Report No.20
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Japan Entrepreneur Report No. 20 June 2004
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- People services for pets
- Pets as business, pets as leisure
- Target transposition as service strategy
- The leisure issues
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People services for pets
Komori Nobuaki never imagined starting his own business. As an elite
insurance industry "salaryman" earning more than $130,000 annually in his
20s, he was on a fail-safe track to orthodox success.
But when hometown friends died in the Great Hanshin Earthquake of 1995,
Mr. Komori questioned whether his career path would ultimately bring
happy results. Somehow he wanted to feel more alive, he thought, and for
the first time he seriously considered launching his own firm.
With an eye on Japan's exploding pet market, Komori came up with the idea
of offering medical insurance for dogs, cats, and other pets. Under his
scheme, subscribers would pay an annual premium for insurance covering
half of all treatment expenses at participating veterinarian clinics.
The notion of pet insurance wasn't new, but insurance industry veterans
who had researched the potential market advised Komori against the
business, citing the showstopping cost of processing thousands of
reimbursement requests amounting to only a few hundred yen each.
Komori removed that bottleneck by developing a system enabling
veterinarians to manage insured transactions and to bill the insurance
carrier once monthly in bulk rather than on a piecemeal basis.
With a viable reimbursement system in place, Komori launched his new pet
insurance plan, dubbed anicom. But within six months he exhausted 40
million yen in startup funds under a strategy heavily focused on
promoting the billing system at veterinarian conferences. He grew
depressed and announced to his tiny staff that he was shutting down the
company.
One young salesman, though, refused to quit. Urging Komori to stick with
his original vision, the freshman employee managed to win one
veterinarian account, then another. Two leading national daily
newspapers then featured anicom in nearly back-to-back news stories. The
fledgling company was suddenly flooded with inquiries.
Now, three years later, Komori has 2,200 participating care providers and
70,000 subscribers paying an annual premium of approximately U.S. $185.
Gross yearly revenues are nearly U.S. $13 million.
"Wherever there are services for people, but not yet for pets, there are
business opportunities," Komori said in a magazine interview last month.
"And we're just getting started."
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Pets as business, pets as leisure
While it exists in some other affluent countries, medical insurance for
pets may seem like over-the-top indulgence to many people. But Japan is
world-class at indulgence, and that means serious entrepreneurial
opportunities in this fast-growing sector.
Noting that Japan's 19.2 million cats and dogs now outnumber its 17.9
million children under the age of 15, some industry watchers even say
pets may soon influence consumer spending more than children do. The
nation's households now spend nearly $20 billion each year on pets, pet
food, pet accessories?and on services challenging the sensibilities of
non-pet enthusiasts.
For example, you can now pack your pooch off to Shizuoka's Dog Forest
(www.dogforest.com), an amusement park for mutts built at a cost of
nearly $10 million. Admission is 1,200 yen per day.
Alternatively, you can trot that big barker down to Tsunayoshi no Yu,
Japan's first hot springs for dogs. A relaxing soak runs 2,100 yen (with
owner).
Looking to romp with Rover in a big, dog-friendly space? Commercial dog
runs charging 1,500 yen per day are becoming common in the greater Tokyo
Metropolitan area. Some even sell memberships.
Japan's pet boom is as recent as it is explosive. Today 33 dog and cat
magazines crowd bookstore shelves, but more than a third launched after
2000. In 2002, only ten Internet sites were devoted to selling pets;
today more than 200 are thriving, according to an online pet broker.
Odds are this is no short-lived fad. Witness sales of products and
services that anticipate decades of consumer life with pets: medicines
for aging pets, vitamin supplements, pet diapers, seasonal pet wardrobes,
grooming and trimming services, schools that train students to provide
grooming and trimming services, pet-friendly condominiums, and...well,
you get the idea.
There's untapped opportunity on the non-service side of the equation, too.
Many owners feed their canine companions supermarket beef and other
delicacies, with only 39 percent buying dog food versus 80 percent in the
U.S. That spells big potential growth for foreign dog food manufacturers
like Master Foods, Nestle, and Hills-Colgate.
What accounts for the remarkable boom in pets and pet-related products?
I'd say pets offer consumers two vital benefits: leisure and love.
Raising, training, exercising, and grooming a pet is a constructive hobby
for overworked, under-enjoying salarypeople. Pets bring leisure and
tranquility into owners' lives every day, and they make for purposeful
weekend outings.
Owners seem to rejoice in lavishing their pets with the hugs and kisses
they are often too inhibited to bestow on children. Treasured pets may
also answer the needs of the growing number of couples who choose to
remain childless, yet yearn for objects of affection. Dogs and cats make
effective companions for the swelling ranks of empty-nest seniors. Pets
are likewise ideal for singles seeking affection?and a way to socialize
with other pet-loving singles.
Whatever the reasons, pets are serious business. On a per capita basis,
Japan's consumers spend 35 percent more on pets each year than their U.S.
counterparts, and growth is accelerating.
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Target transposition as service strategy
Mr. Komori demonstrates a strategy I'll call "target transposition"?
applying an existing service to a completely different set of customers?
in his case, an insuree group few ever imagined.
NTT DoCoMo, Japan's largest cellular telephone carrier, has been on to
the target transposition idea for years. Discarding the notion that
mobile transceivers had to be carried and used by people, the telephone
giant has been developing non-human target groups with strong "installed
bases": vending machines (4.5 million), cars (74.2 million), and pets
(19.2 million).
Entrepreneurs can take a clue from Komori and DoCoMo, even if they need
to keep their service offerings focused on people. Affluent, indulgent
Japan is one of the world's top markets for target transposition
strategies. That's just one more reason why I'm so bullish on Japan's
fascinating, frustrating, but ultimately rewarding multi-trillion dollar
service economy.
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Bits and bytes
Here's a chance to learn from a heavy hitter: Suga Hitoshi, vice chairman
of Tully's Japan, will discuss how his firm founded and grew the
Starbucks alternative. Mr. Suga will make his presentation at the
Entrepreneur Association of Tokyo's monthly meeting Monday July 5. See
<www.ea-tokyo.com> for details.
What are the three best things about being a teacher? "June, July, and
August," is the punchline to an old U.S. joke. With summer here, leisure,
will dominate the themes of our June, July, and August issues of JER.
Enjoy yourself and stay tuned...
Tim Clark
Senior Fellow
SunBridge Corp.
Mobile (Tokyo thru 8/1/2004) 090.4420.0825
Voice (U.S.) 503.235.4419
Fax (U.S.) 503.235.4429
clark@sunbridge.com
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