Product Feasibility Analysis: Soigne Pets

Product Feasibility Analysis: Soigne Pets

Table of Contents

Description of Product/Service Being Offered Introduction…………………………………………………………………………………………………3

The Intended Market/Industry Analysis

Industry Overview………………………………………………………………………………. 4

Target Market……………………………………………………………………………………4

External Drivers………………………………………………………………………………….5

Competition………………………………………………………………………………………6

Benefits of the Product/Service

The Product………………………………………………………………………………………7

Nutritional Products……………………………………………………………………7

Pastime Products……………………………………………………………………………………………….7

Accessories………………………………………………………………………………7

Positioning of the Product/Service

SWOT Analysis of Major Competitors……………………………………………………………8

Positioning of Product…………………………………………………………………………….9

Selling & Distribution of Product/Service……………………………………………………10

Break Even Analysis

Pricing Method…………………………………………………………………………………..11

Break Even Analysis……………………………………………………………………………..12

Sales Revenue & Cost Estimate………………………………………………………………….12

Profitability………………………………………………………………………………………12

Gross Margin & Operating Expenses……………………………………………………………12

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Product Feasibility Analysis: Soigne Pets

Description of Product/Service Being Offered

Introduction

In the contemporary era, the number of domesticated animals in numerous households in the United States has increased exceptionally over a short amount of time.

Nowadays, most households own pets that are usually represented by dogs and cats. Additionally, there is evidence of an emergent upscale market that is willing to purchase expensive and unique products for their pets. Another reason attributed to the emergence of a pet upscale market is due to the luxury exuded from owning these animals.

In most upscale homes, pets are revered as objects of luxury, thus increasing the need for accessories based on sustaining or exemplifying the image of the pet in order to provide the owner with a positive and luxurious image. Therefore, to cater for the needs of the pets in terms of accessories, Soigne Pets will be an excellent choice that will cater for the upscale pet owners in the region. Soigne Pets will provide high-quality products that are specifically designated for pets.

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The pet store will provide pet products for upscale pet owners who desire to see their pets enjoy an enjoyable, healthy and graceful lifestyle while being coddled. Through the callous selection of luxurious accessories produced with better-quality materials, Soigne Pets will offer a privileged line of products that celebrate the distinctiveness intrinsic in every animal’s personality.

The Intended Market/Industry Analysis

Industry Overview

The pet store industry in the United States is one of the fastest growing markets specifically designated for pet accessories. This is attributed to the fact that the target market emerges at a rapid rate compared to other similar industries such as Veterinary services and Online pet food retail services in America. Moreover, the target market ensuring the fast growth of the pet store industry is the domestic household. According to C. Barnes & Co. (25), the accessory market for pets in America occupies a quarter of the industry for pet goods. The extent at which the pet market is growing is indicated by the fact that pet food occupies 70 percent of the industry for pet commodities (Marsh, p2). Additionally, the pet accessory sector is diversified in the provision of pet goods and services. The pet boutique industry is comprised of pet shops that sell an assortment of pet accessories that include beauty supplements, health aids, furniture for cats and kennels for dogs and other physical adornments for animals such as leashes and collars.

The pet store industry has also played a crucial role in lessening the unemployment rate in the United States. This is reflected by the increase in the number of small pet boutique businesses to 13600 by the end of 2012 and wages amounting to US$ 2 billion by the end of the fiscal year. The performance of the pet store industry is considerably characterized by financial stability. The Great recession in 2007 to 2010 slowed down most businesses, including multinational corporations and small enterprises. However, the pet store sector was unaffected and continued to gain growth in revenues (Rosenberg, 61; Simpkins, p1)).

Target Market

The main activities intrinsic of the pet store industry are defined by specific primary activities. These chief activities include retail and wholesale of pets, pet foodstuffs and supplies and provision of grooming services for pets. Additionally, the pet boutique industry specializes in the provision of animals, supplies, food and services for domestic households, who are the main target market (Institute for Career Research, 15-21). The financial aspect of the pet store industry is significant in the determination of success of the products and services Soigne Pets is willing to offer domestic households. At a glance, the pet store industry generated revenue of US$ 14.7 billion by the end of the 2012 fiscal year from domestic households. Interestingly, the industry gained a profit of US$ 516.1 million by the end of 2012 thus indicating the ease of profitability in the industry due to an increasing customer base. Additionally, the per annum growth for the pet store sector increased to 2.8 percent between 2007 and 2012 and is expected to increase by 1 percent to 3.8 percent between 2013 and 2017 (Parker, 134-137).

External Drivers

The key driver in the industry’s growth was an increasing number of pet owners. The increase in the number of pet owners increased the demand for pet accessories such as pet foodstuffs and services, hence increasing financial growth in other pet-related sectors. One of the main reasons attributed to the increase in sales of pet foodstuffs and delicacies regardless of the recession is due to the owners’ relation with their pets. Most owners treat their pets as members of their family and thus strive to ensure that they provide them with daily organic and nutritious food and delicacies. Additionally, nutritionists have been affected positively by the industry’s performance indicated by their extensive advances in the provision of highly nutritious food products for the animals (Laue & Tucker, 57).

On a different note, another key driver in the industry is attributed to the increasing number of dogs and cats in house holds due to the increased adoption of pets in domestic households. The increase has increased the demand for accessories, food products and health facilitators. According to the APPMA (79), the standard pet owner spends up to US$ 250 on a yearly basis for pet food products. Another driver related to the industry’s performance is increased consumer disposable income. Since owners consider pets as family members, pet products are considered as non-discreet. This is because changes in disposable income do not affect demand since most households usually lessen spending on supplementary domestic and entertaining products before reducing spending on pet food products and accessories.

Competition

The main competitions that pet stores face in the industry are grocery suppliers and supermarkets. This is because most suppliers and supermarkets provide similar products as those offered by pet boutiques such as food products and accessories. Nevertheless, the major competitors in the pet store industry include large specialty stores. These stores include major players in the pet store sector, which are PetSmart and PETCO. PetSmart and PETCO offer premium pet products and accessories in bulk to the extent that small and medium enterprises are unable to compete with the stores. Additionally, the two major specialty stores provide clientele with a wide range of selection and at the same time operate on a considerable scale that allows them to transfer savings in costs to customers in the context of discounted prices. Described as using the Big-Box Strategy, PetSmart and PETCO have been able to dominate the Pet Store industry (Mendoes, p9). This is indicated by the PetSmart’s market share, which increased from 39.3 percent to 43.1 percent between 2007 and 2012 (Moldvay, 8). Additionally, PETCO’s market share is estimated at 20.2 percent of the market.

Benefits of the Product/Service

The Product

The benefits provided by the products from Soigne Pets will be mainly aimed at providing the pets with a lifestyle that encourages fitness and health and at the same time facilitate the development of connections with owners through an assortment of pastime accessories. Soigne Pets will provide products that encourage an amusing, fit and graceful way of life for cats and dogs. The products will be classified into three main categories, which include nutritional products, pastime products and accessories.

Nutritional Products

The nutritional products provided by Soigne Pets will consist of pet foodstuffs and delicacies that contain the correct amount of indispensable vitamins and nutrients to guarantee a balanced and healthy diet for the animals. Providing the nutritional products will require Soigne Pets to carry three to four brands of organic pet food from three of the most successful pet food companies, Mars, Procter & Gamble and Newman’s Own Organics. Soigne Pets will also acquire delicacies and snacks from companies such as Three Dog Bakery and Howling Hound Bakery.

Pastime Products

Engaging in pastime activities such as playing is also important in ensuring a pet gains a fit way of life. Thus, Soigne Pets will provide products that allow the pets and their respective owners to play in a chic manner. For dogs, Soigne Pets will provide toys that are designed for towing, chewing, tracking and reclaiming. For cats, the boutique will provide toys that are embedded with quality-graded catswort, which is a substance that induces euphoria and excitement in cats and other toys for fetching and chasing. Soigne Pets will provide exclusive brands of toys such as Fat Cat, Inc. and Happy Dog Toys.

Accessories

Soigne Pets will ensure that traveling or traversing with a pet such as a cat or a dog extends style to the owner through a chic assortment of collars, travel bags and leashes that create a fashion statement. The boutique will also provide home accessories for pets such as water and food bowls, pillows, pet furniture and pet clothing and attire produced from exemplary fabrics such as silk and faux fur. Unlike other stores for pets, Soigne Pets will target customers who demand top quality in pet classiness. In order to cater for this demand, Soigne Pets will order pet accessories and clothing from stylish brands such as Ruff Ruff and Meow.

Positioning of the Product/Service

SWOT Analysis of Major Competitors

Positioning of the products offered by Soigne Pets requires an in-depth analysis of the factors that will determine the successful positioning of the products with respect to other similar products in the market. The factors that will be analyzed are composed of internal factors, which include the Strengths and Weaknesses, and the external factors, which include the Opportunities and Threats of the competitive pet stores in the market. These stores include PetSmart and PETCO. One of the main strengths of PetSmart is based on pet grooming. The pet store allows customers to browse over the internet at a free charge while waiting for their pets in grooming. PetSmart also possesses a reputable brand identity. This enables clientele to perceive the brand in terms of the store’s product specifications. PetSmart also enables clientele to perform online shopping. PETCO also possesses a recognized brand identity. The store also incorporates a brick and mortar design in the construction of its stores. PETCO also facilitates online shopping and employs a broad choice of essential pet requirements.

In terms of weaknesses, PetSmart implies lofty costs of shipping on clientele purchasing pet foodstuffs online. Additionally, PetSmart possesses high-end brands irrespective of its broad range of pet attire and accessory brands. PetSmart also incorporates inexpert sales employees. PETCO is unable to vend pet foodstuffs online due to high costs of shipping. The store also incorporates inexpert sales employees and possesses a limited number of brands in pet attire and ancillaries. The main threat that faces both PetSmart and PETCO is intense competition. Both stores comprise 60-70 percent of the market and are thus major competitors of each other. Additionally, both firms face threat from sole entrepreneurships and emergent companies such as Cessar Millan and Polo Ralph Lauren and P&G respectively due to unrestricted barriers to entry. Since both stores are major players in the industry, the opportunities available to them are based on their economies of scale. Both stores possess the financial capability to conduct online e-commerce for latent international clientele. Additionally, both stores possess the capability to acquire smaller stores in the market in order to increase their market share and thus raise the barriers to entry.

Positioning of Product

Thus, Soigne Pets, based on the SWOT analysis will be able to pursue different strategies that will enable it to position its products successfully (Hooley, 31). Foremost, Soigne Pets will focus mainly on the selection and sale of luxurious pet commodities and ancillaries as its core competency. The store will also focus on discriminating tastes respective of the owners and their pets by offering high-end commodities and ancillaries. Consequently, the storeowner will encourage customer service and satisfaction by establishing special relationships with clientele based on service that delves on the clientele’s individual preferences and the pet’s persona. Soigne Pets will also focus on providing a broad assortment of organic treats for pets. Additionally, the store will focus on targeting clients that search for the newest pet fashion design by centering on brands specifically designed for animals. Soigne Pets will also establish a website that will offer information and styles for a la mode pet owners. Finally, Soigne Pets will contribute a certain percentage (preferably 4 percent) of its profits before tax to local animal havens.

Selling & Distribution of Product/Service

The main selling and distribution strategy that Soigne Pets in the sale and distribution of its products will be based on the use of distributors. Most pet stores employ distribution outlets as the main channels of selling and distribution due to the high costs experienced in using franchises as well as the strict regulations that accompany the conduction of businesses by franchises (Awe, 100). Moreover, Soigne Pets will not possess the financial capability to open up a franchise due to its limited start-up capital. Therefore, Soigne Pets will operate with established distributors that specialize mainly in the distribution of pet supplies such as food products and ancillaries. Additionally, Soigne Pets will take advantage of the retail distribution channel. This is because retailing allows products to be distributed in considerable quantities and concurrently provides the store with the opportunity to sell its products by using the retailer at the expense of commission (Dent, 121).

Moreover, Soigne Pets will take advantage of the Internet in order to sell its products. For a starting pet store such as Soigne Pets, the Internet is the best and foremost option in conducting selling of its products. This is because the Internet provides a medium for commercial transactions and at the same time, enables the business to advertise and market its products at a lower cost. Additionally, the costs of advertising through newspapers and magazines is exorbitant hence the reason for using the Internet as a tool for selling Soigne Pets pet products. Using distribution channels for selling and distribution for Soigne Pets will enable the pet store to gain numerous advantages. One advantage of using the distribution channel is based on its function as an intermediary. The distributor will act as an intermediary between the customer and the store. This means that Soigne Pets will be able to avoid the costs of advertising or direct selling in the context of selling its products, even in the midst of incorporating the distributor’s commission margin. Additionally, Soigne Pets will be able to gain supplementary supply logistics. Lastly, consumers will be able to have a wide range of selection from the products distributed.

Break Even Analysis

Pricing Method

The pricing method that Soigne Pets will use for price setting its products will be Cost-Plus pricing. Through Cost-Plus pricing, Soigne Pets will set the base cost as the product’s wholesale cost (Baker, 56). The profit the store receives from the sale of each product will result into the constituent for the markup. Soigne Pets will presume a margin of 55 percent on all products sold. Since the boutique will be focused on selling luxurious commodities to customers that possess a significant disposable income, Soigne Pets will focus on profit maximization from every product sold. Additionally, Soigne Pets will set high prices for the latest luxurious products on the first instance of release. However, the store will not maintain exorbitant prices since it will decrease the price in due time. Since the store will provide a broad assortment of commodities and fashion ancillaries for pets, high prices will be charged on the newest arrivals and lower the prices as the commodities become typical.

Break Even Analysis

Soigne Pets will include various assumptions that will be included in the forecast for sales revenue after the first year of its operations. The first assumption involves signing a rental agreement for 1 year. The rent will be stated at US$ 70000 inherent of a tax of US$ 19000 each year. Subsequently, Soigne Pets will carry out business from Monday to Saturday. Soigne Pets also estimates that the client will spend US$ 18 each visit and will visit the store two times in a month on average. Additionally, Soigne Pets will contribute 4 percent of its profits before tax to a local animal haven each quarter. Regarding the assumptions developed for the forecast, Soigne Pets will be able to gain break-even sales in one year through a break-even analysis. Therefore, the break-even sales for Soigne Pets in its first year will be US$ 263699. The break-even sales will be computed by establishing the fixed costs arising in the first year and dividing them, as a total, with the gross margin, which will be articulated as a sales percentage (Shim and Siegel, 66).

Sales Revenue & Cost Estimate

Soigne Pets forecasts that it will gain gross revenues of US$ 296740 for the first year. Additionally, Soigne Pets will sustain its stock based on the three classes of products. During the selling of goods, the store will replenish the stock every month. Thus, Soigne Pets forecasts its cost of inventory at US$ 20000. Thus, the cost of inventory for the first year will be US$ 147000.

Gross Margin & Operating Expenses

The gross margin for Soigne Pets, which includes the cost of the products sold from the sales, for Soigne Pets will be placed at US$ 159620 for the first year. The operational costs for Soigne Pets are based on costs of advertising, rent, expert services aid and utilities. These will be the sum operating expenses and are estimated at US$ 147907 for the first year.

Profitability

The estimated net profit for Year 1 for Soigne Pets will be US$ 10660.

Works Cited

American Pet Products Manufacturers Association. 2007-2008 Appma National Pet Owners Survey. Greenwich: American Pet Products Manufacturers Association, 2007. Print.

Awe, Susan C. The Entrepreneur’s Information Sourcebook: Charting the Path to Small Business Success. Westport: Libraries Unlimited, 2006. Print.

Baker, Ronald J. Pricing on Purpose: Creating and Capturing Value. Hoboken: Wiley, 2006. Print.

C. Barnes & Co. United States Pet & Pet Supplies Stores Industry Report. Woolwich: C. Barnes & Co, 2000. Print.

Dent, Julian. Distribution Channels: Understanding and Managing Channels to Market. London: Kogan Page, 2008. Print.

Hooley, Graham J. Marketing Strategy and Competitive Positioning. Harlow: Prentice Hall Financial Times, 2004. Print.

Institute for Career Research. Management-ownership Careers in the Pet Shop Business: Selling Animals, Pet Products, and Grooming Services. Chicago: Institute for Career Research, 2010. Print.

Laue, D K, and Lucy A. Tucker. Recent Advances in Pet Nutrition. Nottingham: Nottingham University Press, 2006. Print.

Marsh, Frederick. “Pet Supplies Industry (International Trade)”. International Trade Forum n1 (1998). n. pag. Web. 27 Feb. 2013.

Mendoes, Beth. “PetSmart and PETCO: The Good, the Bad and the Ugly”. Examiner.com. 5 Jan 2010. Web. 27 Feb. 2013.

Moldvay, Caitlin. “Pet Stores in the U.S”. IBIS World Industry Report 45391 (2012): 1-34. Web. 27 Feb. 2013.

Parker, Philip M. 2007-2012 World Outlook for Pet and Pet Supplies Stores. ICON Group, 2006. Print.

Rosenberg, Jerry M. The Concise Encyclopedia of the Great Recession, 2007-2010. Lanham: Scarecrow Press, 2010. Print.

Shim, Jae K, and Joel G. Siegel. Handbook of Financial Analysis, Forecasting, and Modeling. Paramus, Prentice Hall Press, 2001. Print.

Simpkins, Jason. “Despite the Recession, the U.S. Pet Care Industry is Staying Out of the Dog House”. Money Morning. 29 May 2009. Web. 27 Feb. 2013.