant.
There are schools for obedience training and photography services for pets. Following this trend, lots of designers’ brands, like LV, Coach, and Gucci, have also produced exquisite accessories such as handbags, leashes and clothes.
The analysis of the business environment provided some hints to The Phoebe’s:
3 The annual spending and category spending ratio are based on a 2006 research from Company A.
Company A is the world’s largest dog food and accessory supplier and is kept anonymous due to confidential info.
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♦ The Phoebe’s will provide boarding services to pet dogs only since most of household pets are dogs and the market for dogs is much larger than that for cats.
♦ The Phoebe’s is going to provide services in Northern Taiwan in its initial stage.
♦ The Phoebe’s will only focus on serving upscale dog owners.
Total Available Market for The Phoebe’s
In 2006, the annual average spending on a household dog is $8,676 in Taiwan, and the total market size is NT$9.9 billion per year. The figure includes the values of foods, clothes, accessories, health and entertainment, but not first time purchase prices and funeral costs. The amount of spending on entertainment and health related areas has increased year by year.
Again, in the aspect of regional distribution, Northern Taiwan, including Taichung, accounts for 52% of the overall consumer spending on pet dogs, and the area with the highest spending on dogs services (not include foods) is Northern Taiwan.
Average Spending per dog per month (NT$)
Northern 827 429,538,594 52%
Central 634 187,879,002 23%
Southern 655 174,267,658 21%
Others 565 33,602,370 4%
Total monthly spending 825,287,625 100%
Total annual spending on dogs 9,903,451,500
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Annual spending per dog per year 8,676
TABLE 5.4PET MARKET VALUE
Source: 2006 Council of Agriculture, Executive Yuan
The followings are the steps to calculate the total available market of pet hotels in Taiwan and of The Phoebe’s:
Step 1. Calculate the fundamental numbers
Head Count – Traveling Overseas per Year (a) 8,208,000
Ratio of Adults in People Traveling Overseas (b) 90%
Average Adult Count per Family (c) 2
Family Count – Traveling Overseas per Year (d=a*b/c) 3,693,600
Ratio of Families – Raising at Least One Dog (e) 12%
Step 2. Obtain the total number of days dogs are away from their owners per year Dog Count – Away from Their Owners per Year (f=e*d) 458,006
Average Traveling Duration (g) 10.6
Total Number of Days Dogs Are Away from Their Owners
per Year (h=f*g) 4,854,868
Step 3. Obtain the total number of boarding days for dogs per year Percentage of Dog-Raising Families Having Traveled and Bought
Services from Pet Hotels (i) 30%
Total Number of Boarding Days for Dogs per Year in Taiwan (j=h*i) 1,456,460
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國立 政 治 大 學
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TABLE 5.5TOTAL AVAILABLE MARKET –PET HOTEL IN TAIWAN Source: 2005 Tourism Bureau and Council of Agriculture, Executive Yuan
It can be concluded that the estimated available market size of The Phoebe’s is NT$
87,096,329.
Step 4. Obtain the value of dog hotel market in Taiwan per year
Average Pet Hotel Selling Price per Day (k) NT$ 500
Value of Dog Hotel Market in Taiwan per Year (l=j*k) NT$ 728,230,176
Step 5. Obtain the total number of boarding days for dogs in Northern Taiwan per year
Ratio of Household Dogs in Northern Taiwan (m) 46%
Total Number of Boarding Days for Dogs in Northern Taiwan
per Year (n=j*m) 669,972
Step 6. Obtain the total market value of The Phoebe’s
The Phoebe's Target Segment (Top % consumer) (o) 10%
The Phoebe's Total Loading Days for Available Dogs (p=n*o) 66,997
High End Peer Avg Price per Day (q) NT$ 1,300
The Total Market Value of the Phoebe’s (r=p*q) NT$ 87,096,329
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Comparing to the situations in other developed countries, offering pet hotels in Taiwan is more of a value-added service attached to other major pet businesses rather than a well-developed individual business sector.
Because of its immaturity, pet boarding services right now in Taiwan are mostly run by pet shops or vet clinics. But as a matter of fact, an emerging sector of dedicated professional pet hotels has been observed on this island.
Amateur players with unclear positioning
There are 2,640 registered pet stores island wide.4 50% of them are individual stores selling puppies, foods, and accessories, while the other 50% of them are vet clinics providing health checks, vaccine injection, and consulting. Around 70% of them offer stay-over services, and are chosen by dog owners for the following reasons:
♦ Convenience of location
Location is the major concern when pet owners are looking for a place to buy pet foods and accessories, or a veterinary clinic for their beloved pets.
♦ Trust
Most pet owners take very good care of their pets as if they were their kids. Very similar to the factors and processes to be considered when choosing babysitters, trust has been a major concern when choosing pet hotels. Vet clinics therefore have inherent advantages over other choices to be handpicked by pet owners.
♦ Emergency handling
This is something related to trust, but with more techniques, experiences, and capacity to handle emergencies, especially dog’s health problems that require
4 The pet store statistics is retrieved from a survey conducted by Company A in 2006.